Renewable energy reduces power prices by more than cost of subsidies, study finds

A landmark study has shown that renewable energy has reduced electricity prices by far more than the subsidies paid for it.


Key points:
  • The study’s lead author said the research proved renewables were the key to lower power prices
  • Researchers found South Australians were paying, on average, the highest electricity prices in the world
  • Gas-fired power is pushing prices higher, while wind and solar are placing downward pressure on prices, the study found

The independent study, by the Victoria Energy Policy Center, focused on the South Australian electricity market and confirmed households in the state have on average the highest electricity prices in the world.

The report comes as the Federal Government attempts to develop a fresh energy policy after the collapse of the National Energy Guarantee earlier this year.

The Government hopes to pass new laws to force energy companies — especially retailers — to offer customers cheaper electricity.

The study’s lead author, Associate Professor Bruce Mountain, said the research provided verifiable evidence that renewable drive down prices.

“I think in the current climate it’s critically important,” he said.

“We have an evidence base that puts this issue on the table for people to engage with.

“What our study finds unequivocally is the route to lower prices lies with cleaner sources.”

Wind and solar reduce prices by more than subsidies

The study used computer modelling to crunch electricity price data from the past five years.

It sampled wholesale market prices every half hour from 2013 to 2018, and calculated the factors that led to those prices.

It found that even though South Australians were paying the highest average bills in the world, wind and solar generation in South Australia actually brought wholesale prices down — and by far more than the subsidies paid for them.

It found that in the 2017–18 financial year, renewables reduced wholesale prices by an average of about 30 per cent, or about $37 per megawatt hour, mostly due to wind generation.

This was far more than the cost of the subsidies paid for them, which the study calculated was $11 per megawatt hour of electricity produced.

Renewable generators have been able to sell electricity on the wholesale market very cheaply, because the ongoing cost of producing electricity from wind and solar is effectively zero.

These cheap offers from renewable generators on the wholesale market displace more expensive offers from gas generators, effectively reducing prices for the entire market.

But gas generation drives up prices

But the study found the reduction in wholesale prices thanks to renewables has not been enough to offset the high price of gas.

The closure of the Northern and Playford coal-fired power stations has left South Australia reliant on expensive generation from gas-fired power stations, which are needed especially when wind and solar are not producing energy.

The study found electricity sourced from gas pushed prices higher by about 40 per cent on average in the 2017–18 financial year, or $56 per megawatt hour of electricity.

“Every additional unit of production you get from the wind or from the sun, that displaces gas generation, and brings your price down,” Associate Professor Mountain said.

“As long as you have so much gas generation with such inefficient and old gas plants … your prices will be high.”

The Grattan Institute’s energy program director, Tony Wood, said the study was a sharp analysis of the South Australian experience.

“Certainly renewable have benefited the system, and we would have had higher prices in South Australia without renewable, fundamentally because of the high price of gas,” Mr Wood said.

“And that’s a conclusion that I think makes sense and this report shows it very clearly.”

Policy vacuum part of the problem

The researchers also compared the average Australian household prices with those in European countries, which have the next highest residential electricity bills, and found other states on the east coast were not far behind.

South Australia was closely followed by Denmark and Germany, countries which pay by far the highest taxes.

The graph showed high prices were also being felt by households in other Australian states — next in line were New South Wales, Queensland and Victoria.

Mr Wood agreed that South Australia’s current energy mix meant expensive gas generation was setting the price for the whole market.

“What tends to happen is that gas is setting the price so high, so often, that it overwhelms everything else,” he said.

He said an energy policy vacuum at a federal level is part of the problem.

“Because we’ve not had good policy … nationally, we’ve not seen other kinds of generation come in to compete with gas-fired power stations, which set the price so often and keep the price so high.”

 

 

 

SUPPORT FOR RENTERS TO OPEN UNTAPPED SOLAR MARKET

Renters, landlords and the solar industry stand to benefit from the commitment that a re-elected Andrews Labor Government will expand the Victorian Solar Homes program to rental properties.

Getting solar onto rental homes has always been a major challenge. Landlords are reluctant to buy solar when the benefits of lower electricity bills only go to their tenants, while tenants are reluctant to spend money to improve someone else’s property, especially if they don’t know whether they will be in the same home long enough to recoup their investment.

