South Australia takes on energy oligopoly in push for more renewables

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South Australia pushes for new electricity cable to eastern states to break local energy oligopoly and open up new markets for renewable energy.

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South Australia has announced its intention to push for a new electricity link to the eastern states in a move that it says will allow more renewable energy to be built, will help lower power prices, and break the stranglehold on the state held by major energy players.

Premier Jay Weatherill announced on Tuesday that the government will set aside $500,000 to help fund a feasibility study on the proposed $1 billion link, which would likely connect South Australia to NSW and add to the new and expanded links to Victoria.

Two things in the announcement by Weatherill and energy minister Tom Koutsantonis stood out – the desire to open the market to competition, and the reference to “incredibly cheap” renewable energy.

“All Australian consumers would benefit from greater interconnection because it would create more competition between wholesale suppliers,” Weatherill said in the statement.

This is a crucial point. South Australia has always had the highest electricity prices in the country, a legacy the Australian Energy Regulator blames on its historic reliance on expensive gas generation, and the lack of competition in the local energy market.

South Australia’s transition to the leading state for renewable energy – with wind and solar now contributing more than 40 per cent of its demand (and 50 per cent in the month of May) – has meant wholesale prices have been lowered.

That forced out the last remaining coal-fired generator, but in turn has led to reduced competition following the closure of the Northern brown coal power station.

Energy analysts have been surprised by the prices bid in the market, and point to the dominance of the major players, which control more than 70 per cent of dispatchable capacity. A similar situation exists in Queensland where the state-owned coal generators account for more than 60 per cent of capacity.

Koutsantonis lamented that since the state’s electricity generators were privatised by the Liberal Party, “we have lost the ability” to control prices.

“This study will look at how we can better connect with Eastern markets to gain greater access to baseload power and find new markets for the incredibly cheap renewable energy generated in South Australia.”

South Australia is not the only state considering a new cable linking to the National Electricity Market. Tasmania is considering a second link over the Bass Strait, although analysts suggest this should only be done if more renewables are built. They argue there is little point of a new cable if it is merely a mechanism to import more coal from Victoria.

A similar view will be held for the South Australian proposition. There are some in Western Australia who also favour a link to the eastern states market, although the costs of that is likely to be prohibitive.

But there is a general view that more high voltage links will facilitate the delivery and sharing of renewable energy, while allowing local networks to focus more on micro-grids and other options that can use storage and competing technologies.

Indeed, there are some in the industry who question whether a new $1 billion link will deliver value for money, given the amount of storage that could be built for the same sum. That will likely be a question for the regulators, when asked to rule on the investment if a cable is ever proposed.

Transgrid, the NSW-based transmission operator, welcomed the idea, saying it could underpin the building of new solar farms. Some suggest there is limited capacity in western NSW now because the capacity of the existing lines are dominated by the big projects built with government support by AGL Energy.

South Australia’s transmission group ElectraNet says that a “pre-feasibility” study indicated the potential for a new interconnector to be economically feasible.

It says the new study will consider a range of interconnector options and include broad consultation and reporting on outcomes, with electricity consumers and industry stakeholders.

“Stronger interconnection of South Australia to the Eastern States will improve wholesale market competition and power system security for South Australia, as well as providing renewable energy for Australia,” it said in a statement.

Weatherill and the South Australian government have been lamenting the lack of a true national energy market, and have complained that current rules penalise rather than encourage renewable energy.

This is critically important to the state, which is about to head on a path beyond 50 per cent wind and solar towards a 100 per cent renewable energy outcome, although there are still influential factions in the state pushing for nuclear, despite its huge costs.



“We need a true national energy market that supports renewable energy and doesn’t punish it,” Weatherill said. “All Australian consumers would benefit from greater interconnection because it would create more competition between wholesale suppliers.

“Renewable energy is providing the high tech jobs of the future, and is helping South Australia transition to a low-carbon economy. South Australia is blessed with both wind and sun and perfectly positioned to lead the way in the rapidly growing renewables industry.

