Solar panels significantly cut the price of wholesale energy in Australia, according to research led by an economist specialising in energy technology.
Dr Zsuzsanna Csereklyei is a lecturer in the School of Economics, Finance and Marketing at RMIT University. She says each extra gigawatt (GW) of utility-scale solar power cuts the wholesale electricity price by $14 per MWh.
Csereklyei and co-researchers from the University of Sydney compared different types of electricity generators between 2010 and 2018. Their research paper is titled: ‘The effect of wind and solar power generation on wholesale electricity prices in Australia’.
Rising wholesale energy prices: Gas to blame
The paper was presented at the 2019 Australian Conference of Economists held in Melbourne earlier this month.
Renewables have been blamed for rising wholesale electricity prices, she says. That’s because the price hike coincides with large amounts of wind and solar power entering the market.
However, natural gas is the real culprit, she adds. Natural gas prices have surged as a result of larger east coast export capacity along with the integration of Australian and international gas markets.
The price of natural gas therefore has a significant effect on wholesale energy prices, the paper concludes. In fact, an increase of $1 per gigajoule in natural gas price inflates wholesale prices by around $5 per MWh.
Renewables can reverse upward trend in wholesale energy
Electricity generators place bids to supply electricity in Australia’s National Electricity Market (NEM). These are averaged over 30-minute intervals.
Wind and utility-scale solar generators often displace higher-cost bids from gas or diesel. That’s because their power is freely available when the wind blows and sun shines.
As a result, increased solar generation can decrease daily wholesale electricity prices by $2.7 per MWh, the study shows. Equivalent wind energy reduces prices by $1 per MWh.
Solution: Large-scale batteries and pumped hydro
Utility-scale battery storage and pumped hydro-electricity are ultimately the best way to peg wholesale energy prices, researchers claim.
As a result, they can replace gas peaker plants to supply electricity during times of heavy demand.
Rooftop solar power is booming in Australia with more than two million household installations. Meanwhile, commercial solar is catching up along with domestic solar batteries like Tesla Powerwall 2 and Enphase.
However, the paper warns against cutting wholesale electricity prices too much. This would just discourage investment, leading to higher prices down the track.
Csereklyei completed the study with colleagues Songze Qu and Tihomir Ancev from the University of Sydney. The team examined wholesale energy prices by the half-hour between November 1 2010 and June 30 2018.