This last week has seen extraordinary events in South Australia’s energy market make front page headlines nation-wide. In an unprecedented move, South Australian business and energy leaders demanded the re-start of a moth-balled power station to provide relief from suging and variable wholesale energy prices… and the Minister complied. 

As reported in the Australian Financial Review, prices in the state have been “frequently surging above $1000 a MWh this month and at one point… hitting the $14000MWh maximum price”.  The Australian Financial Review reports that average monthly prices have been three to  four times higher than in the eastern states during the month of July and new contract prices in South Australia are nearly double the prices in the eastern states.


Image from Energetics.

Let’s be clear: the South Australian electricity supply is the cleanest it has ever been and it is the most vulnerable, volatile and fragile than any time in recent history with no signs of relief in the short-term. As much as many people, including me, want the former (clean power), we are shooting ourselves and our wishes in the head if we keep contributing to the latter. There are few worse advertisements for clean energy than the current market in South Australia. Short-sighted over-development of variable generation without compensatory planning and policy has driven consequences that were entirely foreseeable. Suggestions that the renewable sector is now merely a “scapegoat” for our problems are absurd, stemming from an ideology of nil criticism for some technologies. While those sectors are not alone in the frame as contributing to this problem, the Pollyanna  group-think that insists that no line can ever be drawn to the obvious shortcomings of variable generators is starting to positively stink.

Around 12 months ago we published our paper Beyond wind. Since that time I have observed nearly everything we flagged coming true only faster than I anticipated, with the biggest surprise being that we did stand by as reliable generators left the market rather than coughing up to keep them in the game. 

I have re-produced an extract of this paper below. As you can see both we and the sources we cite were paying attention to problems in the pipeline. These problems were foreseeable and foreseen. Maybe we just needed more pain to make us pay attention.

Since 2003, the contribution of wind power to electricity generation in South Australia has grown to around 27 % of total annual electricity supplied to the State (Australian Energy Market Operator Ltd. 2014b). This increased wind generation has come mainly at the expense of generation from existing coal and gas generators which are now run less frequently (Australian Energy Market Operator Ltd. 2014b). Yet despite the rapid increase in wind-generated electricity in the State, South Australia still depends on participation in the National Electricity Market for a reliable supply of electricity.

The National Energy Market is spatially the largest electricity grid in the world and serves approximately 9.5 million end-use customers (Australian Energy Regulator 2014). It is a wholesale market for the supply of electricity to retailers and end users in Queensland, New South Wales, the Australian Capital Territory, Victoria, Tasmania and South Australia. Exchange of electricity is facilitated through a pool where the output from all generators in the network is aggregated and scheduled at short (15-minute) intervals, to meet demand across the network. Within the National Electricity Market, electricity is indistinguishable from one generator to another, but network stability concerns mean that there is a need to have generators operating across a wide geographical spread of network nodes. The purpose of the market is to provide efficient and above all, secure electricity supply to meet a dynamically changing electricity demand efficiently (Australian Energy Market Operator Ltd. 2010b).

South Australia’s connection with the National Electricity Market supports both reliability of supply and the efficient use of the wind resource, typically exporting power when the output is high and demand is low (as commonly occurs around 04:00) (Australian Energy Market Operator Ltd. 2013b). Over the entire National Electricity Market, wind contributed 4.4 % of total electricity generation output in 2013-2014, with 74 % coming from coal, and 12 % from gas (Australian Energy Regulator 2014). Despite the ability to sell low-emissions power from wind, South Australia imported 2010 GWh in 2013-2014, six times the quantity exported (338 GWh) (Australian Energy Market Operator Ltd. 2014b).

 Trading between adjacent National Energy Market regions relies on high-voltage transmission lines called ‘interconnectors’, which are used to import electricity into a region when demand is higher than can be met by local generators, or when the price of electricity in an adjoining region is low enough to displace the local supply (Australian Energy Market Operator Ltd. 2010b). The efficient use of South Australia’s wind generators relies on two interconnectors to Victoria, as well as substantial transmission infrastructure within South Australia. South Australia’s larger Heywood Interconnector (460 MW) was used at 100 % capacity for 8.7 % of the time in financial year 2012-2013 (Australian Energy Market Operator Ltd. 2013d). A $108-million upgrade of Heywood, to be commissioned in July 2016, aims to accommodate the increase in wind generation that has occurred over the last few years (Electranet 2013). The recently approved development of Australia’s largest wind farm (199 turbines for 600 MW at a cost of ~ $1.3 billion), to be located on the Yorke Peninsula, includes investment in 60 km of undersea cables to transmit the power to load centres, as well as two converter stations (The Ceres Project 2013). In another study, capital costs of > $900 million were identified for the additional transmission requirements to support development of the extensive Eyre Peninsula wind resource, with annual operational and maintenance costs of > $18 million year-1 (Baker & McKenzie, Worley Parsons & Macquarie 2010).

With the benefit of the National Electricity Market ensuring security of supply and efficient export of surplus generation, the wind sector has driven total greenhouse-gas emissions from South Australia’s electricity sector down by one quarter over the last ten years: from just over 8 megatonnes (Mt) CO2-e year-1 to just over 6 Mt CO2-e year-1 (Australian Energy Market Operator Ltd 2014). South Australian electricity now has the second-lowest emissions intensity (> 0.6 kg CO2-e kWh-1) of the Australian states and territories (Figure 4), having diverged sharply from approximate parity with Queensland, New South Wales and the South West Interconnected System from 2005 until today (the South West Interconnected System is a smaller electricity grid that serves the south-west of Western Australia; it is not part of the National Electricity Market). Until recent connection with the National Electricity Market, Tasmanian electricity generation had nearly zero emissions due to a predominant supply from hydro-electric generation. It has retained the lowest-emission electricity of any National Electricity Market region (0.2 kg CO2-e kWh-1), but its relative emissions intensity has risen sharply following the interconnection. Victorian electricity releases approximately 1.2 kg CO2-e kWh-1 due to a dependence on combustion of lignite (brown coal) for electricity supply.

