Wind forces up electricity prices in direct and indirect ways

Different generator types earn different average prices in electricity markets.  Australia’s National Electricity Market can see prices at anywhere between $14,200 per MWh to -$1,000 per MWh in response to different demand and supply situations.  The price variability provides incentives for suppliers to stand ready to take advantage of high price situations, thereby also evening out the actual price.

The average price is now $80 per MWh, double the level that prevailed prior to the regulatory measures that favour wind forced major coal stations to close.

Hydro provides the ideal supply source to supply the peaks since water supply limits its availability to run but it can switch on and off quickly.  This makes it an ideal balance to other fuels both for peak operations and to take advantage of sudden price surges caused by unanticipated demand increases or plant breakdown.  The Snowy system runs, and was always intended to run, when demand and hence the price is high.  It produces on average about 4500 GWh of electricity a year, 13 per cent of its theoretical capacity of 4100 MW.

Wind and solar are the opposite of hydro and can only run when the weather conditions are appropriate.  Being non-dispatchable and dependent upon the weather, unlike coal, hydro and gas, they cannot take advantage of high prices to be ramped up to take advantage of high price periods in the wholesale electricity market.

Wind turbines produce no energy in the absence of wind or when the wind is blowing hard.  Wind typically operates at around 30 per cent of its nominal capacity.  Solar, either in large scale systems or on the rooftops that now supply 3-4 per cent of demand, only operates during the day and only at its maximum when the skies are clear.

Wind gets massive subsidies but gets below average prices on the spot market because the periods of high demand and high prices are often hot windless days.

This is observable from the data collected by the Australian Energy Market Operator, data that is almost impenetrable and requires software not normally available to undertake anything but rudimentary analyses.

The following table prepared by the Australian Energy Council illustrates the price discount earned by wind.  Last year wind generators in South Australia earned 17 per cent less than the average price; wind generators in Victoria earned 10 per cent less.

The discount has tended to increase as the renewable share has increased and has tended to be higher in South Australia where wind has a greater share than in Victoria.

This suggests that there other factors in addition to the inability of wind to supply on hot windless days.  It is likely that the growing share of wind is itself creating more high priced events by reducing the amount of baseload available to cover predictable demand changes.  Hence the interest in batteries and $10 billion plus Snowy2 to help paper over the deficiencies of electricity dependent upon the elements.

The disparity between wind and other sources is also likely to be further enhanced by the price bidding of dispatchable generators.  Responding to weather events that reduce the ability of wind farms to generate, other suppliers are likely to adjust their bidding upwards.  Such behaviour is fully consistent with the way the market is designed to operate – the higher bids would attract more electricity from sources (i.e. coal and maybe gas) that are able to take advantage of such situations.  The problem is, of course, that governments have made such sources highly risky by subsidising their competitors wind, batteries and Snowy2.

So while a surfeit of subsidised wind drives down prices, the distress this causes brings about closures of reliable generators, forcing up prices. But the inability of wind and solar to operate when the market requires them to do so is also lifting prices by incentivising other power sources to adjust their bid prices upwards in situations when they anticipate wind will not be available.

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37 Responses to Wind forces up electricity prices in direct and indirect ways

  1. sfw

    “The Snowy system runs, and was always intended to run, when demand and hence the price is high. It produces on average about 4500 GWh of electricity a year, 13 per cent of its theoretical capacity of 4100 MW.”

    ??

  2. Hamster Wheels! What we need are Hamster Wheels. They’re green, cheap to run and the motive power is self-reproducing.

  3. stackja

    In the past we just had market forces. No subsidies. Then ALP needed Greens.

  4. cohenite

    ??

    4500 GWh of electricity a year, 13 per cent of its theoretical capacity of 4100 MW.

  5. pbw

    sfw,

    I have the same question. 4500 GwH per year is 4,500,000 MwH per year. If that is 13% of capacity, capacity is around 34,000 GwH per year. I have no idea of how that figure is related to 4100 Mw.

