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South Australia’s big win with wind

Matthew Wright
6

Wind Power in South Australia has been a howling success; it now provides more electricity in the state than coal and in just a decade the wind industry has developed into one of the world’s leaders – and all to the benefit of South Australians.

Back in 1998 when the National Electricity Market was formed, South Australian generators charged more for electricity than generators in any of the other states. Today South Australian electricity is at its lowest price since the creation of the NEM and that is largely because of its choice to significantly develop its wind resources.

Wind Power costs a lot less than the savings it makes – it’s like a preventative measure; an insurance that you buy against high electricity prices. In the case of South Australia, they did just that and it paid off. According to the Essential Service Commission of South Australia wind power adds just 0.366c per kWh to the average South Australian electricity bill or just on 1 per cent (based on AEMC 2013/2014 South Australian 32c retail rate) The oft claimed outrageously high cost of wind is just $18.00 a year per household.

However offsetting this small cost is South Australia’s transition from having the highest cost wholesale electricity to the lowest cost in the country (AEMC 2013/2014). This lower-cost electricity has been a result of the Merit Order Effect, and a number of reports have quantified this value to consumers.

The Australian Energy Market Operator (AEMO) recently stated that South Australian pool prices are now the lowest since the start of the NEM, and data in a published report shows the wholesale price is half the ‘normal’ price when it’s windy, and shows that wholesale prices are at least 0.5c per kWh lower thanks to wind power in that state. The analysis was current until 2010, savings on wholesale electricity in 2011 are expected to be even greater.

This means that South Australian householders are paying 0.366cents ($18 a year) for wind but saving 0.5cents ($25 a year) on wholesale electricity. In other words, they’re already better off to the tune of $7 and we’ve only just started shifting to renewables. We’ve only just started, because South Australia is on 26 per cent wind power (25 per cent coal, 49 per cent gas), while Denmark – the world’s leader – is on the same, but is already building to its target of 50 per cent wind power by 2020. South Australia can easily do the same by upgrading its electricity grid interconnection to Victoria and New South Wales in order to become a wind powerhouse, exporting renewable energy eastward.

Uninformed critics of South Australia’s rollout of wind claim that the state would not save significantly on its carbon emissions, that it would burn as much, or more, coal and gas and that it would continue to rely on electricity imports from Victoria to prop up its high penetration renewable power grid.

None of this has proven to be the case.

As AEMO’s report makes clear, while South Australian electricity demand has increased over the period that the majority of the state’s wind has been installed (2005-2011), carbon emissions have reduced by over 15 per cent.

During the same period, South Australia deployed just 200MW of new capacity (other than wind) – a tiny amount given the increase in demand, and especially peak demand, in the state over the period – and 1,000MW of wind farms. This clearly shows that wind power does not require new backup generation and can be deployed well beyond 25 per cent nationwide before any significant augmentation is required to the current electricity supply system.

In fact, a huge amount of gas peaker and hydro has always been available on the grid, sized to replace the shocking instantaneous loss of a 500MW coal-fired power generators. Liddell Unit 3 in NSW tripped five times in just 40 days last year, with no production for over 3 days at time. These challenges have been proven to be far greater than the challenge of integrating wind power.

The real data from AEMO now shows that South Australia is burning less coal, less gas and, most importantly, importing less electricity (mostly brown coal) from Victoria – and wind output can be accurately predicted to 97+ per cent for each period. (Just ask AEMO, the people who run the electricity market).

Wind Works. It’s giving South Australia climate security through decarbonising its economy, energy security through reduced imports of expensive volatile fossil fuels. And it works so well that South Australia can now go further and target 50 per cent of the state to run on wind power and put much more solar on rooftops while planning to integrate this with Baseload Solar Thermal plants installed in locations like Port Augusta.

As for the rest of Australia, we should be ratcheting up our efforts and not missing out on the benefits that have been afforded to those in Australia’s least-populated mainland state.

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6 responses to “South Australia’s big win with wind”

  1. Ian Franklin Avatar
    Ian Franklin

    Mathew,
    The published figures (26% wind, 25% coal, 49% gas) add to 100%. Solar, of course, is not included, presumably because it is not measured. I wonder what contribution solar is making, as it appears that SA now has around 80,000 households with installed PV, perhaps 150MW installed, and lots of sun? Hence, SA has around 12% or more of total PV installed in Australia, but 8% of the population.