Electricity from wind generation brings challenges related to its variable and intermittent supply. As installed capacity grows, the frequency of sudden changes in wind farm output also increases, rendering the management of power systems and transmissions networks more challenging (Australian Energy Market Operator Ltd. 2013d). A review of the aggregated wind output across three defined geographical regions in South Australia (Mid-North, South-East and Costal Peninsula regions) has found that spatial dispersion of wind generation helps to reduce overall variation in supply, but cannot substantially mitigate it (Australian Energy Market Operator Ltd. 2013d).

The relationship between wind generation and consumer electricity demand , shows “little correlation… between the aggregate wind output and demand in any region” (Australian Energy Market Operator Ltd. 2011a). At times wind supply can be negatively correlated with demand during heat waves (Australian Energy Market Operator Ltd. 2011b). So while the geographic distribution of wind provides some smoothing, the combined variability of wind and consumer demand means that other generation sources are required to respond to rapid changes of supply during periods of low output from wind (Australian Energy Market Operator Ltd. 2013d). For example the largest five-minute change in supply from wind in South Australia was a decrease of 294 MW (Australian Energy Market Operator Ltd. 2013d). To manage this variation, capacity in excess of an entire, large generating unit (280 MW of coal generation from Northern power station) had to be sourced at short notice (Australian Energy Market Operator Ltd. 2013d). Such challenges will increase in size and frequency, and therefore potential economic cost, as wind power supply increases, notwithstanding improving prediction of the availability of electricity from wind (Edis 2014).

The lack of correlation between electricity demand and supply from wind has another long-term impact on overall system costs: the constrained ability to retire other ‘baseload’ (in reality, ‘dispatchable’ (sensu Nicholson, Biegler & Brook 2011), generators from service. This is best illustrated by the poor correlation between supply and peak demand. During periods of peak demand, only a small amount of the total installed wind capacity can be relied on firmly to be providing electricity; the Australian Energy Market Operator currently assumes only 8.6 % for summer and 7.9 % for winter peak demand in South Australia (more precisely, for every MW of wind-generating capacity installed, the Market Operator can only rely on a statistically ‘firm’ 8.6 % of that capacity being available during 85 % of the top 10 % highest demand periods of the year) (Australian Energy Market Operator Ltd. 2013c). During periods of low wind generation, the cost impact is minimal. Pre-existing margins of reserve supply, which insure against the sudden loss of fossil-fuel generators, can also cover the wind variability. As wind-power penetration increases, however, the cost implications become ever more daunting. These subsidised, variable generators supply electricity at low marginal costs (e.g., no fuel requirements, no need for permanent staff at the power plant, etc.). This removes potential generating hours for other (baseload) generators with higher marginal costs to sell power and raise revenue. However, little of this dispatchable generation can permanently exit the market. Most of it must be retained to cover periods of peak demand when wind is generating little electricity. South Australia has 1473 MW of existing and committed registered generation capacity from wind, but the maximum ‘firm’ contribution is only 93 MW (Australian Energy Market Operator Ltd. undated). Just 60 MW of coal has been taken out of service (Australian Energy Market Operator Ltd. 2013a) and the market operator has not been advised of any plant retirements within the 10-year planning outlook (Australian Energy Market Operator Ltd. undated). In the eleven years since wind first entered the South Australian market, registered generation capacity increased 62 % while peak demand grew only 13 % (Figure 5). South Australia has been through a period of system overbuilding (Brook 2010), exemplifying Tainter’s “complexity spiral” whereby societies become more complex as they attempt to solve problems, with increasing costs and diminishing returns as the complexity increases (Tainter 1990 cited in Palmer 2014). Perversely therefore, the addition of variable, low marginal-cost generators gradually places upward pressure on overall system costs, in order to keep all necessary generators in the market (Ueckerdt et al. 2013). There is already evidence of this effect in South Australia.

Initially, the average wholesale price of electricity in South Australia declined from a spot price of > $80 MWh-1 in 2009-2010, to $42 MWh-1 in 2010-2011 (Australian Energy Regulator 2013). The decline in wholesale price was due in part to wind generators sometimes bidding at negative prices because of their ability to earn and sell renewable energy certificates to cover their costs (Australian Energy Regulator 2012). However in 2012-2013, the South Australian wholesale electricity spot price rose by over 70 % (Australian Energy Regulator 2013). The main driver of this rise was a price spike in autumn. This was unusual; autumn is a period of typically subdued demand, and the event occurred against a backdrop of generally lower demand in the National Electricity Market (Australian Energy Regulator 2013). The Australian Energy Regulator attributed the price spike to commercial decisions (i.e., cost control) from non-wind suppliers to take some generating capacity offline, which increased the wholesale price of electricity (Australian Energy Regulator 2013). The Australian Energy Regulator highlighted that the State’s reliance on wind-generated electricity had driven down spot prices, thereby eroding the returns for other generators. During this event, South Australia’s electricity imports were at their highest for six years (Australian Energy Regulator 2013). This illustrates system costs rising perversely from increasing reliance on subsidised, variable renewable energy generators whose output is uncorrelated with demand.

Another reliability issue is the provision of necessary ancillary services to the network to ensure systems stability and power quality, such as frequency-control capability and reactive support (Australian Energy Market Operator Ltd & Electranet 2014). These services are provided by ‘synchronous’ generators, typically traditional coal and gas generation or hydro (in some states), where electricity is generated through turbines spinning in synch at close to 50 Hz. Ancillary services are a physical requirement of any electrical system and have been necessary since the development of reticulated power (Australian Energy Market Operator Ltd. 2010a). However as shown, increased wind participation displaces traditional (non-hydro) synchronous generators from the market. The associated ancillary services reduce or disappear (Australian Energy Market Operator Ltd & Electranet 2014).

The rapid influx of wind generation, combined with proposals for over 3000 MW of additional wind generation (Australian Energy Market Operator Ltd. 2014a) spurred the Australian Energy Market Operator and transmission network operator Electranet to “identify existing limits to secure SA power system operation with high levels of installed wind generation and PV relative to SA electricity demand” (Australian Energy Market Operator Ltd & Electranet 2014). The report stipulates that the asynchronous generation of wind and solar PV “by themselves, are not able to provide the required controls to ensure system security” (Australian Energy Market Operator Ltd & Electranet 2014, p. 2). The report finds that South Australia is able to operate securely with high generation from these sources, even more than 100 % of demand, provided at least one of the following two conditions are met: (a) the Heywood Interconnector linking South Australia and Victoria is operational; and (b) sufficient synchronous generation, such as coal or gas thermal generators, is connected and operating on the South Australia power system (Australian Energy Market Operator Ltd & Electranet 2014, p. 2).

