Negative prices: South Australia solar farms had to pay to produce in September

“Record low wholesale prices in September resulted in South Australian solar farms having to pay $9.70/MWh to generate,” the Australian Energy Market Operator notes in its latest Quarterly Energy Dynamics report.

Over the whole quarter, the volume weighted average price of large scale solar was $23/MWh, down some 62 per cent from the same time in 2019, while the average price for all electricity produced in South Australia for the quarter was $40/MWh.

There are several reasons for the negative price of South Australia solar – firstly the increase in output from large scale solar, as Bungala 2 finally reached full output, the continued rapid expansion of rooftop solar, which in turn is dramatically reducing operating demand in the middle of the day, and grid constraints which limited the amount of exports from South Australia into Victoria.

South Australia has three large scale solar farms, the 110MW Bungala One installation near Port Augusta, the neighbouring 110MW Bungala Two (which has only just reached full output after nearly two years of delays due to technical issues), and the 95MW Tailem Bend solar farm near the town of the same name.

Tailem Bend usually ducks negative pricing events, turning its output down to zero under the terms of its long term power purchase agreement with Snowy Hydro.

But the two Bungala solar farms, under long term contracts with Origin Energy, plough through the negative prices. The exact nature  of the contracts is not known, but it is not necessarily a bad thing for either party, but it’s not a great market signal for more solar, or for more off-take agreements – although it is for storage.

Across the National Electricity Market, which comprises South Australia, Victoria, Tasmania, NSW and Queensland, the average price for solar fell to $29/MWh in the September quarter, and the average price for wind fell to $38/MWh, both representing falls of around 50 per cent from the same period a year earlier.

AEMO’s QED report notes that curtailment of wind and solar farms across the NEM rose to 5.5 per cent in the September quarter, a result of the record levels of negative pricing events in South Australia and Queensland, and newly emerging system strength issues in north Queensland.

In Queensland, two solar farms and one wind farm were told of system strength issues that would cause their output to be reduced significantly, or down to zero, depending on conditions, and then another nine solar farms were told the same thing as new modelling unveiled new problems.

In Queensland, the average constraint for wind and solar over the whole quarter was 49MW, up from 5MW in the same period last year.  Ironically, the situation was worsened by increased outages at the state’s coal fired generators. New synchronous condensers may alleviate that issue.

Economic constraints – the decision by generators to “self-curtail” in the face of negative prices – meant that on average there was 50MW of curtailment of wind and solar farms through the September quarter. AEMO says 70 per cent of that curtailment occurred in daytime hours between 7am and 7pm.