Mythbusting: Electricity prices in South Australia

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New report reveals that electricity price spikes in South Australia have reduced as renewable energy grows.

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In recent months, there have been a number of inaccurate media stories linking high electricity prices in South Australia with the state’s high proportion of wind and solar generation.

However, our new report reveals that electricity price spikes in South Australia have reduced as renewable energy grows.

Key Findings

1. South Australia is a global leader in renewable energy and is much further ahead than the other states in reducing emissions to tackle climate change.

  • The state is on track to reach its target of 50% renewable electricity by 2030.
  • The state’s transition away from fossil fuels, particularly coal, is consistent with action needed to avoid catastrophic climate change and ensure the survival of the Great Barrier Reef.

2. Recent short-term increases in South Australia’s wholesale power prices have been driven primarily by a reliance on expensive gas for power and a lack of competition amongst power generators.

  • Average electricity prices have been historically higher in South Australia due to the state’s more expensive fossil fuel options and lower electricity market competition.
  • Recent events, including very cold weather, work on the interconnector that restricted supply from Victoria and gas prices at almost four times the usual level, put the two main electricity generators in South Australia in an extraordinarily powerful position to increase prices.
  • Without South Australia’s high level of renewables, the state’s reliance on expensive gas would be even greater. ›› Queensland (with less than 5% renewable electricity) has until recently experienced similarly high prices to South Australia (with more than 40% renewable electricity).
  • In the past year in particular, all eastern states have experienced similar short-term price patterns over many months, even though New South Wales, Victoria and Queensland generation is overwhelmingly coal based. This is further evidence that the cause of price rises is due to a range of industry factors rather than renewable energy.

3. Renewable energy has dramatically reduced electricity price spikes in South Australia.

  • Electricity price spikes (periods where prices exceeded $5,000/MWh) have fallen significantly across the National Electricity Market as the proportion of renewable energy has increased but especially in South Australia.
  • For comparison, in 2008, South Australia experienced more than 50 price peaks compared to one price peak in 2015.

4. The key to reducing electricity prices in South Australia is reducing the state’s reliance on expensive gas through increased competition and a smarter, more connected electricity grid.

  • Improved competition in the electricity market could be achieved by reducing the time intervals set for spot price (wholesale electricity price for a given time period) settlements from half-hour blocks to five-minute blocks.
  • Developing alternative reserve capacity such as large-scale and distributed energy storage would reduce exposure to short-term price exploitation when wind and solar supply are low.
  • Increased interconnection with the eastern states would expand supply options and increase competition with South Australian gas fuelled power plants.
  • AEMO and ElectraNet (2016) have been jointly working together to plan for and accommodate and manage higher levels of wind and solar PV in South Australia.

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Download the Report

Andrew Stock is lead researcher for the Climate Council.

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10 Comments
  1. david_fta 3 years ago

    Thanks Andrew, no surprises here.

  2. howardpatr 3 years ago

    With some luck Minister Canavan will be asked question on Q and A tonight which probes into this issue – just to see how he come out defending the LNP fossil fuel supporters; like him

    • iampeter 3 years ago

      But there are no real defenders of fossil fuel in the LNP and they have been responsible for implementing most of the crippling environmentalist regulations.

  3. iampeter 3 years ago

    All up this report is more of the same futile evasions that we have had since the recent spat of energy price spikes in SA.

    All it does is blame a lack of affordable fossil fuels, but isn’t this exactly what the advocates of alternative energy are pushing for?
    Saying that the price spikes were caused by a low supply of fossil fuel generation is the SAME as saying wind/solar are responsible without having to actually say it.

    It’s all futile because the evidence is right there for you to see.
    You don’t need reports, you just need to think.

    • Ren Stimpy 3 years ago

      You have to put it in the context of the overall policy. The policy is to reduce GHG emissions by 26-28% on 2005 levels by 2030. As far as I am aware there are no programs to reduce emissions in the transport, agriculture or mining, so all of this reduction in GHG emissions will have to be achieved by the electricity sector. Basically, they need to make renewables work, on our current grid, and yes there will be technical difficulties but they must be overcome (for example by interconnectors). The only alternative would be to make emissions reductions in other sectors, and I wonder would the deputy PM be in favour of reducing emissions in the agriculture sector instead of the electricity sector? Or in the transport sector (carbon price on fuel perhaps)? Very unpopular stuff for our honourable representatives in government. Frydenberg knows this. He also knows his pet energy generation type of nuclear will never happen in Australia. Renewables it must be. Which is why his attitude is just get on with it, regardless the technical issues and the misinformation campaign from a particular section of the media.

      Looking further beyond 2030 – I would guesstimate the emissions reduction target for 2040 will be at least 50% reduction on 2005 levels, and the target for 2050 at least 75% reduction on 2005 levels. Even if it is a lesser target it will still be a very significant reductions of emissions on 2005 levels, and renewables is the low fruit on the tree in terms of emissions reductions (much easier politically than compelling emissions reductions in transport, agriculture, and mining).

      • iampeter 3 years ago

        Hi Ren, I know where you’re coming from but my questions regarding this are:
        1. Why reduce “GHG” emissions by any arbitrary numbers when we know industrial civilization (all those polluting businesses) has lifted mankind out of poverty to the level of life we enjoy today? It’s empirically proven the these are net beneficent industries – not net cost.
        2. How will funneling cash into an industry that consumes almost $300 billion in subsidies per annum going to reduce any emissions? We need to produce $300 billion dollars worth of unprofitable products when before we just used fossil fuels. Shouldn’t any real environmentalist be appalled at the waste of the alternative energy industry?
        3. All this talk of “it has to be nuclear/it has to be wind/it has to be fossil” – why not just remove the government from the equation and let the market decide? This will ensure that the best bang (therefore the most environmentally friendly) product will win.

    • Neil Woodford 2 years ago

      You stated that “Saying that the price spikes were caused by a low supply of fossil fuel generation”

      While the article states:
      “Average electricity prices have been historically higher in South
      Australia due to the state’s more expensive fossil fuel options and
      lower electricity market competition.”

      It does not appear to be putting the blame on high prices on low fossil fuel supply, but on the reverse. That the price increases (particularly the peaks) are due to the reliance on gas as a power source.

  4. howardpatr 3 years ago

    Well Canavan got an appropriate question and came out pushing fossil fuels – including, of course Adani. One day the true cost of electricity will be revealed when the cost of GHG emmissions are taken into account.

  5. valvolux2 3 years ago

    Why write such a report – the answer is as simple as wind and solar only operate 25% of the time? So relying on them is a dumb idea. Blaming backup generation and grid setup is so mind numbingly silly. You have admitted defeat – that you need 100% base load from fossil fuels at all times. You need all of your neighbours to not be using renewables, so that they can take your excess energy.

    Gas is not expensive if there’s lots of it. How stupid to say that. Its expensive because SA shut down plants to make way for renewables. Why cant any of these renewables mobs get someone who knows ANYTHING about power generation and economics to proof read the stupid excuses they make.

    • Neil Woodford 2 years ago

      The abundance of gas is not the issue with cost. It is that gas is now being priced based on global markets (primarily the Singapore market which also determines our petrol prices). Gas suppliers get more money from shipping gas overseas than they get for power generation. This is pushing the price of gas up, even for local use in power generation.

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