From The ABC
Renewable energy reduces power prices by more than cost of subsidies, study finds
By Liz Hobday
Posted Thu at 3:06pmThu 6 Dec 2018, 3:06pm
Related Story: Renewables ‘heading for 80 per cent of electricity market by 2030’
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A landmark study has shown that renewable energy has reduced electricity prices by far more than the subsidies paid for it.
Key points:
- The study’s lead author said the research proved renewables were the key to lower power prices
- Researchers found South Australians were paying, on average, the highest electricity prices in the world
- Gas-fired power is pushing prices higher, while wind and solar are placing downward pressure on prices, the study found
The independent study, by the Victoria Energy Policy Centre, focused on the South Australian electricity market and confirmed households in the state have on average the highest electricity prices in the world.
The report comes as the Federal Government attempts to develop a fresh energy policy after the collapse of the National Energy Guarantee earlier this year.
The Government hopes to pass new laws to force energy companies — especially retailers — to offer customers cheaper electricity.
The study’s lead author, Associate Professor Bruce Mountain, said the research provided verifiable evidence that renewables drive down prices.
“I think in the current climate it’s critically important,” he said.
“We have an evidence base that puts this issue on the table for people to engage with.
“What our study finds unequivocally is the route to lower prices lies with cleaner sources.”
Wind and solar reduce prices by more than subsidies
The study used computer modelling to crunch electricity price data from the past five years.
It sampled wholesale market prices every half hour from 2013 to 2018, and calculated the factors that led to those prices.
It found that even though South Australians were paying the highest average bills in the world, wind and solar generation in South Australia actually brought wholesale prices down — and by far more than the subsidies paid for them.
It found that in the 2017–18 financial year, renewables reduced wholesale prices by an average of about 30 per cent, or about $37 per megawatt hour, mostly due to wind generation.
This was far more than the cost of the subsidies paid for them, which the study calculated was $11 per megawatt hour of electricity produced.
Renewable generators have been able to sell electricity on the wholesale market very cheaply, because the ongoing cost of producing electricity from wind and solar is effectively zero.
These cheap offers from renewable generators on the wholesale market displace more expensive offers from gas generators, effectively reducing prices for the entire market.
But gas generation drives up prices
But the study found the reduction in wholesale prices thanks to renewables has not been enough to offset the high price of gas.
The closure of the Northern and Playford coal-fired power stations has left South Australia reliant on expensive generation from gas-fired power stations, which are needed especially when wind and solar are not producing energy.
The study found electricity sourced from gas pushed prices higher by about 40 per cent on average in the 2017–18 financial year, or $56 per megawatt hour of electricity.
“Every additional unit of production you get from the wind or from the sun, that displaces gas generation, and brings your price down,” Associate Professor Mountain said.
“As long as you have so much gas generation with such inefficient and old gas plants … your prices will be high.”
The Grattan Institute’s energy program director, Tony Wood, said the study was a sharp analysis of the South Australian experience.
“Certainly renewables have benefited the system, and we would have had higher prices in South Australia without renewables, fundamentally because of the high price of gas,” Mr Wood said.
“And that’s a conclusion that I think makes sense and this report shows it very clearly.”
Policy vacuum part of the problem
The researchers also compared the average Australian household prices with those in European countries, which have the next highest residential electricity bills, and found other states on the east coast were not far behind.
South Australia was closely followed by Denmark and Germany, countries which pay by far the highest taxes.
The graph showed high prices were also being felt by households in other Australian states — next in line were New South Wales, Queensland and Victoria.
Mr Wood agreed that South Australia’s current energy mix meant expensive gas generation was setting the price for the whole market.
HT/SMS
I love how they don’t figure in the capital expenses from wind power.
A coal or gas fired power plant generally lasts for 50 years. Wind turbines need to be replaced every 15 years. So the capital expenditure is triple for wind. That never makes the story.
That should be accounted for as part of the depreciation calculation. What’s generally missing is the cost of a backup facility, or batteries.
End all renewable subsidies tomorrow and end all regulations that require renewables to be a minimum fixed % of usage . Wind power causes voltage transients costs, inverter costs, voltage variation costs, waveform distortion costs, frequency variation costs etc at the power plant. Solar also has many of these costs. New tranmission power line costs have also not been factored in. Factor in the costs of fossil fuel backup.