AEMO and Electranet examined the credible event that future market conditions could push the number of synchronous generators in South Australia to zero at any given time, and this coincided with a loss of interconnection. They found:

“Where SA has zero synchronous generation online, and is separated from the rest of the NEM, AEMO is unable to maintain frequency in the islanded SA power system. This would result in state-wide power outage”. (Australian Energy Market Operator Ltd & Electranet 2014, p. 12)

This finding provides insight into how South Australia needs to view variable renewable energy. In electricity terms, South Australia is not, in normal circumstances, an island. The current and future success of integrating variable renewable energy in South Australia hinges on the reliability provided by the rest of the NEM network. In that context, pursuing high penetrations of variable renewables in South Australia, as an end itself, becomes a parochial pursuit more so than a meaningful contribution to decarbonising the National Electricity Market. Proposed solutions to mitigate this risk include payments for minimum synchronous generation to remain online, development of a new market in ancillary services, network augmentation and even curtailing supply from wind and photovoltaics (Australian Energy Market Operator Ltd & Electranet 2014). This again points to system costs that are not represented by technology-specific metrics such as capital cost or levelised cost of electricity of the renewable generator. Such costs would spread nation-wide were other states to follow South Australia’s lead, with each new addition of variable renewable energy eroding the buffer of reliability on which the overall system depends and increasing their implicit operating subsidy.

These phenomena argue strongly that South Australia should plan both for more wind integration, but also on how to move beyond a sole focus on maximising wind capacity. Other forms of low-emissions generation must finish the decarbonisation job that wind has begun, and ultimately meet the role of largest provider. There are no credible plans for decarbonisation of Australian electricity that rely on variable supply alone, so this cannot come from merely a wind-plus-solar photovoltaic combination. Studies that have sought to address this challenge have applied varying combinations of energy storage and dispatchable, synchronous ‘clean’ energy (e.g., burning biomass) to support the variable renewable generators (Australian Energy Market Operator Ltd 2013; Elliston, Diesendorf & MacGill 2012; Seligman 2010; Wright & Hearps 2010). The only real question is just what these constant, dispatchable and synchronous sources of supply should be.


  1. SA desperately needs a chunky synchronous generator that is more price stable than gas (up to $22/GJ this week) and is not at the mercy of interstate transmission. Note both SA and Tas are now considering additional connectors effectively to the Vic brown coal plants that are supposed to be phased out by 2050. Tas learned that the hard way with the failure of Basslink which could as easily have happened to the Heywood line. I’d say SA is at or has exceeded optimum wind penetration. That is in terms of emissions reduction, reliability and power bill fatigue.

    I think SA could justify getting say an 800 MW dispatchable power plant which had some load following ability plus some modification to the ‘must take’ regime for wind power. For example the RET could be subsumed by an emissions trading scheme. The reason Ceres got the go ahead is because the 2020 RET of 33 Twh is such a huge leap from 2015’s actual 19 Twh. We’re building them whether they help or not. If it was based on a tough national emissions target we could be more confident new wind power was justified.

    Did Ceres get their hay burning backup plant approved? I note nearby Wattle Pt wind farm is getting a 20 Mwh lithium battery and there will be 100 subsidised Powerwalls in the Adelaide suburbs.

    1. 800MW might be a bit large.

      Imagine what the result of a trip from full load would be… no other generator or combination of generators in SA would be able to handle the load. SA would close down unless the interconnectors were available and able to handle the job – which is improbable. Look for 3 smaller ones, although nuclear power being what it is, running at part load is possible but not ideal.

      The ideal might be a 6-pack of 150MWe, but there is no such animal.

      That leads me to consideration of a trippable load – perhaps desalination plant – to absorb the surplus power when it is available and to be progressively unloaded when market price is above a set point, perhaps about $60 per MWh.

  2. @John Newlands

    NuScale out of Corvallis Oregon is marketing a 600 MWe dispatchable power station that is virtually emission free. Unfortunately, the process of getting that product approved for construction will take until 2020 so the first demonstration of the design in commercial operation will probably not be running until 2025.

    That approval process could be dramatically improved in terms of time efficiency without harming its safety function.

    1. So at least a decade of doing it tough. Some of the 7300 MW of lignite plants over the border that were built around 1970 will soon need to be replaced as well. I’d like the federal govt to give us a plan for that decade that isn’t based on CCS, granite geothermal, giant batteries and fabulous efficiency gains.

      1. John N, there isn’t such a plan.

        My natural response would be to call our “leaders”, national and state, rude names and to apply even ruder names for their advisors. Unfortunately, that would only result in further polarisation of the debate and even less effective communication than there is at present.

        Eventually, my guess is that accountants in the guise of State and Federal Treasurers will call the shots in the name of balancing their budgets. I’m not optimistic, though. Professor Ross Garnault presented both the environmental and the financial cases for a rational approach to energy generation, use and climate change and has pretty much been ignored once the initial applause died down.

        We will need to wait until a new breed of politician is elected. The current class of career politicians, led by know-nothing lawyers, will need to be replaced by majorities of representatives skilled in engineering, science, mathematics, economics and commerce. It might also be a good idea to cull the closed-mind religious nuts of politicians, including those of the Greens religion while we are at it.

        Only then can a meaningful plan be adopted.

        Anyone in favour of starting a STEM Party? (That’s Science, Technology, Engineering, Maths)

      2. John I doubt the Latrobe Valley generators will disappear any time soon without government intervention. Even Hazelwood is still economically viable and producing more than 50 years later.

  3. If the goal is to throw money away, then it appears that SA has achieved it admirably via donating payments for RET’s to wind generators and forcing the costs of providing anciliary services such as frequency control to other market players and to consumers generally. Add to this the escalating costs for transmission system upgrades, subsidised batteries with capability measured in minutes, not hours and days as necessary to support an islanded system, and the folly is exposed for what it is.