“It’s important that as a nation we create an energy network that allows greater access for consumers to South Australia’s renewable energy endowment.”

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8 Comments
  1. DevMac 3 years ago

    In related news AGL announces 12% increase in electricity prices in South Australia as of the 1st of July.

    It seems the Northern Power Station was closed because it could no longer compete with electricity generation prices, but now that it’s closed, power prices are going up. Whilst this recent RE article states that wind power is reducing the price of power:
    https://reneweconomy.com.au/2016/wind-energys-biggest-month-and-how-it-keeps-prices-down-69687

    Those three factors don’t fit into a single truthful narrative.

    • Giles 3 years ago

      Of course they do – this is a story about market power, and when the wind doesn’t blow the gas generators can charge what they want. AGL is the biggest gas generator in the state, so right now it is getting more revenue out of gas generation and has decided to get more revenue out of its retail customers.

      • DevMac 3 years ago

        Hah, of course! I’m always forgetting to take into account gratuitous opportunism. Cheers Giles (I shouldn’t need such reminders…)

  2. Mark Roest 3 years ago

    I have questions from two perspectives:
    If you can get all the storage you can use for under $150 per kWh, to cover you when the wind dies down or the sun is hidden, do you really have a huge surplus that is worth spending a billion dollars to reach a market for it? I’m assuming if you are only talking about baseload, you can have plenty of peaking power most of the time. It’s worth running the numbers to see if there is any reason at all to build that line; it could be just old-school thinking without considering renewable energy, smart microgrids, and energy efficiency, along with cheap battery storage, which by the way, will probably last over 4,000 cycles, and in a few years, over 10,000 cycles.
    If it does still make sense to build the line, can anyone tell me if transmission towers are going to be used, and if so, how tall, how many, how much will they cost, and the dead weight, live weight, and wind loading they must tolerate? Plus I guess, what kind of fire exposure should they be able to tolerate?

    • DevMac 3 years ago

      Sounds like one of those situations where two sets of economists would come up with polar opposite conclusions based on who asked (paid) for their modelling.

      Power generation and transmission could turn into two distinct markets: One for small-medium users served by solar, micro-grids and small-scale storage, and then one for large users served by large plants spread about the country, possibly requiring additional interstate connectors to balance out requirements on a “just in time” basis – potentially with micro-grids providing small levels of locally sourced power generation from any over-supply (likely at far cheaper rates than the large-plant sourced power).

      This separation could then cause a large disparity between power prices for micro-grid consumers versus the large consumers that need the big expensive plants and infrastructure.

      Interesting times ahead.

  3. Ian 3 years ago

    The buildout of wind farms from Melbourne to Adelaide would probably require a substantial interconnector system. There are many routes between these two cities. Presumably this proposed interconnector would be line of site through Ballarat, Stawell, Horsham and Bordertown taking Victorian brown coal baseLOAD to Adalaide. However there are wind farms at McArthur, Port Fairy, Cape Bridgewater, Mt Gambier (lake Bonney) and plenty of wind resources along the way. There are regional centres like Warrnambool, Portland, Mt Gambier, and Robe. A carefully thought-out interconnector system could breath new life into all those rural and regional centres and enable huge amounts of Wind and solar resources development.

  4. Andrew Woodroffe 3 years ago

    Why not both transmission line and storage. Putting some storage at both ends will allow very high useage factors for the line. And they can be put in later as the need for some a line increases. Note that modelling suggests that there will be times of no wind, no sun and empty batteries. These times will be short and infrequent, but they will happen and are a reason to keep and maintain gas turbines.

  5. jeffthewalker 3 years ago

    With ubiquitous home (and some business) storage in 2 to 5 years, solar/battery/inverters will provide the peak/trough loads for the building. If storage gets down to 50%, a thin pipe will open up to the grid and draw in the average daily requirement.

    eg For a 24kWh household, 4A X 240V (1kW) for 24hrs will keep the storage adequately functional till the sun comes out.

    No need for peak supply for these buildings. Off with the duck’s head (and tail).

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