  6. Egor

    You think Trump would put up with this Australian ideological Green shit from “conservative” politicians?

    Read how a US patriot deals with globalist carpetbaggers…..
    https://theconservativetreehouse.com/2018/06/30/apoplectic-trade-reactions-from-german-auto-sector/

  7. Herodotus

    ??? indeed.
    I’ve noticed that The Australian’s comments section is heavily trolled whenever there’s a story on power.
    Outrageous lies are told by them and there’s more than a likelihood, way more than a smidgin, probably a cartload of truth in the supposition that it’s part of the campaign of the greatest scammy show on earth.

  8. NuThink

    I have the same question. 4500 GwH per year is 4,500,000 MwH per year. If that is 13% of capacity, capacity is around 34,000 GwH per year. I have no idea of how that figure is related to 4100 Mw.

    This seems to fit the figures given, assuming non leap year.
    Multiply 4,100 MW nameplate capacity by the number of hours (8760*) in a year gives 35,916,000 MWh or 35,916 GWh per year total nameplate capacity.
    So if actual generation is only 4,500 GWh of a potential 35,916 GWh, that is close to 13% (12.53%**) of 35,916 GWh of nameplate capacity if the wind was blowing at its optimum all the time.
    * 24 x 365 gives 8760 hours in the year.
    **4,500 divided by 35,916 then multiply by 100 to get percent of 12.53%.

  9. Leo G

    I have no idea of how that figure is related to 4100 Mw.

    By the number of hours in a year perhaps?

  10. OneWorldGovernment

    Don’t blame the wind put the blame where it belongs.

    Communist Politicians, Bureaucrats, NGO’s, Big Union manipulators, Big Business sycophants and Overseas Scammers are forcing up electricity prices.

  11. RobK

    Nu think,
    you got the numbers right but it’s the snowy hydro scheme (if they had enough water to run full throttle for a year).
    A point that many dont seem to realize is that with higher penetration RE, there will be increasing times when RE generators will get throttled back. This already happens in streets where there are lots of solar PV installations causing inverters to drop-off due to high voltage as all the inverters are trying to push energy into the grid. Similar siruations can arise with wind. The end effect is deminished capacity factor and less fiancial returns. This is an incentive for storage but the cost is high. RE will need very high amounts of storage to be reliable. This scheme is folly.

  12. OneWorldGovernment

    RobK
    #2751783, posted on July 1, 2018 at 8:53 pm

    This scheme is folly.

    No wonder they are all for it then.

  13. EvilElvis

    I would suggest that hydro is certainly dependent on weather, the timeline is just a different scale than wind turbines or solar.

    Intriguingly we are investing in a hydro white elephant, reliant on rainfall, despite the proponents being climate change global warming freaks who think our continent will get hotter and dryer.

  14. RobK

    EE,
    Correct, especially when we cant even build dams to keep up with population.
    Desal plants are energy intensive not only to power the reverse osmosis but also to pump millions of tons of water upfrom sea level to reservoir storage.

  15. DaveR

    Unfortunately when the wind blows in Australia, power prices for consumers go up.

  16. Leo G

    This is an incentive for storage but the cost is high. RE will need very high amounts of storage to be reliable. This scheme is folly.

    Moreover, the efficiency of pumped hydro storage depends on the pumps being driven at rated output. Average pump efficiency for a pump powered by a wind generator array would be below 50%. Very likely they would power the pump motors from the grid. An absurd situation.