If the above is implemented and the extra costs are factored into the price, the WIND and SOLAR industries would die tomorrow.
… and place price caps on electricity if it is so economical.
“end all regulations that require renewables to be a minimum fixed % of usage”
Amen. Most are state Renewable Portfolio Standards (RPS). A really, really bad idea. They cause all sorts of stupid actions.
Out here in the real world, renewable energy always increases the cost of energy.
What are these guys smoking?
Kangaroo-shit.
This is 1984 level – if I tell you the sky is green, it’s green – pure propaganda.
The study deals with wholesale prices not retail prices. The consumer pays retail not wholesale and retail includes other costs.
Wind and solar get priority so when they can supply energy, it must be bought. That means fossil fuel generators must go off-line but stand ready to reconnect when the wind or solar generators cannot supply… frequently and intermittently. That leaves the fossil fuel generators with costs which they cannot recover because they cannot sell their output as they normally would.
As wind and solar make up more of the energy mix, the time will come when fossil fuel generators sell too little to make it profitable and then they will need subsidies as they must have enough standby capacity to fill in when the ‘renewables’ drop out, but they will not sell enough to be profitable or make investment worth it.
Additionally when wind and solar are producing but the demand is too low, they must disconnect but are paid anyway – this is quite appart from subsidies – and this drives retail prices up too.
If you look at just one input cost and then assume this alone determines end-user cost, you are bound to get the wrong answer.
The study’s lead author, Associate Professor Bruce Mountain, said the research provided verifiable evidence that renewables drive down prices.
“I think in the current climate it’s critically important,” he said.
Is this clever pun intentional?
Just did my own eyeball of the data as well. . .
took less than a minute,
there is a direct link between age of plant and cost, the older the generating kit, in years, the cheaper the electricity, bingo, proven. Also a direct link to age of consumer, proven .
Easy stuff is this maths especially when you know all about break even points like wot I do. after the breakeven everything is profit, init ?
If it were all gas all the time, the prices would be 1/3 what they are now. But because of the renewables and the shuttering of coal plants, you do not have enough base load to cover when the reneables do not provide enough electricity. This brings about scarcity which then causes prices to rise.
This study is aimed squarely at the ignorant and stupid.
RE: “…because the ongoing cost of producing electricity from wind and solar is effectively zero.”
And in what alternate universe might this be true? I’m not a climate scientist nor an engineer, but I have spent a lifetime operating mechanical and electrical devices of all types, from bicycles to 4 engine transport category airplanes to server farms, and NOTHING operates with an ongoing cost of effectively zero. Even a bicycle requires consideration of capital and replacement cost, and maintenance costs such as oil for the chain and gears, as well as eventual replacement of chain, tires, pedals, bearings, grips and so on. It’s well known that solar panels begin to degrade as soon as they are exposed to light and they require a considerable amount of labor cost to keep clean and the electronics, wiring and associated equipment maintained. Wind farms have a lot of very heavy moving parts subjected to wide and sometimes very rapid variations in load and torque. I don’t have numbers on the MTBF of wind turbines, but from all the photos around of catastrophic failures I suspect it happens more than some would like to admit. And the repair/replacement cost is NOT “effectively zero.”
MTBF of a wind turbine is around 6 weeks. Not all failures will halt production though.
Service life to BER is 10-20 years depending on location.
In addition to the costs that you list Bill, there’s also the cost to the rest of the system that has to adapt to large amounts of unpredictable power.
The report is a great example of how to lie with statistics.
The high price of gas is a result of intermittent renewables. If renewables were able to deliver 7×24 gas costs would be low.
the reoprt is an ivory tower magicians trick. It is cleverly disguised nonsense.
If the report is correct, you can cut electricity prices but shutting down all gas generation and going 100% with renewables.
And while this is correct mathematically your average 6 year old could tell you why it is utter nonsense because renewables are unreliable .
The good professor has not factored in the value of reliability to his calculations. Gas is more expensive because reliability has value which is reflected in the price.
If gas was as unreliable as wind or solar the demand for gas would drop and the price of gas would fall to equal that of wind and solar.
The ABC, (like all other government “under-funded” broadcasters) should lead the way in cost saving by divesting from any gas generated electrical power and only using whatever is available solar and wind for their operations.
Peak audiences around noon on sunny days will appreciate their frugality.
So we finally find out what the scarecrow did with his “diploma of thinkology”.
