VIDEO: Michelle Grattan on the government's response to the bushfires

University of Canberra Deputy Vice-Chancellor Professor Geoff Crisp discusses the the week in politics the government’s response to the bush fires as well as the Emergency Leaders for Climate Ac...

Michelle Grattan, Professorial Fellow, University of Canberra - avatar Michelle Grattan, Professorial Fellow, University of Canberra

Conditions built into Frydenberg's okay for Chinese baby formula takeover

Bellamy’s will have to have to manufacture in Victoria and keep its Australian headquarters for ten years.Bellamy’s AustraliaThe proposed acquisition of infant formula producer Bellamy&rsq...

Michelle Grattan, Professorial Fellow, University of Canberra - avatar Michelle Grattan, Professorial Fellow, University of Canberra

Tons of acorns? It must be a mast year

A mast year can be a squirrel's dream come true.Editor77/Shutterstock.comIf you have oak trees in your neighborhood, perhaps you’ve noticed that some years the ground is carpeted with their acor...

Emily Moran, Assistant Professor of Life and Environmental Sciences, University of California, Merced - avatar Emily Moran, Assistant Professor of Life and Environmental Sciences, University of California, Merced

Do we actually grow from adversity?

We like to narrate our lives in terms of the challenges we've confronted and the setbacks we've overcome.frankie's/shutterstock.com In our culture, there’s this idea that enduring a tragedy can ...

Eranda Jayawickreme, Associate Professor of Psychology, Wake Forest University - avatar Eranda Jayawickreme, Associate Professor of Psychology, Wake Forest University

Proposed asylum fees are part of a bid to make immigrants to the US fund their own red tape

Like making applicants wait in Mexico, fees could discourage asylum seekers.AP Photo/Fernando LlanoThe Trump administration wants to make people fleeing persecution in their home countries pay for som...

Sarah R. Sherman-Stokes, Lecturer and Clinical Instructor of Law; Associate Director of the Immigrants’ Rights and Human Trafficking Clinic, Boston University - avatar Sarah R. Sherman-Stokes, Lecturer and Clinical Instructor of Law; Associate Director of the Immigrants’ Rights and Human Trafficking Clinic, Boston University

The Democrats are running more female veterans for office than ever before – but can they win?

Amy McGrath speaks to supporters in Louisville, Kentucky.AP Photo/Timothy D. EasleyIt’s not often that a political unknown’s campaign ad goes viral. But in 2018, M.J. Hegar (TX-13) burst o...

Theresa Schroeder Hageman, Visiting Assistant Professor, Ohio Northern University - avatar Theresa Schroeder Hageman, Visiting Assistant Professor, Ohio Northern University

Haiti protests summon spirit of the Haitian Revolution to condemn a president tainted by scandal

Jean Marcellis Destine, dressed as Haitian independence hero Jean-Jacques Dessalines, heads to a protest against President Jovenel Moïse in Port-au-Prince, Haiti, Oct. 4, 2019. AP Photo/Rebecca B...

Julia Gaffield, Associate Professor of History, Georgia State University - avatar Julia Gaffield, Associate Professor of History, Georgia State University

Conditions built into Frydenberg's okay for Chinese baby formula takeover

Bellamy’s will have to have to manufacture in Victoria and keep its Australian headquarters for ten years.Bellamy’s AustraliaThe proposed acquisition of infant formula producer Bellamy&rsq...

The Conversation - avatar The Conversation

Climate change: why Sweden's central bank dumped Australian bonds

Sweden's central bank ways it will no longer invest in assets from governments with large climate footprints, even if the yields were high.ShutterstockWhat’s happening? Suddenly, at the level of...

John Hawkins, Assistant professor, University of Canberra - avatar John Hawkins, Assistant professor, University of Canberra

The Conversation Yearbook 2019: celebrate with us and grab your discounted copy

The Conversation's Deputy Health Editor, Phoebe Roth, and Assistant Editor: Technology, Noor Gillani, agree this is the must-have read of 2019. Wes Mountain/The ConversationA little bit of authority g...

Molly Glassey, Digital Editor, The Conversation - avatar Molly Glassey, Digital Editor, The Conversation

Place your bets: will banning illegal offshore sites really help kick our gambling habit?

While total gambling spending in Australia decreased during 2016-17, sports betting increased by 15.3%, from A$921 million to A$1.062 billion.SHUTTERSTOCKThe Australian Communications and Media Autho...

Charles Livingstone, Associate Professor, School of Public Health and Preventive Medicine, Monash University - avatar Charles Livingstone, Associate Professor, School of Public Health and Preventive Medicine, Monash University

Stop the world, I want to get off! In Exit Strategies, one woman leaves and leaves again

The script for Exit Strategies was developed by performer Mish Grigor during an artist’s residency in the UK, against the backdrop of Brexit.Bryony JacksonTo perform an exit is not as simple as ...