  17. Genghis

    Alan,
    Wind Energy output during the last 13 days of April was 10% of wind capacity for 25% of the time. Now tell us how hydro or batteries or even solar panels are going tocharge the increasing air conditioners, heaters and battery charges for electrical cars. You should know that wind averages (a completely stupid figure) at 30% of capacity so it has to be three times the capacity to work at its capacity (if you get what I mean), but there are still times when it works at a fraction of this amount (like the last 13 days of April) and when fully utilised at around 80% is in oversupply but you and I have to pay, because it cannot be stored. This is the very trouble that Germany (that wonderful ‘Green’ energy country) is now experiencing, When producing at a low amount it imports electrical energy from surrounding countries with a fair percentage of Nuclear and when utilising the wind at a high level exports the excess power at ridiculously low prices but the generators are subsidised by the German citizens. This is the nub of this stupid renewable energy system. The only place wind turbines are useful is in situations where they can substitute diesel generators in remote locations so when the wind does blow they do not need to have diesel generators running.
    RE is a total scam and you should be exposing it.
    If Australia really wants to lower CO2 output then the only base load generation is Nuclear.
    What really upsets me is the constant bleating of the RE sector claiming that Wind now generates 13% of Australia’s electrical system when it only does an average of 30% of that and that it does it intermittently, needing constant backup choofing out CO2 because our base load is coal or gas.
    Don’t start me on the inherent CO2 on Natural Gas fields, that no one discusses or recognises!
    Regards,

  18. OneWorldGovernment

    Genghis
    #2751845, posted on July 1, 2018 at 10:02 pm

    . . . . . .

    Don’t start me on the inherent CO2 on Natural Gas fields, that no one discusses or recognises!

    Genghis

    Agree with your sentiments but what do you mean by that last comment please?

  19. RobK

    OWG,
    Natural gas contains amouts of CO2 when it comes to the surface. It needs the co2 seperated off to bring it up to specification to put into the pipeline. That CO2 typically is not trucked or piped away but is alowed to escape. Most accounts of NG combustion concider only the reaction of oxidation.

  20. OneWorldGovernment

    Ahhh. Ok.

    Thanks RobK.

  21. RobK

    Leo G,
    Yes. Pumped hydro specifically aimed at RE storage is at a disadvantage to pumped hydro for baseload. In the case of baseload, pumped storage is opportunistic on a daily cycle, picking the eyes out of peak prices. When standing in for RE it is in effect a surrogate baseload. This is a dilemma for the owner of the pumped storage . He has to determine how much stored energy to invest in before knowing the demand which is determined not by customers but by the whim of the weather as it will ideally provide both cheap energy them some other time its absence will offer a market. Without subsidies this is not a scheme you could take to the bank.

  22. RobK

    Genghis,
    RE is a total scam and you should be exposing it.

    I think Alan is doing his level best to do just that. He is tirelessly at it for ages.
    I tip my hat to him.

  23. OneWorldGovernment

    RobK
    #2751897, posted on July 1, 2018 at 11:11 pm

    Genghis,
    RE is a total scam and you should be exposing it.
    I think Alan is doing his level best to do just that. He is tirelessly at it for ages.
    I tip my hat to him.

    Same same
    ++++++

  24. Bruce of Newcastle

    Grattan (hoho) has a report out today saying high electricity prices are the new normal.

    How odd that the average price for industry customers in the US is only 6.61 c/kWh (8.92 c/kWh Aussie). I wonder what they are doing that we can’t seem to do? It’s a mystery!

  25. Amadeus

    It was interesting to read last week on a link from JoNova how Spanish rent seekers have been milking the overly generous RE subsidies by using diesel generators to run banks of lights at night shining onto solar panels.
    This came to light (…excuse the pun) when authorities discovered after several years and tens of millions of Euros down the drain, that Spain was the only country where solar panels were generating “green” energy when the sun doesn’t shine.
    Stump up a government subsidy and there’ll be someone out there who’ll milk it for all it’s worth…much like the rent seekers here in Australia. Just goes to show that it doesn’t really take much in the way of brains to be a politician or a bureaucrat…they just love running “successful” grants schemes using our money for no worthwhile outcome. Real genii….or geniuses….