    Unfortunately, people will die when their essential medical support fails and when traffic lights, elevators and air conditioning fails.

    It is appropriate to say that South Australian lives, money, jobs and businesses are all being sacrificed on the alter to wind.

    It didn’t have to be like this. Since the French nuclear power program of the 1970’s and eighties, there has been ample and rapidly growing evidence of alternatives. There may some day be other possibilities such as the still-unrealisably impractical geothermal and wave power options. Nuclear power has long been known to be the only rational contender to provide safe, dispatchable zero carbon electricity in the necessary quantities.

    Why is this not happening right now?

      1. Robert, if the dream of tidal power from the north was environmentally acceptable and financially viable, it would be under way right now. It is not. In saying this, I do agree with some proponents that tidal power can be arranged such that it supplies continuously rather than only at high or low tides.

        If you are convinced that large scale tidal power is viable, where is the study that supports this?

    1. Hi singletonengineer. I suspect you already know this, but in answer to your question as to why Australia is yet to embrace nuclear power, it is mainly because:

      1) Our politicians still feel there is widespread community (and business i.e. the domestic thermal coal industry) animosity towards electricity generated from splitting atoms in Australia, and thus if they support it, they could get kicked out of power.

      2) Our politicians still feel there is widespread community and business animosity towards having a penalty on carbon emissions in Australia (which is required for nuclear power to out-compete coal and gas on price), and thus if they support it, they could get kicked out of power.

      So long story short, it is not because of technical barriers, merely political ones (sorry if I uploaded this comment more than once, subscription sorted now!).

  4. South Australia has essentially shot itself in one – if not both – feet with their idolisation of wind. As already mentioned here the spot price of gas has surged with some minor constraints on the MAPS. I can’t blame Pelican Point for remaining offline with the current market conditions. Unfortunately this has left the grossly inefficient TIPS in the role of swing producer with Hallett and Snuggery being economically viable to operate intermediate load. The situation is very diabolical and the only winner I can see is Victoria with increased exports.

  5. “Uniting Communities advocacy manager Mark Henley said it was difficult to predict future movements in household bills, but further rises of up to 10 per cent could be coming.

    “Already we’ve got literally thousands of SA households, maybe about 40 per cent, who are struggling to pay their bills at some stage during the year.””

    That is a shockingly high percentage.

    “Mr Henley emphasised that the state’s large volume of renewable energy could become a long-term advantage, especially if battery storage technology could be mastered and exported.”


    It continues to sicken me that well-meaning people like Mr Henley are convinced that some sudden economical deployment or breakthrough with battery storage will fix all the challenges associated with wind and solar.

    And who convinces people like Mr Henley? Thought leaders like Mark Parnell, endlessly touting a renewables+batteries fantasy.

    And why?..

    “Business SA chief executive Nigel McBride said local companies were already considering moving their operations interstate, while others considering an investment stayed away entirely.”

    (The precise point I’ve been making for years. It will be completely dismissed by some, even as industry closes up and investment dollars flow elsewhere.)

    “The one thing that we know for sure is that we are going to see increases in power prices across the board for the next three years,” he said.
    “We’ve been raising the alarm for a long time now and there’s been an overemphasis on renewables and neglect of baseload energy.””

    Promising everyone that super batteries are just around the corner allows people like Parnell to dismiss the need for conventional ‘baseload’ capacity. Because if this isn’t supplied by coal or gas, it’s gotta be fission, which must never be allowed. Then we have certain academics and websites which make it there mission to spread this dismissal of baseload far and wide.

    Furthermore, even in some form of economical renewables+batteries future, what assurance does industry and investment have that there’s *enough* supply stored during extended overcast lulls?

    Honestly, this oversell has got to end.

  6. This looks very much like what is happening in Ontario. I don’t live there, but Scott Luft ( keeps an excellent blog.

    Basically, due to government policies, an enormous amount of wind and solar has come online during a time of essentially level demand, which has depressed the price of wholesale electricity. But various generators have been given price guarantees (the Global Adjustment), so the retail price of electricity has gone up (price support = price guarantee – value of electricity). Many generators receive GA payments (apparently the nukes have a different support mechanism), and many of the wind and solar systems receive a further price support. It all depends on what the government policies were when the generators came online.

    And, even more perversely, Ontario is a major exporter of electricity, but since the export price is even lower than the Ontario market rates, retail prices rise even further as exports increase.

    The only (expensive) silver lining is that the price guarantees have kept their baseload/dispatchable generators online, so the system is stable, and no one is talking about shutting down the nukes. Apparently, the CANDUs are able to bypass steam around the turbines at a high rate, so they can go to standby for a few hours.

    Anyway, if you would like to see how the SA power market might look in a few years (with the obvious differences of government policies and the size of imports/exports):

    On a somewhat related note, there is a lovely new-ish study about “system-friendlier” wind generators from our good German friends:

  7. A.S. (ante-script): This post has gotten much longer than I originally anticipated, and its organization suffered a bit. I apologize in advance for the slightly disjointed and wandering nature of my points. And I don’t blame you if you don’t read all of it. I would have deleted point 2, since I basically undermined the idea, but I leave it as a possible discussion starter about capacity markets. Similarly, I’ve left the comments about cows in point 4, because I grew up with cows and still milk them on the weekends, and because it was all over the ag journals about 8-10 years ago. Eventually, someone will try to figure out how to measure and regulate methane production from them, and it will be a mess.

    The executive summary:
    – any market adjustments by governments can’t be allowed to hide the price mechanism
    – renewable energy producers should pay for the backup power necessary to firm up their production
    – the problem is carbon from fossil fuels, not a lack of renewable energy, so focus on eliminating carbon, not maximizing renewable energy
    – simple mechanisms work better than complicated ones: to keep the market simple, complex calculations should be done by the actors in a market, rather than the regulators of a market
    – allow developing countries to develop using the fuels we are trying not to burn (we should export our fuels if they want them), and get them out of poverty as quickly as possible, so they can afford to to replace the coal plants they are building with the new nukes we are developing

    Some of the other comments on this post (and others) here have spurred the “little grey cells” to recall and expand some thoughts I’ve had recently about energy markets.

