Solar farms switch off en masse as coal plants flex their muscle in Queensland | RenewEconomy

Solar farms switch off en masse as coal plants flex their muscle in Queensland

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Solar and coal are fighting for dominance in the Queensland market. On Wednesday, coal won – with solar farms switching off en masse as prices plunged. But for how long?

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There is something very unusual going on in the state of Queensland. Over the past two months the number of negative pricing events has accelerated, in some weeks to an almost daily basis.

But it seems that the legacy coal generators are deciding not to ramp down as the market might expect. Instead, some observers suspect they are trying to force the solar plants out of the market on occasions. Some observers are comparing it to a Mexican stand-off, or even to the Survivor TV series.

On Wednesday, due to planned network outage in northern NSW, Queensland’s ability to export surplus electricity to NSW was dramatically reduced, and prices went down to zero early in the morning as the amount of solar increased significantly.

What happened then was highly unusual. Nearly all the 21 operating large scale solar plants switched off, some for short periods, others for longer.

But at the same time, as the output of large scale solar fell to negligible levels in the middle of the day, and the price of electricity went near the price floor (minus $1,000MWh), the amount of coal generation actually increased. And during all this time, the biggest pumped hydro facility in the state, Wivenhoe, owned by CS Energy, did not pump.

And, just for good measure, the same pattern looks like it is being repeated on Thursday. Most solar plants have switched off, the coal generators have increased output. Wivenhoe is not pumping.

This graph – from the OpenNem resource – illustrates how. It shows the amount of rooftop solar and utility solar generation throughout the last three days.

On Wednesday, (look for the vertical red line linking the output on top and the prices below) utility scale solar scaled right down, from more than 600MW to less than 100MW. You can’t blame clouds, otherwise that would have impacted rooftop solar as well.

But notice that vertical red line, that signals when the price hit the floor (minus ($1,000MWh), and the state owned coal generators increased production, before more solar plants chose to stop generating.

The same occurred on Thursday too – coal dials up as prices plunge into negative territory, large scale solar dials down.

To try and plot the actions of all the solar plants would look like a bowl of spaghetti (you can get the idea here, click on the solar tab), but Dylan McConnell from the Climate and Energy College produced these graphs to illustrate roughly what went on.
The first (above) is what happened at Daydream solar farm, which generated briefly in the morning, switched off as prices locked in negative territory and didn’t come on again until the price outlook was better in mid afternoon. Another seven solar farms, including Clare, Sun Metals, and Rugby Run had similar patterns.

The second graph below is Hamilton, which was off for a shorter period, (see graph below) and may have been managed more actively – either by their trading teams or by automatic software.

Or, they it have contracts that simply said “do not generate when prices go negative”. Another eight solar plants, including Haughton, Ross Over and Emerald, has similar outputs. Looks like they finally gave up when the coal plants increased output.

Only a handful of plants, mostly smaller installations of around 10MW, but also including the 118MW Lilyvale solar farm, kept on generating all the way through the day.

But here’s the interesting thing. As the solar plants turned off, the amount of coal output increased by around the same amount, even though the price was near the market floor. Anyone generating at that time were effectively paying  $700/MWh or even up to $1,000/MWh for the right to generate.

This is not the first time that coal generators have increased generation at the worse possible point in the day, at a time of low or negative prices.

The Australian Energy Regulator reports regularly on the workings of the wholesale electricity market, and in late July noted that prices had fallen to the price floor on occasions because the government generator Stanwell plants had increased capacity by 130MW at Tarong and bid to the price floor (minus $1,000/MWh).

That inspired other generator to do the same, preferring to keep generating rather than switching off, and likely protected by some hedging.

The actions on Wednesday this week may have been random, or a mistake, or – as analysts at Watt Clarity suggest – it may have been motivated by the high prices gained from the FCAS market at the same time.

Although, as one observer noted, probably not enough to cover their costs at an electricity price of minus $1,000/MWh. Energy minister Anthony Lynham, in a statement to parliament, suggested the low prices in Queensland would enable the coal generators to lock in lower future contracts and that the coal generators are well hedged in any case.

It has some in the market wondering. Most of the solar contracts now being written in the market don’t pay out when price goes below zero, so the solar plants switch off rather than pay for the right to keep generating. Those that continue generating are likely to have an old-style fixed price.

But the actions of Stanwell are a mystery, As plants operated by CS Energy wound down, the other half did the opposite. The longer and deeper the negative prices, the more that solar plants will switch off. A similar thing transpired on Monday.

And analysts wonder: Why increase generation and burn more fossil fuel even if well hedged, as Lynham suggests, as it would dilute the gains.

Is this a deliberate strategy to restrict the amount of solar production? If so, how much is it costing the state-owned generators. (It is not so easy to find out because the nature of most contracts is not revealed, and they are likely to be heavily hedged).

If it’s deliberate, Why? Is this a last ditch attempt to skew the market before the emergence of the new “CleanCo” generator that will operate the Wivenhoe pumped hydro plant, and seek to encourage another 1,000W of wind, solar and storage into the market in coming years?

One industry insider, commenting anonymously on RenewEconomy late Wednesday, described the situation as a “Mexican stand off” against Solar (with no batteries). He (or she) even compared it to the TV series “Survivor”.

“Interesting to see who goes broke first? Queensland coal’s daily load weighted dispatch is still  around $40ish during negative days. ( they will take a P&L hit but can probably still survive at those levels for a while).