    Of course, the commentariat today is full of misinformation about the role of renewables in South Australia’s “third highest electricity cost in the world”

  2. Ben Courtice Avatar
    Ben Courtice

    The contribution of solar is harder to measure (you could model it) because energy from solar panels is usually measured as a simple reduction in overall demand, rather than as energy fed into the grid. However, in terms of the merit order effect, it has a similar effect as wind in depressing prices.

    As to the “third highest electricity cost in the world” – Germans, who have a lot of renewable energy (and fairly high electricity prices, per KWh) pay a lot less than Australians because, on average, they have far greater efficiency in energy use.

  3. Matthew Wright Avatar
    Matthew Wright

    Giles Parkison (Reneweconomy editor) had an article in the Australian the other week which had some additional very useful background data in it. (Though it doesn’t have the updated 2011 generation statistics)

    http://www.theaustralian.com.au/business/opinion/states-wind-farms-help-debunk-a-few-myths/story-e6frg9if-1226300892848

    OR
    Search google for the headline
    “State’s wind farms help debunk a few myths”

  4. Matthew Wright Avatar
    Matthew Wright

    South Australia should have a little over 150MW of Solar Photovoltaic. (Difficult to get a precise estimate)

    So my guess is that they’d have about 2% Solar PV if you take into account the mitigation against grid losses as well.

  5. Matthew Wright Avatar
    Matthew Wright

    State’s wind farms help debunk a few myths

    This is Giles’ article from the Australian, with some additional information on the SA situation which I missed in my article.
    http://www.theaustralian.com.au/business/opinion/states-wind-farms-help-debunk-a-few-myths/story-e6frg9if-1226300892848

    IS wind energy as useless as its critics say it is? Is it really so expensive and ineffective that its emissions abatement is achieved at 10 times the cost of gas-fired generation?

    That was the conclusion of a British study sponsored by the Global Warming Policy Foundation, chaired by former Conservative chancellor and noted climate sceptic Nigel Lawson. Wind power upsets a few people, not least the climate sceptics who simply can’t comprehend its utility.

    But reports such as Lawson’s are also a red rag to the bull of the wind industry itself, which sees itself as cost-competitive with fossil fuels in most Western countries and as a major contributor to the task of reducing greenhouse emissions.

    But rather than consider the merits of the arguments of the anti-wind lobby versus the pro-wind lobby and to set aside the debate about visual amenity and noise, it’s probably most worthwhile to consider what the Australian Energy Market Operator, the organisation responsible for co-ordinating the contributions of various energy sources and for keeping the lights on, has to say about the matter.

    It should go a long way to settling the fears. While Lawson’s report was based on a hypothetical case unique to Britain, Australia can draw on real-life experience in South Australia. And it serves to debunk a few myths: wind does not need like-for-like back-up, or anything near it. It does achieve abatement, it does displace fossil fuel generation, and it is not anywhere near as expensive as some claim. The AEMO says wind accounts for more than 20 per cent of SA’s electricity consumption, making it the second largest in percentage terms in the world after Denmark, and the highest on a per capita basis.

    It had 1150MW of capacity in 2010-11, growing to 1203MW with the anticipated completion of the Hallett 5 wind farm late last year. Interestingly, wind accounted for 20 per cent of nameplate capacity (installed capacity) and the same percentage of production.

    As the accompanying graph shows, most of that wind capacity and production has come in the past five years.

    The AEMO data shows that very little peaking gas plant has been built during that period — 200MW versus 760MW of wind — and this has been built almost exclusively to deal with rising peak demand, which has grown by more than 350MW over the period (and by 40 per cent over the last decade).

    And although wind is highly intermittent — it contributed as little as 60MW in some peaks and as much as 873MW in others — the amount of peaking gas generation used over the period has actually fallen in the past five years, from 501 gigawatt hour to 325GWh, despite the increased capacity and the rising peak demand.

    Overall, the use of locally sourced coal and gas-fired generation (both baseload and peaking) has declined, and the state has been a lot less reliant on imported energy from Victoria’s brown-coal generators.

    In some years, that need has been totally eliminated. The overall share of coal-fired generation has fallen to 32 per cent from 42 per cent in 2003 and gas to 47 per cent from 57 per cent. It met its 20 per cent target three years ahead of its own schedule and nine years ahead of the federal mandate. Far from causing a 10-fold increase in prices, AEMO reports that in 2010-11 wholesale electricity prices in the state averaged $34/MWh, their lowest since the National Electricity Market began more than a decade ago. During the same period, emissions have been reduced from 0.72 tonnes of CO2 to 0.55t/CO2.