    Note: I live in Wisconsin, USA, so this is based on the policies I’ve seen at work in the US, which are busily shutting down excellent nukes.

    1) Turn the renewable energy (RE) production tax credit from a flat rate to a percentage of net income. Right now, RE generation companies still make money even when the price has gone to zero or somewhat negative. Turning the support into a percentage means they will loose money along with everyone else. Indeed, if they continue to shove energy onto a node that doesn’t need it, a percentage support multiplies the loss, so they would lose even more than everyone else.

    True, because of their near-zero marginal costs, they will still be the first generators called on, but making the support a percentage means the price mechanism has a chance to work correctly. So, the signal for RE producers will no longer just be: produce energy, instead it will be: produce economically valuable energy.

    2) Allow the grid operators to designate “protected baseload”, and have them curtail operators that are eating into it. The price mechanism gets a bit wonky here, since we’re almost making two different markets, with the big baseload thermal stations in one and the variable/load followers in another. The capacity credit payments are part of this kind of mechanism, but the system seem too complicated to me to be workable. Maybe the best way is to allow generators to charge for idle time at some average price/hour. Really, it could be part of the standard electrical market: $A/kWh of production, $B/hour of standby. Then the grid operators are able to mix and match to get the lowest price at any one time, which would allow them to curtail erratic production levels.

    Two problems I see, though: a) it would probably kill the RE energy market due to their needing to have production costs below the difference of (production – standby), and b) who gets to decide which generators are allowed to charge for standby? In a free market energy system, it would produce an absolute glut of overcapacity. And would the payment be the same for all generators? Once again, it looks like a big, complicated mess that hides the price mechanism, and seems to point to overcapacity. So, turning from a carrot to a stick:

    3) Require all generators to buy production insurance based on their output leveled over time. Effectively, pretend that all generators are dispatchable, that the grid operators can call any of them up at any time to get any amount of the power they have on offer. This places RE on the same field as everyone else, rather than letting them flit in and out of the market as the clouds and wind dictate. They would be allowed to create daily/seasonal schedules of maximum power (a bit like a planned outage for a big station), but they would have to be responsible for getting power to the grid when requested during those schedules. Of course, they can’t always produce the power themselves, they have to find those generators that can and pay them an insurance rate to back them up. It will cause the price of wind to increase rather dramatically, considering the’s intermittent schedule. Solar would be a bit better, if only because demand tends to be higher during the day.

    But it puts the costs of their erratic production on them, not on everyone else, so the price mechanism once again tells them: produce economically valuable energy. They would have an incentive to make their production more reliable and more correlated with demand.

    Of course, we can make the insurance contracts into a simple insurance market at the grid operators, working alongside the power market. Standard hourly and day-ahead rules apply.

    While this is still a big, complicated mess, all of the calculations are done by the buyers and sellers before they get to the market, so the market mechanism still works.

    For a more involved discussion about intermittancy, storage, and RE price “grid-parity”, see this very clear, readable post from Schalk Cloete:

    4) Change all RE supports, incentives, requirements, and minimums into zero-carbon supports, then slowly change the whole system over to a carbon tax. Admittedly, we go from carrot to stick, but the effect will be much larger, it will actually target the problem, and it will keep the price mechanism intact and working.

    The definition of carbon here should probably be changed to include all greenhouse gases, the next biggest of which is methane. The difference is that no one wants to release methane, since it is valuable. Any release is basically a leak, not a final by-product. Indeed, the only process that springs to mind where methane is released as a byproduct is milk production, as cows produce a fair amount of methane while digesting plants. The problem is that a tax would be punitive in this case, since we can’t drive the release to zero in an economic manner*. We can mitigate the problem, though, by feeding cows oregano and garlic, and a few other dietary changes. So, maybe a kind of tax on emissions above a certain level? And I have no idea how it could ever be checked or enforced.

    *Thinking about it, we probably can get to zero using genetic engineering of the bacteria, or maybe finding different bacteria that still produce the fatty acids needed by the cows, but have CO2 as the byproduct instead. I have my doubts we could find a bacteria, though, as likely the cows would already be using it if one were available.

    And, technically, the carbon in cow methane isn’t from fossil sources, it is just that it was turned into a gas that is much more potent than CO2.

    In general, if a system requires extremely detailed, accurate, and careful accounting of everything in order to work, I stay away from it, as it is prone to error and will eventually breakdown. Simple mechanisms are robust, so a carbon tax on the major fossil sources (coal, oil, gas) will likely be the best answer. Tax it at the point of production or import, and don’t tax their export to developing countries. If it is going to a developed country (or a country we don’t like, I suppose), then tax the export, so we can keep the money here. I’m not sure how the WTO would react to a carbon tax (China would almost certainly sue) on imported goods, but if it were applied to everything within a whole country, with no difference considered between domestic and foreign production, it might be acceptable, since it isn’t a tariff.

    The Trans-Pacific Partnership may be a bigger block, as pointed out by Blair King (
    “Under the National Treatment and Market Access (NTMA) chapter of the TPP, Canada would not be allowed to put a tariff on imported steel (that was not subject to the carbon tax) to address the difference in price and our steel industry would suffer.”

    Developing countries and their energy usage (currently) are not the problems. They will become the problem fairly quickly, considering the rate of coal power plant construction, but bringing them out of poverty as quickly as possible is more important, as it will bring their environmental impact down, and allow them to afford to use build our new, advanced nukes. Until then, we should ship them our natural gas to replace their coal.

    A few references about wealth, population, and environmental impact. The videos from Gapminder were great eye-openers for me.

  8. The assumption that increased SA wind power can easily be exported to Australia’s east coast could face challenges. The state of Victoria may end up with more wind power than SA if plans materialise
    By continuing at that rate it is expected Vic’s power sector emissions will decline just 12% by 2035. Surely we want 50-100% less emissions by 2035.