Sandra D'urso, Researcher, The Australian Centre, University of Melbourne - avatar Sandra D'urso, Researcher, The Australian Centre, University of Melbourne

Sri Lanka election: will the country see a return to strongman politics?

Gotabaya Rajapaksa, the frontrunner in Sri Lanka's presidential election, faces a lawsuit in the US for alleged extrajudicial killing and torture.M.A. Pushpa Kumara/EPASri Lanka’s presidential e...

Niro Kandasamy, Tutor, University of Melbourne - avatar Niro Kandasamy, Tutor, University of Melbourne

Is social media damaging to children and teens? We asked five experts

They need to have it to fit in, but social media is probably doing teens more harm than good. from www.shutterstock.comIf you have kids, chances are you’ve worried about their presence on social...

Alexandra Hansen, Chief of Staff, The Conversation - avatar Alexandra Hansen, Chief of Staff, The Conversation

Wholesale prices in the National Electricity Market have climbed significantly in recent years. The increase has coincided with a rapid increase in the proportion of electricity supplied by wind and solar generators.

But that needn’t mean the increase in wind and solar generation caused the increase in prices. It might have been caused by other things.

Colleagues Songze Qu and Tihomir Ancev from the University of Sydney and I have examined the contribution of each type of generator to wholesale prices, half hour by half hour over the eight years between November 1, 2010 and June 30, 2018.

We find that, rather than pushing prices up, each extra gigawatt of dispatched wind generation cuts the wholesale electricity price by about A$11 per megawatt hour at the time of generation, while each extra gigawatt of utility-scale solar cuts it A$14 per megawatt hour.

Merit order matters

Here’s how.

In Australia’s National Electricity Market, prices are determined at five-minute intervals and averaged over 30-minute intervals for settlement. Generators place bids for supplying electricity to meet the expected demand which are accepted in a “merit order” of cheapest to most expensive.

The final price – awarded to all the bidders accepted – is determined by the final and most expensive bid accepted, which is often a bid by a gas generator.

Read more: A high price for policy failure: the ten-year story of spiralling electricity bills

Wind and utility-scale solar generators bid into the market at low cost because their power is essentially free when the wind is blowing or the sun is shining. They displace higher cost bids, usually from gas or diesel turbines that have high fuel costs. We find this effect on prices (known as the “merit order effect”) has grown as wind and solar generation has grown.

The daily impact of wind and solar on wholesale prices is somewhat lower. A 1 gigawatt per hour increase in daily wind generation is associated with about a A$1 per megawatt hour decrease in the average daily wholesale price. The same increase in solar generation is associated with A$2.7 per megawatt hour decrease in daily wholesale electricity prices.

These findings and those of others since 2003 challenge the previous conventional wisdom that mandating renewable generation necessarily increases prices.

So why are prices climbing?

Natural gas prices have been climbing dramatically over the recent years, mainly due to the opening up of east coast export capacity and the integration of the Australian market with international markets. The higher prices have made it more expensive to run gas turbines and have pushed up the price of what is often the last bid to be accepted.

We find the price of natural gas has a strong positive effect on wholesale electricity prices. An increase of A$1 per gigajoule in the natural gas price pushes up wholesale electricity prices by about A$5 per megawatt hour.

Although in recent years the upward price pressure from more expensive gas has overwhelmed the downward pressure from greater wind and solar capacity, it is nevertheless true that wholesale prices are lower than they would have been without renewable generation.

Therefore, a continued expansion of renewables is likely to put downward pressure on wholesale prices for some time.

There’s a case for moving away from gas peaking plants

This means that rather than reconsidering renewables, authorities should reconsider their reliance on gas plants for handling peaks in demand. While peaking plants are more needed with the increased penetration of renewables, there is a case for switching to alternative providers of peaking power, such as large-scale batteries and pumped hydro.

In doing so governments should also consider something else. Wholesale prices that are too low will discourage investment, leading to higher prices down the track.

The lower prices go, the more the government might need to provide investment incentives.

For now, all other things being equal, more wind and solar power means lower wholesale prices. But they’ll have to be watched.

Read more: The verdict is in: renewables reduce energy prices (yes, even in South Australia)

This article is based on a paper being delivered to the 2019 Australian Conference of Economists, taking place in Melbourne from July 14 to 16.

Authors: The Conversation

Read more http://theconversation.com/wind-and-solar-cut-rather-than-boost-australias-wholesale-electricity-prices-119979