    The biggest losers in this, in terms of displaced capacity and slumping wholesale energy costs, and therefore earnings, have been the Victorian coal-fired generators, which is why they have lobbied hard against expanded renewable energy targets, and for upgrading the interconnector between the two states.

    The AEMO data shows that SA’s imports of electricity have fallen sharply, but its exports (mostly wind) have increased dramatically.

    The cost of “firming” wind is estimated at 0.66c/MWh, less than 2 per cent of the retail energy cost in SA, and less than in NSW, which has negligible amounts of wind generation.

    Firming refers to the need to have other power sources on standby to support the grid and provide power in case of interruptions.

    AGL Energy, which owns both wind farms and brown coal-fired generators, said in an analysis of the SA wind deployment that the “hidden costs” of wind, such as firming, were negligible. There is, however, some debate about how far SA’s wind capacity can grow without an upgrade to links to other states. The state’s target for 2020 is 33 per cent renewable energy. Some suggest more than mid-20s penetration will be problematic. Linking with the wider grid is the key.

    A recent International Energy Agency analysis of Denmark found that the country could go as high as 63 per cent wind penetration, using existing flexible resources to balance supply. It benefits from being able to import and export from neighbouring grids in Scandinavia and Germany.

    “The report concluded that power systems have a greater capacity to handle variable renewable electricity (wind, solar, tidal and wave power) than commonly believed,” the IEA said.

    There was no doubt that wind energy could be challenging to incorporate, but it could be done. Interconnection, however, was critically important.

    Denmark plans to lift the share of wind to 50 per cent by 2000. By 2050 it expects to be free of fossil-fuel energy sources, altogether.

    As recently as the early 1990s, it sourced around 90 per cent of its electricity from fossil fuel sources. Because it still relies on fossil fuel sources for around half of its energy, its emissions per capita are above the OECD average.

    Retail electricity costs are high, caused by taxes that account for 60 per cent of its cost, but industrial users enjoy some of the lowest rates within the EU, the IEA says.

    Bright outlook

    ROSS Edwards, the head of business development and one who is in charge of new gas and renewable projects at TRUenergy, says any new peaking plant built in Australia over the coming decade will essentially be for meeting peak demand, not for acting as a back-up to wind.

    TRUenergy will need to build or commission about 2500MW of renewable energy capacity over the next eight years to meets its obligations under the 20 per cent renewable energy target.

    Most of this will come from wind, he says, although solar PV (photovoltaic) will likely come into the equation in the second half of the decade.

    Edwards echoes recent comments by Origin Energy chief Grant King, who believes there is no need for baseload power generation for the rest of the decade, with the possible exception of Queensland, and that most investment will be in wind to meet the MRET, and in open-cycle gas to meet the peak demand.

    Isn’t the open-cycle gas being deployed to match the intermittency for wind, Greenchip asked. “No, it’s really to match peak demand,” Edwards said.

    The good news for the renewable developers is that Edwards predicts TRUenergy will be back in the market, building its own wind farms or writing contracts for third parties, by the end of the year.

    The company’s first project, the 120MW Stoney Gap wind project in the Clare Valley in South Australia, was likely to be ready for final investment decision this year, and TRUenergy would likely need a couple of such projects a year to meet its commitments. Edwards says that while wind will dominate the MRET in the next few years, it is possible that solar PV will become cost-competitive in the latter half of the decade, particularly as costs of panels and modules continue to fall.

    TRUenergy is hopeful that it will succeed with its proposed 150MW Mallee Solar Farm project in the recalled Solar Flagships tender, and says it has proposed a substantial reduction in costs.

  6. Ian Franklin Avatar
    Ian Franklin

    Thanks Ben, Matthew. The 2% figure matches closely my back of envelope estimates; this is, of course, an average over the year. At times, around the middle of the day in summer, the supply from PV panels must be of the order of 7.5% of the net demand. Still small, I agree, but not trivial, and given the high SA prices, PV power now generally exceeds retail parity. Hence, PV installations will continue to increase.

    Power fed into the grid is measured, as everyone with such installations gets some form of feed-in tariff. I have not seen any figures for the state as a whole. Finally, all of the figures for demand in SA show a strong tendency to peak in the middle of the day, not after hours as the just so stories claim.

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