Wind, solar and water chase coal and gas out of grid, and reshape price and demand

Replacing fossil fuels with renewable energy is the best way to reduce carbon dioxide emissions. Berrybank wind farm. Photo: Naturgy Group.

Australia’s transition to a renewables dominated grid accelerated in the December quarter, with a record share of wind, solar and hydro, gas and black coal falling to levels not seen for nearly two decades or more, and new benchmarks for minimum demand and emissions reductions.

The latest data from the Australian Energy Market Operator, in its latest Quarterly Energy Dynamics report, shows that renewables reached a 34.9 per cent share of generation in Australia’s main National Electricity Market, with gas slumping to its lowest level since 2003 and black coal to its lowest since 1998.

The combination of increased renewables and moderate demand – thanks to lower temperatures caused by La Nina – led to a number of other benchmarks, much of them during daytime hours thanks to the growing influence of the surging amounts of solar PV on the nation’s rooftops.

New lows for minimum demand were established across the NEM, and also in NSW, Victoria and South Australia, while wholesale prices fell sharply (particularly in October), and emissions for the quarter fell to a record low – a stunning eight per cent below their previous record low.

“Grid-scale solar, wind, hydro and rooftop solar PV continued to displace thermal generation, with black coal- fired generation falling to its lowest Q4 average since 1998, while gas generation declined to its lowest Q4 average since 2003,” AEMO’s Violette Mouchaileh said in a statement.

These developments are significant because they represent a complete repudiation of the federal government’s stance on energy and climate, as well as a triumph of technology and engineering over politics.

The outcome has been heavily influenced by actual policies, almost entirely those introduced a decade ago by the then Labor government, at the urging and with the assistance of the Greens and independents, and through some key support from the states.

The transition has survived a Coalition more interested in promoting coal and a “gas led recovery”, and which has sought to destroy those policies, has repeatedly claimed there there is too much wind and solar in the grid, and has resorted to childish sledges of new technologies such as battery storage.

The pace of the transition will accelerate in coming years with AEMO modelling a near 80 per cent renewables share by 2030, and even the Coalition assuming a share of nearly 70 per cent renewables by 2030 in its own modelling.

One feature of the changing generation mix, particularly in daytime hours, is the increasing number of negative spot prices, which occurred in 16.6% of all dispatch intervals during the December quarter.

That was largely courtesy of the growing impact of rooftop solar, and the dramatic falls in minimum demand levels, forcing generators to push prices below zero because it is cheaper than having to switch off.

But large scale wind and solar is also having a growing impact on the grid. Wind and solar (variable renewable energy) reached a new peak in the December quarter and renewables marked a new “instantaneous” peak of 61.8 per cent on November 15, as we reported at the time.

Other notable milestones included a record output of large scale solar – 4,444MW on December 24, which was 560MW above the previous record. These records will continue to fall as the installations and connections of new wind and solar farms are completed.

The changes to the energy mix is having some interesting effects on demand, and pricing. AEMO notes a new “north-south divide”, where states such as Queensland and NSW which rely more on coal and gas experiencing significantly higher average prices than southern states with more renewables.

“While underlying spot prices fell or were stable in the southern NEM regions, the larger share of thermal generation in Queensland and New South Wales and higher prices being set by black coal and gas, as well as limitations on transfers of lower cost energy from the southern regions, each contributed to an average $45/MWh north-south price differential,” Mouchaileh said.

You don’t read about that much in the fossil fuel lobby’s campaign literature. You can read more about that article here.

Another new innovation is the switch to 5-minute settlements, designed to stop the rorting of wholesale prices by fossil fuel generators, and also encourage fast and flexible equipment such as battery storage. That has also had a big impact on bidding patterns.

The decline of gas generation is also significant, although predicated by everyone outside the gas lobby and the Coalition government.

It shows that gas generation has and is falling sharply. Even in South Australia, where it had its greatest market share, its use has been significantly diminished after the introduction of synchronous condensers which can provide the same grid services as fossil fuel generators.

That means that at times, only two gas generators operating at minimum output are needed in the grid, helping South Australia accelerate its planned transition to net 100 per cent wind and solar, a world-leading achievement that it is likely to reach well before the 2030 target date.

 

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