  26. Amadeus

    Dear Alan
    My comment about “….it doesn’t really take much in the way of brains to be a politician or a bureaucrat…” was not intended to reflect on your spending time in the Canberra bureaucracy. I also did a stint in the old “Trade and Industry” and “Industry and Commerce” outfits but eventually left in frustration and have been running my own company, instead, for nigh on 30 years….and regained my sanity!!!
    Regards
    Amadeus

  27. Phill

    Wind is the bloke at work who shows up late, only does jobs that everyone else can do better, clears of early, and puts in a raft of compo claims. The union rep of the energy industry.

  28. Woolfe

    You can see what ruinables do to an economy. South Australia Electricity demand only 17% of that of NSW

  29. Woolfe

    What’s the point of having a market share if you cant produce?

    Currently ruinables producing 21% of SA’s electricity, and yes it is sucking power from other states.

  30. Roger

    Shorter Moran: We are governed by idiots.

  31. Dr Fred Lenin

    What in the name of Gaia would a bunch of grasping corrupt failed lawtradespersons and union thugs with tiny pretend uni degrees know about the electricity industry? Apart from knowing if you flick the switch the light goes on,(if you can afford to pay the bill)_. Get them right out of anything they know nothing about ,,that would make them totally unemployed .

  32. Dr Fred Lenin

    What about a Royal Commission into Renewable Energy turnbull? It might expose what a fraud it is and who is profiting from the scam . (_turnbull and the Union super scammers bolt for the nearest rabbit burrow to hide , or catch a plane to Venezuela).

  33. ALAN moran

    A Royal Commission will discover what the people appointing it want them to discover

  34. Delta

    Nameplate capacity for Snowy is as follows: Tumut 3 – 1,500MW; Tumut 1 – 330MW; Tumut 2 – 286MW, Murray 1 – 950MW, and Murray 2 – 550MW = total 3,616MW. There are some other stations – Blowering 80MW; Jindabyne 63.8MW pumping; and finally Guthega 60MW. Generally I would not expect much generation from Blowering, Jindabyne and Guthega because of their locations, seasonal patterns and general purpose. Of course hydro electricity can only approach a high utilisation rate if the water flow is continuous. With Snowy generally we have a single release each year from the snows that melt that is discharged downstream with regular pumping and return through the generators for the pumped storage part of the water use. In Alan’s analysis if he said that Snowy produces 4,500 GWh per year, the installed capacity is 3,616 MW per year (or 31,676 GWh at 100% utilisation) then the output that is equivalent to 14% would have some meaning but no much. If I add in all the Snowy area generators, then the output is equivalent to 13% of 100% utlisation output.

    Having said all this, pumped hydro is a net user of electricity and it takes at least 20% more energy than is delivered to pump the water uphill in the first place. And a pure pumped hydro scheme at best could pump water uphill for 50% of the time so that it could run down for the other 50% of the time.

  35. Cohenite and others think about Maths. 4100MMW for one year (*8760 hrs) is 35.916 GWhrs, If only 4500 GWhrs produced that is 12.5% of capacity.

  36. Alan Moran

    Delta
    In Alan’s analysis if he said that Snowy produces 4,500 GWh per year, the installed capacity is 3,616 MW per year (or 31,676 GWh at 100% utilisation) then the output that is equivalent to 14% would have some meaning but no much. The number illustrates how hydro is “fuel starved” and hence has to ensure its fuel is used in the highest cost periods. I think that is a notion more worthy of “not much meaning”

  37. Ben

    Yes, it seems obvious that wind sets the minimum 30min price and gas sets the maximum 30min price.

    SA is the prime example.

    When wind is blowing enough to crowd out other generators it suppresses prices and reduces market share for other generators, even solar. This is a small percentage of the time.
    When wind is not blowing the dispatchable generators have to recoup their costs with the additional variability of gas prices. This is a small percentage of the time.

    But… when wind is blowing enough to buy in, but still needs gas to make up the difference, gas still sets the price but all generators receive the high price. Wind and solar also get the LGC subsidy. This is the largest proportion of time.

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