Prices hit zero again across the main electricity market on Australia’s mainland on Wednesday, as low demand combined with strong output of wind and solar, and the reluctance of many fossil fuel plants to dial down their output.
Prices, as we reported briefly on Tuesday, hit zero in all four mainland states that participate in the National Electricity Market – Queensland, NSW, Victoria and Tasmania. It occurred at least twice, just before 3pm, although prices in Tasmania remained in positive territory.
And it happened again on Wednesday, as demand kept low and the combined output of wind, solar and storage hit more than 10GW – as it has done on a few occasions in the last week. That equates to more than 40 per cent of total demand.
In short, and as they say in the stock market, there were more sellers than buyers, and so the price went down. Thermal generators, many of which do not like to ramp up and down quickly as wind and solar output varies, maintained their output, but had to bid low to ensure they were dispatched.
Analysts expect more volatility in the grid with added wind and solar, which in turn will provide a price signal for more storage – battery and pumped hydro – and other flexible generation, which in turn will then flatten prices again.
On Sunday, when wind and solar provided more than 100 per cent of local demand (the surplus was exported to Victoria), the average price of wholesale electricity in South Australia was minus 23c a megawatt hour, according to AEMO data. The average for this financial year in that state is $73/MWh.
In Queensland, prices have gone negative for four days in a row now, as this chart above reveals. The main reason is the amount of solar – both rooftop and the surge in large scale, and the inflexibility of coal. Meanwhile, the crazy gang in the LNP are suggesting that Queensland should separate from the grid. Yeah, sure, that would work.
Energy participants also suggested that some coal generators not switching off may be heavily contracted, or have take or pay fuel supplies – meaning that they might as well burn the fossil fuels as they have to pay anyway. “It could be multiple things that aren’t public,” observed one.
Of course, wind and solar farms do not have “take or pay” contracts with the providers of wind and sunshine, although they may have other contractual arrangements that could inhibit their output (such as switching off when prices go below zero).
Marija Petkovic, from Energy Synapse, who provided the above graph, says the negative pricing is mainly a combination of high solar uptake, low demand, and inflexible coal generation.
“Electricity generation from solar (utility scale + rooftop) during the first 20 days of August has been 2.4 times higher than the same period two years ago,” she notes (mostly due to influx of large solar).
“Electricity demand also tends to be quite low in Queensland at this time of year, so solar is able to push prices down to very low levels. Black coal generators in Queensland do have some flexibility. They ramp down during the day almost as low as they can go, but it is not enough to offset the solar.”
Indeed, the negative pricing is becoming more regular now, although they are occasionally the result of network and other constraints imposed by the market operator.
Interestingly, the negative prices came as a US-based software company specialising in bidding strategies driven by artificial intelligence, launched a new product that can help wind and solar farms dodge such negative pricing events and maximise their revenues.
The company, AMS is backed by former California governor and actor Arnold Schwarzenegger, and was founded and is led by his former chief of staff, Susan Kennedy.
Date: Aug 21, 2019