Report says gas not renewables causing high power prices in South Australia

Gas is causing price spikes in SA

According to a new report, gas is the cause of high electricity prices in South Australia, not renewable energy.

The Victoria Energy Policy Centre produced the report, titled ‘Does renewable electricity generation reduce electricity prices?’

The centre’s research found that the closure of two power stations did lead to wholesale price increases. These amounted to around $23 per MWh. At the same time, wind and solar power generation increased in the state by about 70 per cent.

The researchers then asked: Did the expansion of renewables cause the price spike?

Report concludes renewable power reduces prices

The research examined wholesale prices in SA from 2013-18, which rose approximately 30 per cent in that time.

High power prices caused by gas powered electricity generators such as this

According to new research, gas-powered electricity generators are the most significant cause of high power prices in SA.

It also looked at renewable energy costs and subsidies, and at electricity prices in Europe.

It concluded that:

  • Renewable generation in SA reduced wholesale prices by $38/MWh less than what they would have otherwise been. That is, if the Hazelwood and Northern power plants had remained operational.
  • The renewable subsidy cost was $11/MWh – over three times lower than the price reduction. This means subsidies had minimal impact on prices.
  • Wind generation expansion would reduce wholesale prices at around 9c/MWh for each additional MWh of generation. For solar power generation (most of which consists of rooftop solar installations) the average price reduction would be 26c/MWh.
  • In SA, high gas prices are the most significant factor affecting price increases. Gas generation is also very inefficient.
  • Higher prices in Australia than Europe overall can be explained by higher network charges, higher production costs and higher retail charges.
  • Even in countries with the biggest renewable energy subsidies, those subsidies account for only a small part of consumer bills.

The report’s authors are now expanding research to other parts of Australia.

Cleaner power a priority: report author

Lead author of the report Dr Bruce Mountain told the Sydney Morning Herald that there is “no dilemma” between cleaner power generation and cheaper prices.

He said if Australians are serious about reducing prices, we should be ushering in cleaner energy sources, which would pay for themselves “handsomely”.