    Output from the 270 MW Hornsdale wind farm southeast of Pt Augusta is supposed to be earmarked for the ACT about 1000 km away. In theory it shouldn’t affect SA power prices but it clearly will during lulls and storms. Note the LGC subsidy is now around $85 per Mwh, about double the busbar price of coal. Wind and solar are now mature industries so it’s time to end their protected status. They should find their feet under a system based on a tough CO2 cap, not selective quotas.

    1. I’m not saying don’t build that new wind and solar in Victoria. But 5400 MW of it still has an annual output which is far short of a typical twin-unit nuclear station.

      With a coherent, tech-neutral emissions-reduction-focused energy/climate policy and the discarding of the worst intransigent anti-nuclear myths, we could be building by 2025. This would more than double clean energy by 2035.

      Starting in 2007 would’ve been better. Or in 1999. But “no-nukes-at-any-cost” controlled the narrative then. Not any more. No more time to lose.

      1. According to the Photovoltaic Institute the average PV capacity factor for Victoria is 15%. For wind power maybe 30%. Brown coal 80% average? As we speak the NEM Watch widget is showing 4206 MW for Vic brown coal out of 7300 MW or 58%. Arithmetically there’s no way 5400 MW of wind and solar can replace 7300 MW of brown coal.

        That says that it’s really a gesture not a serious attempt to decarbonise. Greens will be cock-a-hoop with the 5400 MW of wind and solar meanwhile Joe Public has to pay the 8c per kwh subsidy but the emissions saving is minor. My idea is replace Hazelwood and Yallourn with a twin gigawatt Gen 3.5 plant. A heavy water or 4th gen plant in SA can refission the spent fuel and make a small start on the high level waste facility.

        1. I have previously advocated adoption of a twin fleet philosophy for brownfield redevelopment of existing lignite and coal fired power stations.

          Fleet 1: 600MW
          Fleet 2: 1000MW

          Victoria and NSW could reasonably simply host both sizes on existing power station sites.

          Queensland and SA would probably be better suited to 600MW units, provided that SA had access to an upgraded Heywood Interconnector. Otherwise, wait for SMR.

          That way, existing land, transport routes, HV transmission lines, operating, maintenance and construction staff, cooling water supplies and more will work together to minimise costs.

          Existing townships which face difficult futures post-coal might be nuclear power’s strongest allies. These include Muswellbrook, Singleton and even the whole of the Hunter Valley in NSW, plus equivalent towns in Victoria. Currently, many folk in these towns see only the threat that faces the coal and power industries. Once they become aware of the possibilities of strong low carbon futures, they will be much more likely to press for a nuclear future than (say) inner-city Greens who have been dazzled by the 100% Wind + Solar nonsense.

          The vision to sell is not just one or two units, but 20 to 40, eventually expanding to include SMR’s and Gen IV, with construction timed to suit closure of the existing coal fired plant. Probably 30GW all up. Plus (unsubsidised) solar and wind – they will be more valuable as wedges in a properly buffered system than squeezed into an increasingly complex and unreliable Green Dream.

          “Building Australia a believable energy future.”

  9. “One of the nation’s leading experts on electricity prices, Grattan Institute energy program director Tony Wood, said “we are seeing the beginning of the real cost of changes we have imposed on our electricity system”.

    Mr Wood said a “dog’s breakfast” of climate change policies dating back to the first Rudd government had contributed to rising prices because investors haven’t known types of generation capacity to support.

    Even as an advocate for renewable energy, he said Australia should be running more on gas and “cleaned-up” black coal and less on wind and solar, which currently can’t provide reliable supply.

    Mr Wood said the electricity market was responding to rising demand and falling supply, as well as a jump in the cost of gas needed to run gas-fired power plants.

    “Those three factors are coming together to create a perfect storm,” Mr Wood, a former Origin Energy executive, said. “No-one forecast this.”

    A source at a major electricity retailer agreed: “I don’t think anyone in the industry saw this coming. It’s serious.””

  10. As a South Australian resident, I find the absurd position in which this state finds itself to be intensely infuriating. The rush to wind power was all about political dogma and unthinking idealism. The politician who brought this on should be in court, not living high on the hog in Rome, courtesy the Australian taxpayer. Of course the perils of going down the renewables route so recklessly have been totally anticipated by many, and for a long time.
    The South Australian Nuclear Royal Commission understandably found that “…a nuclear power plant of currently available size at current costs of construction would not be viable in the South Australian market under current market rules.”
    Which brings us to the great underlying problem with electricity generation in Australia. It has been said that Australia is not a country but that it is, rather, a collection of competing and bickering states. It is not surprising that South Australia, its economy seemingly forever on the ropes, has insufficient power needs to justify a modern, clean, baseload power system such as nuclear. This is not a problem from which France (66 million people) or Ontario (13 million) suffers. Were Australia able to look at its electricity generation needs as a whole, cohesive country, and to open its mind to not being the only OECD country in which nuclear power generation in unlawful, the equation would look very different.

  11. The latest idea is to pipe gas from the offshore WA Browse Basin to Adelaide via Darwin
    Several pointed observations can be made. First the gas field is closer to another country Timor Leste than to Adelaide. Second Whitlam era politician Rex Connor predicted the need to pump natgas across the continent 40 years ago. Third; who thought it was a good idea to convert 70% of east Australian gas production into export LNG? Fourth natgas is a fossil fuel which negates the whole idea of going low carbon.

  12. Two things here for me; no one who seriously understands the market thinks this is caused by renewables. Prices are up across the NEM, mostly because of gas. Lots of gas in SA so they’re most exposed to it. It is not rocket science.

    The other thing is that I do not believe for a second that turning on one of those coal plants will lower prices. Why did they mothball in the first place? Because they are too expensive to compete in the market. If they thought they could contribute and get dispatched they would be running, but they’re mothballed because they’re getting thrashed in the market. If there’s no money changing hands off-market for those to run again I’ll be very surprised.

    Keep pursuing this strategy though. Maybe if you can attack renewables enough they will ban them and in maybe 15 years there might be nuclear power to cover the difference.

    1. “Suggestions that the renewable sector is now merely a “scapegoat” for our problems are absurd, stemming from an ideology of nil criticism for some technologies. While those sectors are not alone in the frame as contributing to this problem, the Pollyanna group-think that insists that no line can ever be drawn to the obvious shortcomings of variable generators is starting to positively stink.”