“Those who have some PPA cover will be protected to an extent but based on the business cases I’ve seen…. could be some spectacular blow-ups on the way! It’s going to be the energy markets TV equivalent of “Survivor” ! :)”

One thing for sure: there’s usually more than meets the eye in electricity markets in Australia. This is going to be interesting to watch, particularly when the new CleanCo generator comes into operation, and operates assets such as the Wivenhoe pumped hydro facility.

Wivenhoe, as we report elsewhere, has been little used in recent years, but in August has been relatively busy, and notably only charging during the day, and discharging (or generating) at the early morning and evening peaks.

Curiouser and curiouser

But it is still only using a small part of its capacity. And on Wednesday, with prices near the market floor, it did not pump at all. But it did generate when the prices went higher.

That sort of strategy is likely to change under new ownership, and give the solar plants a valuable ally – as will other storage projects due to be built, including the Kidston pumped hydro facility in north Queensland, with its own wind and solar additions, and the 1000MW of wind, solar and storage capacity planned by Cleanco.

Note: This story has been updated to replace some of the graphs, mostly to make them more beautiful, and to clarify that the solar plant generation graphs relate to specific plants, and not an average.

See also: How solar is changing the energy market: No pumping at night

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  1. SCK 9 months ago

    From what i’ve gathered through reading this article, is that as soon as prices go down to minimum levels and even negative, if the solar farms stay on and feed energy into the grid at said prices, the companies operating those farms would lose a considerable amount of money, and because their share in the market is so much smaller (comparatively) to the coal plants, the coal plants can take the small losses to gain market dominance during those times and then make their losses back at peak demand times?

    First, what benefit do the coal plants get from using such strategies? and Second, because you stated most modern solar farm contracts have a ‘switch-off’ clause contingent on low or negative energy prices (which is likely to always happen with solar production during mid-day), how can we ensure that there is enough clean energy production to meet demand if the solar farms are choosing not generate? Is this what CleanCo hopes to combat?

  2. Malcolm McCaskill 9 months ago

    Interesting example from the aneroid energy website: Stanwell-1 was at 60% of capacity overnight when prices were at about $54/MW/hr, then between 10:15 and 10:45 am increased to 100% of capacity when prices were minus $178 to minus $441. So the unit can run at 60% of capacity, but it’s deliberately bidding the pool prices negative so it can increase its output. It’s not the solar farms bidding deeply into negative territory – large-scale solar had decreased from about 1000 MW at their peak yesterday to 250 MW to avoid the negative pricing event. Other coalies to increase output during the negative pricing period are Tarong1 (Stanwell), Gladstone1 (Rio Tinto), Callide3 (CS Energy), and Millmerran1 (Intergen Energy). It is State-owned CS Energy that operates Wivenhoe pumped hydro, until 31 October when it transitions to CleanCo.

  3. Jon 9 months ago

    Very weird, a game that can have no winners, the best you can hope for is to lose less than the others…
    One group guaranteed to lose is Qld taxpayers, both from the state owner FF generators bidding deep into negative territory and from the state owned pumped hydro not pumping during negative pricing events.

    I wonder if there’s a stand off between the state owned FF generators to see who is going to have to mothball a generator first.

    Can only hope that CleanCo will operate Wivenhoe properly.

  4. Seriously...? 9 months ago

    So…a thought experiment. A solar farm can’t pay its interest, and goes bankrupt. The facility is still there, someone buys it at bargain basement price and operates it with a fraction of the interest costs. I mean, who is going to pay to demolish a bankrupt solar farm, when you could keep it operating for minimal cost? This is hardly likely to benefit RE investment, but it also won’t help coal in the medium to long term.

    Oh, and maybe they need to lower the negative price floor 😉

  5. Cooma Doug 9 months ago

    A negative wholesale price moments are going to continue. While we still have a half hour settlement, base load can wriggle through in this situation. 5 minute closure will make it too tough.

    It will also encourage the new technologies and large fossil base load will be dead. So too will be the death of peaking gas.

    Don’t draw too many pessimistic conclusions from negative price signals.

  6. JHM 9 months ago

    Perhaps this could be viewed as a “negative capacity market” for coal. When spot markets experience very high pricing events, it serves as a sort of capacity market, creating incentive for capacity to remain available to the market if only just to enjoy those price spikes. Could this sort of thing happen on the negative side. Perhaps there is too much coal capacity. Extreme negative price events could compel some of that capacity to go offline forever. Coal plants maybe playing a game of chicken with each other to see which one will drive itself off the cliff first.

    Of course, as other note, it is capacity market for storage load capacity. That’s true enough, but it does not address the problem that the field of coal capacity may be overcrowded, and some of it needs to get kick off the island. Adding more storage is not really going to create more demand for coal capacity. Just the opposite, it will reduce the upper quartile prices that coal plants need to cover fixed costs.

    For example, battery capacity will erode the evening peak prices, making the ramp up during negative prices prior to the peak utterly futile. Even the volatility of such peak prices can induce call option like behavior, where enduring negative prices is the cost of the call option on what could be an unexpectedly high payoff in the peak prices. More storage with diverse ownership would trade down that volatility, making the call option worth less. But as it is, there may be too much coal capacity fighting for a few peak prices that each needs to survive in the game. Hence, the whole field will induce losses on each other until certain capacity has capitulated.

  7. Chris 9 months ago

    This is horrific. No doubt the market volatility coal is creating, and higher electricity costs, will be blamed on renewables. What’s the bet it’ll be used by the fossil fuel industry and it’s supporters to push inappropriate regulation. Crazy.

  8. cybernetichero 9 months ago

    Politician: Market forces will give us the best possib…..
    SFX: sound of machine gun fire followed by cheering crowd.

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