Australia’s most coal dependent state takes title of world’s most volatile electricity market
A Rystad Energy report has labelled New South Wales the most volatile electricity market in the world.
NSW was found to have the highest volatility of all 43 markets investigated for the calendar year 2024, with an average 1-hour intraday spread of $A594 per MWh, or around $US390/MWh.
Three key factors drive this volatility: weak interconnections with neighbouring states, high exposure to events like natural disasters, and the combination of high solar penetration with high fossil fuel prices.
The combination of high solar penetration leading to consistently low daytime prices, and high gas prices leading to consistently high evening peak prices results in consistently high volatility.
In the case of NSW, where “always on” coal power generation still dominates the grid, this is a reminder that coal plants – and particularly end-of-life coal plants – are unsuited to this sort of demand profile.
It is also a reminder that while gas can provide the necessary flexibility to back up aging coal and variable renewables, it is far from a cheap (or clean) option.
The answer is more storage, and strategic investment in transmission and other energy market reforms that will optimise the use of power generated from solar and wind.
Happily, more storage is on the way, with the latest stocktake from the Clean Energy Council showing there are 52 committed storage projects currently in development around Australia.