He became the energy program director for Grattan Institute.
And he says “chamber another round and point it at the other foot. I won’t hurt a bit”.
Perfect example of the Catastrophic Anthropogenic Global Warming logic.
Modern Progressive reasoning as well.
“Math is hard, but we feel the answers should be thus..”
We went from the age of enlightenment to the age of delusion in one short step.
Yet far too much of Government Maths uses this same line of reasoning,seems to indicate our civil service is fully staffed with persons who have never had a real job.
Money comes from the government is the true state of reality,amongst our progressive comrades.
Numbers are the first thing regressives manipulate (polls for example) ’cause they think the public is so uneducated that they’ll never know any better. You CANNOT believe any number coming out of the media, especially from “climate scientists”.
“This was far more than the cost of the subsidies paid for them, which the study calculated was $11 per megawatt hour of electricity produced.”
Each MWh of electricity generated by wind and solar farms receive a large scale renewable certificate currently valued around $80.
Can anyone explain where he got the $11 from?
The $11 is averaged across all generation. The RET is currently 16% so average subsidy for intermittent generation works out at $68/MWh. The current price for LGCs is $62/MWh. In 2017 they peaked at $90/MWh. Prices for STCs are around $39/MWh.
If the RET is not increased, the price of LGCs will collapse. Victoria is now offering a direct government subsidy for rooftop because the volume of STCs is estimated on output till only 2030 and value is likely to slide with increased uptake. A 6.6kW rooftop system now costs around $2400 when the subsidies are accounted for being about $3800 for forecast STCs and $2000 direct from State government.
If renewables were cheaper, or equally expensive, the rest of the world—the developing world—would be installing them instead of coal plants. But instead the ones that have tried renewables, like China, are pulling in their horns.
The study authors do not understand the value of predictability, planning and accuracy in fuel purchasing.
Gas is not a storable commodity, and a gas fired power station operator needs to be able to accurately plan its gas requirements to be able to purchase at the best price. This means having the ability to anticipate gas requirements weeks, months or even years in advance (as fuel supply operates over these timescales).
In the prompt market (hours- to days-ahead), the marginal cost of gas fired power station will always be above the zero marginal cost of renewable sources. This allows renewables to displace gas fired power sources when renewables are producing. There is an assumption that gas fired power stations stand ready to produce when renewable sources don’t. As a result, the intermittency of renewables turns onto intermittency in prompt demand for fuels. (Dieter Helm noted this effect in a recent report for the UK Government.)
This intermittency translates into price volatility in prompt fuel prices. Gas prices spike-up when demand increases unexpectedly (intermittent power sources not producing but not be foreseeable). Gas prices collapse when gas purchased is no longer required (intermittent sources are producing more than could be foreseen).
The total cost of gas purchases goes up for a combination of two reasons. If a gas fired power station operator (and its competitors) purchases gas in the forward market, it will land itself with significant losses when (inevitably but not foreseeably) everybody is forced to dump excess gas back into the market. Alternatively, if it (and its competitors) waits to purchase in the prompt markets, it will be forced to buy on the price spikes when everybody is competing for the limited supply available at that time.
The study authors have looked at past prices and arrived at the conclusion that renewables save money compared to the cost of generation linked to purchases in these volatile fuel markets. Their mistake is to assume all other things equal, and they have missed the point that intermittency of renewables is responsible for price volatility and increasing fuel purchase costs.
“Gas is not a storable commodity, and a gas fired power station operator needs to be able to accurately plan its gas requirements to be able to purchase at the best price. This means having the ability to anticipate gas requirements weeks, months or even years in advance (as fuel supply operates over these timescales).”
Exactly and that’s why when new significant new gas developers needed long term contracts to defray gasfield development risk local users like gas generators with blue sky renewables ahead of them passed while Asians stuck their hands up for it. Now we have the bizarre situation that as a large exporter of gas we’re building import terminals to bring gas in from OS to supply the local market. It’s what you get with fickle renewables sticking their finger in the pie.