      Welcome to the discussion.

    1. @evcricket:
      The high prices are not caused by gas – they are entirely due to a lack of wind.

      If wind was reliable, gas wouldn’t get as much business. Indeed, there is a strong argument for wind energy suppliers to pay for their own backup power arrangements, to bid into the market on the same terms as other suppliers and for any shortfall below their contracted supply to be invoiced not to the retail customer via the distributors, but back to the failing wind generator.

      Of course, demand management could reduce the height of the peaks but that won’t happen until a real-time feedback mechanism to communicate high prices to consumers, eg by automatically switching off air conditioning, pool pumps, clothes driers and refrigeration for short periods, say 1 hour, when the market price reaches a user-controlled trigger. That also presumes that high wholesale market prices are reflected in retail tariffs, which they generally are not.

      This goes far beyond the capacity of the so-called smart meters which have been installed across Victoria and elsewhere at costs in the billions of dollars range. When a wind energy supplier knocks on my door with an offer to install equipment necessary to reduce short term peak loads I will believe that it is serious about tackling the problems caused by the unreliability of weather-dependent wind generation. Until that day arrives, wind is not an effective part of the solution to our energy woes – it is the root cause of the “high priced gas” problem.

  13. It is unsurprising that you made no attempt to engage with the substance of my comment. There’s a pretty clear link between high prices and increased gas use.

    And SingletonEngineer, your argument amounts to wind being responsible for the costs of other generators, which is an incredible absurdity. Wind makes very cheap power. Gas does not. Yet this is wind’s fault? Absurd.

    1. Of course it can be wind’s fault. Supply goes down, price goes up – economics 101. You want gas or some other reliable generator to be there when wind isn’t, it’s got to be paid for somehow. This is where all the crowing about merit order effect from the likes of Giles Parkinson comes home to roost – if wind has eaten gas’s lunch, it’s inevitably going to get a feed some other way, whether through price spikes or more reliable consumers overseas.

  14. Global gas demand as backup for mandated renewables is increasing the price of piped gas and LNG. Add to that demand for combined cycle baseload (eg Pelican Pt SA) and NP replacement in some regions like Japan and California. This article asks whether gas is a bridge or barrier

    I’m not confident energy storage will arrive in time as an alternative to gas. AEMO thinks we will have 6.6 Gwh stored in batteries by the year 2035. At 233 Twh a year I make that 15 minutes worth of national electricity supply.

    1. John, do you know the actual reason why gas prices have increased in Australia? Gladstone gas plant and the link to the Japanese market. Previously Australia was insulated because there was no export pathway. Now there is, and so AU gas is moving to parity with Japan.

  15. @evcricket:
    Do you have anything relevant to add; ie not from an echo chamber which is dedicated to a one-eyed adoration of unreliable weather-dependent electricity sources and an assumption that transmission upgrades and ancillary services such as peaking energy and frequency control are Other Peoples’ Problems?

    What is inconvenient about your source is not that it is information, but that it is fatally biased and not informative.

    How about using peer reviewed sources or at least those which are not commercially conflicted?

    1. That’s a strong reaction to a new point of view; is it disgust? Fear? Or just plain cowardice.

      If you had the emotional maturity to engage with a new source of information you would see some graphs from the Australian Energy Regulator. Just skip all the text if it’s too scary for you and look at the graphs. Now, tell me, does wind or gas correlate with high prices?

      And you can keep your ‘peer review’ criteria to yourself. When we’re talking about market events in the last month there are no peer reviewed papers, they just take too long to produce. All we have at the moment is data, but fortunately there’s loads of it.

  16. Thanks for this article, Ben. Exactly the quick, well-referenced article I needed to catch up on all of this.

    Here’s a rather predictable response to the problem from Repower Port Augusta: – i.e., it’s all because gas costs a lot, therefore we should build solar thermal.

    I’d be interested to know what your take on this is. It seems to me CST plants would face the same problem other dispatchable or semi-dispatchable generators do – reduced generating hours due to higher marginal costs relative to wind. I also wonder how well solar output (or potential output given x capacity of solar) has correlated with the these price spikes. And even if solar thermal could reduce some/all of these spikes, how that would affect average electricity prices compared to the current wind + gas mix.

    1. Solar Thermal falls seriously short of being dispatchable. It is still limited by the sunlight that lands on its collectors and thus is only dispatchable in the very short term and to a largely indeterminable degree.

      I have yet to hear of a single ST facility that can provide more than a fraction of its nameplate rating for even a single 10 hour summer night following a perfect day. Even Ivanpah is designed to deplete its thermal store by midnight.

      Desertec (see: is too “one dimensional… utopian… expensive”. That, from a company spokesperson.

      There is none which can start immediately the sun rises, so the morning peak is missed. There is none which can store meaningful heat energy for several sun-free days.

      Essentially, they are a long way short of large scale viability.

      Rather than ask ever more tightly worded questions to try to dig out the truth of STP, why not simply ask those making claims to provide the data and independent analysis to support their claims of cost, reliability, capacity factor, load following ramp rates, despatchability, or whatever other the claimed attribute might be. The important word here is “independent”. Industry-derived opaque spin cannot be trusted.

      1. “why not simply ask those making claims to provide the data and independent analysis to support their claims”

        That would normally be my course of action, but in this case industry-derived information about CST is being taken seriously in South Australia. There is support from the Premier, and from the council and community at Port Augusta, where coal power stations recently closed and the government needs to be seen to be doing something to support job creation. That doesn’t mean it’s a good idea, but the possibility of another 110 MW of variable power generation in SA in the near future isn’t merely an abstract hypothesis. That’s not the same as replacing all gas generation, but I’d genuinely like to consider what the effects might be.

  17. The CST at Sundrop Farms Pt Augusta SA could be more of a job creation exercise than demonstration of a disruptive technology. I understand Coles supermarket will buy tomatoes from the greenhouses and that will employ otherwise idle local youths. The fact that the greenhouses currently use gas heating in winter has been a sore point. I think the idea is to eliminate gas altogether unlike say Ivanpah US.

