Renewable energy smashed all sorts of records in the September quarter, but the good news and other technology milestones has been tarnished by the devastating impact on prices by the fossil gas and black coal generators.
The latest Quarterly Energy Dynamics report released by the Australian Energy Market Operator notes that grid scale solar and wind reached a record average of 4,465MW over the September quarter, and contributed to a record “instantaneous” renewable generation record of 64.1 per cent on September 18.
That helped grid emissions to drop to their lowest September quarter level on record, and for emissions intensity to also fall to a new low.
Other records to fall included highest wind output in the National Electricity Market of 7,271MW at 2100 on August 4, the highest large scale solar output of 4,682MW at 10am on September 4, and the highest combined wind and solar output of 9,112 at 9.30am on August 22.
Those records came despite lower wind speeds and lower solar irradiation, and reflect the growing output from existing and new renewable generation, and fewer constraints, thanks in part to new solutions such as synchronous condensers in South Australia.
Rooftop solar also extended its influence on the grid, causing minimum demand to fall to new record lows of 12,583MW in the main grid on September 25, and to 742MW on the Western Australian grid – a trend that continued through October.
But the positive growth in renewables and technology solutions was overshadowed by soaring wholesale electricity prices, particularly in July, which will inevitably find their way to consumers.
AEMO is in no doubt about the cause: it had little to do with demand or limited supply, and simply reflected the high cost asked by the operators of fossil fuel generators such as coal and gas, partly on the basis of soaring commodity prices.
The average wholesale electricity price in the September quarter was $216/MWh, mostly the result of extremely high prices in the month of July. Extraordinarily, nearly one quarter of all pricing intervals were priced at more than $300/MWh over the quarter.
Gas generation was the biggest culprit. Fossil gas has always been the biggest factor in wholesale electricity prices (see graph above), and in this latest quarter the wholesale market price averaged more than $330/MWh when gas was responsible for setting the price.
It exposes the Coalition’s “gas-led recovery” for the fraud that it always was, dreamed up by the gas industry itself. The grim reality is that gas will continue to set the prices for much of the time until the technology is finally chased out of the market by battery storage.
That debate now has political consequences, because detractors are sheeting the blame home to policies supporting renewable energy. But the cause was, and remains, the cost of fossil fuels, and will remain so until the level of renewables reaches a high enough share to break their stranglehold over the market.
“(These high prices) signify a generally higher cost of energy rather than short-term scarcity-driven extreme prices,” AEMO writes. And it warns that this is now flowing through to the futures market, hence the budget warnings of further price rises for frustrated consumers.
It should be noted that hydro power – largely controlled by the federal government owned Snowy Hydro – was also guilty of setting high prices, an average of nearly $300/MWh, due to “limited” water resources.
Most coal plants also increased their marginal offers to an average of more than $200/MWh. According to AEMO, five influential coal plants have been bidding at more than $100/MWh for more than a year and are offering little capacity below that threshold.
Cheap coal? Tell us another story.
The good news is that despite all the pricing shenanigans, grid emissions hit a record low, at least on a emissions intensity basis, which fell a significant 4 per cent over the quarter, and the lowest aggregate emissions for a September quarter.
This was largely due to the fall in black coal generation, which hit its lowest average levels ever for a September quarter, and a high number of brown coal outages.
Another interesting aspect from the QED report is the low level of curtailment of wind and solar, which fell from nearly 5 per cent in Q3 last year, to just under 2% in Q3 2022.
South Australia had the largest year-on-year reduction from 10 per cent to 2.4 per cent, largely as a result of the newly installed synchronous condensers, which reduced curtailment of wind and solar due to “system strength” concerns down to zero. It also results in significantly less gas generation at those times.
