Wholesale prices in the National Electricity Market have climbed significantly in recent years. The increase has coincided with a rapid increase in the proportion of electricity supplied by wind and solar generators.Surely she knows that Sinclair runs Catallaxy, which campaigns relentlessly on the alleged cost disaster of renewables? Doesn't that annoy her? I hope she is at least sarcastic and condescending.
But that needn’t mean the increase in wind and solar generation caused the increase in prices. It might have been caused by other things.
Colleagues Songze Qu and Tihomir Ancev from the University of Sydney and I have examined the contribution of each type of generator to wholesale prices, half hour by half hour over the eight years between November 1, 2010 and June 30, 2018.
We find that, rather than pushing prices up, each extra gigawatt of dispatched wind generation cuts the wholesale electricity price by about A$11 per megawatt hour at the time of generation, while each extra gigawatt of utility-scale solar cuts it A$14 per megawatt hour.
Thursday, July 18, 2019
The staff room chat must be interesting
What's this? An economist at RMIT, who presumably runs into Sinclair Davidson from time to time, has an article up at The Conversation finding this:
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We don't want to take these things on faith. Its difficult for wind and solar to cut costs in the way claimed. I'm not saying its impossible. But its difficult since you are relying on the coal people to be confident enough to ease up on coal, thanks to the expectation that other energy will be rolling in. So we'd want to audit the assumptions of these people. Plus the auction system may itself be part of the problem. Coal is the slowest mover here. The auction system may be preventing the coal providers from competing because they are unable to jack their power up and down like the sun coming from behind a cloud. So they may be backing off, thus unnaturally creating scarcity.
Still the reasoning of the economists seems sound when it comes to their locating the main source of the energy inflation. They are saying that its our gas policy that is driving up our electricity pricing. I remember John Howard interfering in the market for what he called ENERGY DIPLOMACY. Promising contractually all these cubic feet of gas to the Chinese for decades to come at pre-determined prices. Not that I know the details. The gas can accelerate turbines faster than anything else. Its at the core of the flexibility of the grid in its entirety. So the gas-coal duality was a well-integrated system. But do we know the auction system isn't creating scarcity by privileging the non-coal producers over the slower-moving coal?
Having local gas cheaply available is a key to making all these renewables integrate seamlessly into the grid in its entirety. I have to conclude then that there logic is very credible as far as locating the reason for the price increases. But to say that the investment in the renewables have brought the price down, more than extra coal would have for the same investment ...... well they are not spelling that out exactly ..... but this part of their claims would have to be highly caveated.
So I'm giving them a likely 8 out of 10 for locating the main source of the energy price inflation. We need to talk to the coal producers to see if the auction system could be improved. Initially mostly in their favour, to allow them to plan better for peak time. But I'm saying their headline claims are way overblown and it would depend on spelling out their assumptions. Its as if they were saying that we cannot have chosen to use the same money for a bit of extra coal-electricity production.
The coal people may be just digging the higher prices the relative scarcity of gas and the lack of flexibility of everything else is producing. They may be just sitting back there like a lazy fat spider revelling is the loads of cash coming in. When we must have coal for our core base-load it would have been better if all other power were constructed to be peaking power.
"The higher prices have made it more expensive to run gas turbines and have pushed up the price of what is often the last bid to be accepted."
See that. As gas providers they can sit back and get the best bids. They can manipulate the auction market. They are the only ones who can accelerate these giant steam turbines with any despatch. The coal guys have to maintain momentum AT ALL TIMES but they cannot accelerate quickly.
"Therefore, a continued expansion of renewables is likely to put downward pressure on wholesale prices for some time." No wrong, because its not solving the underlying problem but then they go onto also hit the bullseye:
"This means that rather than reconsidering renewables, authorities should reconsider their reliance on gas plants for handling peaks in demand." No thats just silly still not hitting close there:
"While peaking plants are more needed with the increased penetration of renewables, there is a case for switching to alternative providers of peaking power, such as large-scale batteries and pumped hydro"
See thats the money shot there. But its worded wrong. The whole key to lower overall electricity prices IS A GLUT OF PEAKING POWER. Coal and nuclear can take care of the rest. But with a auction system the absolute key is to set up a glut of peaking power.
My recommendation is therefore, to get every government on all levels in surplus budget, and offer zero interest loans to any scheme, renewables or nay, that is designed for peaking power. And no more funding of renewables if they cannot provide peaking power.
What we are seeing here is monopoly pricing for peaking power. The gas peaking power providers are only competing with each-other, if that can be said to be competing at all. Peaking power is being priced at the monopoly price.
Nuclear and coal ought to also qualify for zero interest loans under this scheme, if they can be paired up with peaking power. Once we have glutted peaking power all power sources can be integrated and prices will be driven down near marginal cost. Which is okay since their won't be interest overhang. Only some principle to pay back slowly.
Davidson is a full professor. Csereklyei is a lecturer. She needs his vote for tenure.
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