    We have yet to see if they achieve the multiple aims of electricity, gas displacement and seawater desalination. The other CST in progress is Jemalong NSW which was set back by a sodium fire. So far CST in Australia has no runs on the board.

    1. CST in Australia has a lot more runs on the board than nuclear, even if you extend that out another decade.

        1. While that is a bad analogy, it doesn’t even have the benefit of being true. Solar thermal has deduced emissions and generated electricity in AU.

            1. Liddell and Kogan Creek power stations, the carbon block mob in Cooma have probably generated electricity by now. Also we’ve been using solar thermal to heat water for decades, which is typically a straight reduction in coal power.

              No I’m not going to look up all the costs.

              1. @EV Cricket:
                You have little idea about the true situation. I am very much familiar with the Liddell CST plants. No need to go into details here, but suffice to say that the proponents did their very best yet have designed and constructed commercial failures, following which they suffered substantial real losses and exited the industry. Such is life – it can be very risky.

                That is despite substantial Federal Government support. Everybody gave it their best shot. I know this first hand – I was there at the time and had a minor hand in the final design as well as management of supervision of early site works.

                Liddell’s STP’s (both of them) were designed not to reduce CO2 emissions, but to enable a black coal burning power station to reduce its overall emission intensity by one or two percentage points on one unit out of four at any given time and thus to obtain social licence to continue to operate. Effectively, they were only a demonstration plant and certainly not something to hold up in discussions such as taking place here as some kind of climate-friendly world-saving success story.

                What they did do quite well was to establish a baseline for part of the body of knowledge as it was almost a decade ago. That is excellent. Unfortunately, the knowledge derived from those two projects has, AFAIK, not been presented as peer reviewed results and analysis with which to better inform the theoreticians, financiers and designers of the world. It is not yet part of the body of peer reviewed knowledge that is essential at the heart of real professionalism and progress.

                Your own lazy acceptance of the value of these projects is simply arm-waving from the sidelines. Peer review and transparent fact checking are essential to the progress of new technologies. Please don’t pretend that because you find them difficult or inconvenient that they can be avoided.

                1. My god you make a lot of assumptions. All i said was that they exist and have generated electricity. Something nuclear will definitely not do before 2030.

                  1. @EvCricket:

                    Evcricket knows nothing yet claims the right to direct others.

                    Without facts, opinions are chaff.

                    Without peer review, knowledge is untested.

                    What have you brought here? I have brought the experience that springs from actual involvement and commitment.


  18. Kinda weird that months after the nuclear Royal Commission SA seem hellbent on anything but nuclear. 2008 climate change review chairman Ross Garnaut wants to install a 40 MW X ? hours battery at Whyalla. Couldabeen PM John Hewson wants a graphite block CST north of Pt Augusta based on a Cooma NSW prototype. That is distinct from the Sundrop Farms molten salt CST south of Pt Augusta. Even the failed Petratherm granite geothermal venture may be revived.

    It seems that all the nuclear RC talk has sparked a flurry of anything-but-nuclear ideas. However new federal energy minister Josh Frydenberg seems likely to approve the Barndioota intermediate and low level nuclear waste site. Trouble is he thinks Australia must keep mining coal to help Asia.

  19. I find it slightly amusing the way current political correctness prevents commentators from using the N-word. It’s like watching an OCD sufferer walking along a pavement without stepping on a crack… it must be excruciatingly difficult. An example
    Apparently ultimate salvation will come in the form of increased connection, developments in batteries and unspecified re-design of ‘the system’. Geez hope it doesn’t take too long.

    1. That is dreadful analysis, taking a proximal-cause approach only and declining to consider the distal causes of the issues raised. Please refer to the extract from our paper.

          1. Oh sorry I assumed there was another paper linked above that was related to SA power prices.

            I don’t see how distal causes explain why spot prices are higher in SA? I don’t see any mechanism described above that links these things. Also, if the cause of the price spikes, which I don’t even think were unusual, was ‘distal causes’ doesn’t that explicitly mean SA wind is not causing the spikes?

            More importantly, the most recent data, linked in The Conversation piece above, flat out disproves your assertion that this is “the most volatile period in history with no signs of relief”. There is little data to support your assertion and plenty to refute it.

            And that’s the key to this whole beat up. You cite the front page of the Australian as if front page news is some sort of proof or more worthy source. I assume you think Utegate was important and truthful as well. The Conversation paper shows pretty clearly that this is a mischaracterisation of a common event by using long run data from the market operator. Prices go up and down, the amount it goes up and down in SA has decreased in the near term

            1. That Frontier Economics paper is bad too. They intentionally do not disclose the number of high price events, then select the ones which correlate with low wind events and make it appear like all the events were wind related. They show 5 events, there were actually 15 events. So a third were related to wind, not all of them.

              They also make no attempt to provide context on the number of high price events with respect to historical precedents. Then put in a graph that shows a long term down trend and concentrate on a one year uptick at the end.

              It is also from last year. I think actual data from this year is the better way to determine what is happening this year.

            2. Ok that’s fine. This is becoming like some other discussions I have had here where someone just keeps saying “I don’t get it” when most others do. No problem. I may be wrong, maybe I am right and not being clear, or maybe you just don’t get. I’m not fussed. Thanks for the discussion, others can pick it up if they wish.

  20. Thanks for an excellent overview of the situation. Also the forum following and thanks to many of the contributors for sensible comments. I’m a retired electrical (power) engineer and feel rather inadequate reading some of the articles. Not anywhere near as inadequate when I attended the AEMO roadshow on “future power system security” (Melbourne 17th August 2016). Back to school for me I guess.

  21. South Australia is the laughing stock of the world, using coal generated power from interstate and they still balls up. The embarrassing power outage is being downplayed with political lies being peddled about coal power generator (master clock) would have had suffered the same fate (if they had one) as the many separate unable-to-synchronize wind generators had – maybe blame cheap Chinese steel for the technical incompetence?

    1. Happy to moderate this in, however given it is so topical and there are still investigations to come, I recommend backing this up with some analysis and data. Strong opinions demand a strong basis.

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