Dr Finkel reported levelised costs in a report for the Australian government as follows:
Wind $92/MWhr (no backup)
Combined Cycle Gas Turbine $83/MWhr
Open Cycle Gas Turbine $123/MWhr
Supercritical Coal $76/MWhr (unavailable in SA)
SA baseload is currently supplied by combined cycle gas turbines at Pelican Point, Osborne, and Torrens, but then they must rely on high cost open cycle gas and diesel turbines (with extremely high spot gas prices) – and when wind is available it therefore lowers the spot price compared to open cycle gas or diesel. But that ignores the fact that when the wind doesn’t blow you must retain 100% gas capability to meet peak evening demand, so SA consumers are being forced to pay for the investment in wind generators and the backup gas/diesel generators – double the investment, therefore higher prices overall.
Another warm to hot summer’s day in Vic and SA with temperatures in the low 30s, and how’s that wind going? Well, prices are above $100/MWhr, and that wind is delivering just 400 MW in SA versus demand of 1600 MW rising to 1900 MW peak this evening, and 600 MW of wind in Vic versus demand of 6300 MW rising to 7200 MW peak this evening. But according to the learned professor and his cohorts, it would have been $38 worse without that wind.
“Dr Finkel reported levelised costs in a report for the Australian government as follows:”
No the only way he could work out levelised costs of power was if there was a level playing field. Namely no tenderer of electrons to the communal grid could tender anymore than they could reasonably guarantee (ie short of unforeseen mechanical breakdown) 24/7 all year round. But then the real truth would out as solar and wind would have to invest in storage to up their average tender or partner with thermal and pay them their just insurance premia or some combination of the two.
Simply put you can’t guarantee the electrons you can keep them but who could tell that to all the mums and dads with useless rooftop solar creating a duck curve management problem for real power. They know damn well stand alone with battery backup doesn’t pay (except in extremely remote off grid areas) so we continue to live the true cost lie for the obvious.
So this is Aussie science. Yikes!
And wind farms also considerably reduce (jam) radar effectiveness in the surrounding.
These jackasses have an infinite supply of gall, that much is for sure.
A single pensioner living in a flat in Adelaide gets a bill of $800 for the quarter, my bill in Qld is $450 for two people.
Anyone that says the South Australian way is cheaper is lying or a moron. The power bills do not lie.
Hmmm.
Jordan, Ferdberple, John B, E J Zuiderwijk, Flight Level, Charles Higley, Sara, richard verney, Krudd Gillard of the Commondebt of Australia, nicholas tesdorf,tom0mason, David Middleton, commieBob, old construction worker, Donald Kasper, Ivor Ward, Malcolm Chapman, and Dodgy Geezer
And old style method of critique is to actually look at the individual arguments in the research article, and actually determine what might be incorrect.
You all just dismiss the study on your judgement with no facts. So I can dismiss your opinions without any comment.
Scientific theories can be invalidated by experiment.
It isn’t necessary to show why the theory is wrong. The experiment is sufficient.
The fact that renewable energy always increases electricity prices invalidates the analysis that says otherwise. It isn’t necessary to show the errors in the analysis.
Thanks for your contribution trafamadore. I could see the mistake from the description as I have spent much of my life working at the sharp end on the above topic, and I could see the authors made a common mistake for this type of analysis (one I have seen before on more than one occasion).
I wasted a few minutes of my life looking at the report as you suggested. And yes, they make the mistake I thought they had. They assume statistical independence of gas price versus wind contribution, whereas I explained why there is good reason to consider that this does not hold.
In Figure 17 and accompanying discussion, the authors recognise increasing volatility in gas prices (as I told you) and increasing gas price (as I told you). At the same time, wind contribution increases. if intermittency of the wind contribution is at least part of the cause of the change in the gas price volatility and price, they are not statistically independent as candidate explanatory variables.
Multiple regression therefore cannot draw conclusions about their respective contributions to power prices.
The authors don’t appear to grasp the significance press-on with a multiple regression analysis on spot power price, including candidate explanatory variable “W(h,s)” half-hourly gross wind generation in MWh, and “G(d,s)” daily gas spot price. You can see this in their Equation 1.
The way to properly check their conclusions would be to put their data and analysis in the hands of a skilled statistician who is aware of the condition sand pitfalls of this type of analysis.
Right now, I consider their conclusions to be, at best, highly questionable
So really all we need to do is to teach windmills to generate when there’s no wind and solar panels to generate when there’s no sun? Then we wouldn’t need those damn dirty gas turbines.
Of coarse it goes without saying also that, unlike in Ozz where Green zealotry forbids fracking and loony Left state Victoria even bans conventional gas extraction, in countries like the US where gas is relatively cheap the price of electricity has been coming down right?