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QLD solar is booming and pushing down daytime electricity prices

October 31, 2018

QLD solar is booming and pushing down daytime electricity prices

2018 is already a record year for solar PV in Australia, and in particular, the utility scale sector. Queensland (QLD) leads the nation across several metrics as shown by the latest data from the Australian PV Institute (APVI) released on 25 October 2018:

(i) QLD has the highest total installed capacity (3,536 MW) out of any state;

(ii) QLD has the highest residential rooftop solar penetration by both capacity (1,935 MW) and percentage of dwellings (32.6%); and

(iii) QLD has the highest large scale (100+ kW) solar PV capacity (1,316 MW).

Figure 1 shows the annual and cumulative generation capacity for solar PV in QLD from 2007 to present. The data is segmented by system size: <9.5 kW (residential), 9.5-100 kW (small commercial & industrial), and 100+ kW (large C&I and utility generation).

QLD solar PV generation capacity

More solar has been added to the QLD grid in the first 10 months of 2018 than in the previous five years combined. 2018 is also the first year where the deployment of large scale solar (100+ kW) has exceeded small scale solar. 88% of the large scale solar generation capacity in QLD comes from solar farms 50+ MW in size. This extraordinary growth in utility scale systems has come about from a combination of drastic decreases in the cost of solar as well as government funding opportunities (particularly from ARENA).

The commercial and industrial sector is also seeing strong growth. Cost decreases in solar combined with high electricity prices brought on by the energy crisis over the past two years, means that for the first time ever, solar is a cost competitive option compared with traditional electricity contracts for large C&I energy users. In contrast, residential installations peaked in 2012, coinciding with the end of generous feed-in-tariffs and multipliers for small-scale technology certificates (STCs).

Growth in QLD solar is depressing daytime electricity prices

Most in the energy industry are familiar with the duck curve – the hollowing out of daytime electricity demand by solar PV. But solar does not just affect electricity demand. The zero marginal cost of solar means that it is also very good at pushing down daytime electricity prices in the wholesale market.

Figure 2 shows how the growth in QLD solar has altered price patterns in the wholesale energy market. The top part of Figure 2 shows the top quartile of spot prices (i.e. top 25% of pricing) in 2009 and 2018. In contrast, the bottom part of Figure 2 shows the bottom quartile (bottom 25% of pricing). We have compiled this data using NemSight, a software developed by Creative Analytics (part of the Energy One group).

Note that Figure 2 shows us how electricity prices in the top and bottom quartile are distributed across each 30 minute Trading Interval. It does not show the value of prices.

QLD solar pushing down daytime electricity prices

We can see that in 2009, the top quartile of pricing was distributed fairly uniformly across daytime trading intervals with a small peak in the evening. The top 25% of prices occurred between 9:00 and 15:30 46% of the time. In contrast, this was only 17% of the time in 2018. High pricing is now occurring more often in the early morning and evening when solar panels are generating little or no power.

Furthermore, these daytime intervals are not only leaving the top quartile of pricing, but are actually entering the bottom quartile. In 2009, the bottom 25% of pricing occurred during 9:00 to 15:30 only 6% of the time. This has increased to 34% in 2018.

The video below shows the full evolution of QLD wholesale electricity prices for the top quartile over the last decade.

Diminishing returns for QLD solar

The big implication of the duck curve in electricity pricing is that those investing in solar may experience diminishing returns. More solar means lower and lower daytime electricity prices. Thus, we may reach a point where electricity prices are so low during the day, that further investment in solar can no longer be justified.

There is a solution to this problem of course, and that is energy storage. Combining solar with storage allows energy to be shifted to more valuable times of the day, thereby increasing revenue for investors. For anyone building QLD solar projects, the question is not if you should add storage, but when.

 

Want to know how solar and wind farms are performing in the NEM and what revenues they are receiving? Get a copy of our detailed analysis.

Author: Marija Petkovic, Founder & Managing Director of Energy Synapse
Follow Marija on LinkedIn | Twitter

Why baseload coal has no future in a modern grid

June 27, 2018

Baseload coal

The debate about the need for baseload coal-fired power stations has reignited this week. Energy Minister Josh Frydenberg was quoted as saying he “would welcome a new coal-fired power station for our country because it supplies reliable baseload power and it has served us well in the past and will continue to serve us well in the future”.

There is no doubt that coal has played a significant role in the National Electricity Market (NEM). But can it provide any value in a future highly renewable grid?

Baseload power is a business model, not a technical requirement

Baseload generators such as coal-fired power stations (or nuclear in other markets) have very high fixed costs, but low marginal costs, and are relatively slow at starting up and ramping up and down. In contrast, natural gas generators have low fixed costs, but high marginal costs and are much quicker to start and ramp.

It is from these characteristics that the concept of baseload and peaking generation emerges. The most economic mode of operation for a coal-fired power station is to run at a steady, constant level more or less 24/7. In contrast, the economic characteristics of gas mean that it is better suited to meet the more variable and dynamic portion of electricity demand.

No role for baseload coal in South Australia

Figure 1 shows electricity generation in South Australia for the previous month (23 May to 22 June 2018) compared with the same period in 2006. We compiled this data using NemSight, a software developed by Creative Analytics (part of the Energy One group).

Disappearing role of baseload power in south australia

Back in 2006, there was virtually no renewable energy in South Australia aside from a tiny amount of rooftop solar (<2 MW). The generation mix consisted of brown coal and natural gas. As can be seen from Figure 1, these generators followed the old world paradigm of baseload and peaking generation.

This is in stark contrast to the new world in 2018. For the 31 day period in question, just over 50% of the energy generated in South Australia came from variable renewable energy (wind power, rooftop solar, and large scale solar). The remaining generation came from dispatchable sources, consisting primarily of gas along with a smaller amount of battery storage and diesel generation. There has been no coal in South Australia since the closure of Northern Power Station in May 2016.

As can be seen from Figure 1, in a highly renewable grid, there is no steady profile left for baseload power to service. A power station that runs at a constant level provides no value or enhancement to reliability in this type of system. What is needed is highly flexible and fast responding power. This can come from a variety of sources such as gas, hydro, energy storage, and demand response. However, coal is not one of them.

Renewable energy not to blame for high electricity prices in South Australia

Some people reading this may look at Figure 1 and immediately conclude that the replacement of coal with renewables has lead to high power prices in South Australia. However, South Australia has always had high prices relative to the rest of the NEM. Data from AEMO shows that in 16 out of the last 20 financial years, South Australia either had the highest or second highest wholesale electricity price. This comes about from South Australia having a peaky demand profile, being over reliant on gas, and a lack of competition in the market, among other factors.

Electricity demand must be in balance with supply at every point in time. This is a true technical requirement. However, there are a number of ways to meet this requirement. The economic characteristics of coal and gas led to the baseload/peaker paradigm. In the new world, flexibility is king and this means that the economics of coal are just not going to stack up.

 

Author: Marija Petkovic, Founder & Managing Director of Energy Synapse
Follow Marija on LinkedIn | Twitter