The Solar Homes program will aim to overcome the ‘split incentive’ problem with an $82 million package of 50,000 rebates to be delivered over 10 years. To be eligible, tenants and their landlords will need to strike an agreement to share the costs of installation. The government will provide a 50 per cent rebate on system costs. Landlords would be expected to contribute 25 per cent and renters would make their 25 per cent contribution through a levy on rent that is spread over four years.

This is the first time an Australian government has made a serious move to overcome the barriers to renters accessing the benefits of solar power. If it’s implemented successfully, this could be a blueprint for governments to make electricity affordable for low-income families across Australia.

Number of Australian homes with rooftop solar tops 2 million…and counting | Clean Energy Council

The Australian solar industry has achieved another record-breaking milestone, with the number of households now enjoying the benefits of rooftop solar reaching a whopping 2 million.

Clean Energy Council Chief Executive Kane Thornton said the milestone recognised the growing appeal of solar for consumers looking to harness the power of the sun to reduce their power bills.

“Homes with rooftop solar installed are saving on average of about $540 per year on their electricity bills,” Mr Thornton said. “Solar is a clear way for consumers to take control of their power consumption and cut costs, and it’s growing quickly by word-of-mouth.”

Queensland continues to lead the nation in rooftop solar, with four of the nation’s top five solar postcodes hailing from the Sunshine State. Bundaberg in central Queensland topped the list for the highest number of households with solar power, followed by Mandurah in Western Australia, then three other Queensland locations: Hervey Bay, Caloundra and Toowoomba.

Mr Thornton said rooftop solar acts like a mini-power station, helping to reduce strain on the electricity network when it is most needed – like during hot weather when air conditioners are running full tilt.

“An average of six panels per minute are being installed in Australia, with the Australian Energy Market Operator estimating an average of 10-20 panels per minute if large-scale solar projects are factored in,” he said.

“Along the way a new industry has been created – thousands of sparkies have specialised in solar power, and it’s hard to find a group of people with as much passion for what they do.”

Mr Thornton also urged consumers considering solar to spend some time doing their research and not be rushed into making a purchase.

“Installing solar is a big decision,” Mr Thornton said. “By choosing Clean Energy Council Accredited Installers and Approved Solar Retailers, customers can be sure their new system is installed correctly and safely and provides all the expected long-term benefits of rooftop solar.”

Australia in midst of $20 billion wind and solar investment boom

The Coalition government tried to prevent it and failed, and haven’t stopped complaining about it ever since. And now we can see why: Australia is in the midst of an extraordinary investment boom in large scale wind and solar projects, and battery storage, far beyond what  even the industry’s most ardent supporters ever imagined.

The latest estimates from the Clean Energy Council show that there is currently $20 billion of wind and solar farms either under construction or about to start because they have reached financial close.

This represents some 80 wind and solar farms with some 14.6 gigawatts of capacity – far beyond that which is required under the mandated renewable energy target, which the Coalition tried to scrap under the Abbott government but only got as far as reducing its target from 41,000GWh to 33,000GWh.

The large scale RET is not the only mechanism out there providing an incentive for new investment – state based schemes targets exist in Victoria and Queensland,  and state governments and private companies are also contracting directly with wind and solar projects to secure a cheaper source of supply.

And, it should be pointed out, this does not include the $6 billion of wind and solar projects already completed, means that the total value of wind, solar and storage projects completed or underway this year is more than $26 billion. A further $2 billion is likely to have been spent on small scale rooftop solar in 2018.

Clean Energy Council Chief Executive Kane Thornton said 2018 was unquestionably a record year for the industry. More than 2 million homes now have solar panels, and over 80 wind and solar farms are now under constructed or about to start, he said.

“The total value of the projects underway is double where we were at the end of last year,” Clean Energy Council CEO Kane Thornton said in a statement accompanying the report.

“More than 80 projects are being built which will deliver over $20 billion of investment and 13,000 direct jobs. It really is an amazing time for this industry.

“The skills and experience our industry has developed this decade allow new projects to be built more efficiently than ever before, helping to push down projects costs and power prices.

“Along with the incentives provided by the Renewable Energy Target (RET) and state policies, wind, solar and storage have created an extraordinary opportunity for thousands of people in regional parts of the country.”

 

Queensland leads the way with $6.9 billion of investment, some 5,640 of new capacity and more than 4,500 direct jobs, it’s followed by Victoria with $5.2 billion and 3,400MW of capacity and 3,800 direct jobs. NSW has $4.3 billion of investment, more than 2100 direct jobs and 3500MW of capacity under construction.

The question for the industry now is that what happens next. The renewable energy target is already easily met, and there is currently no policy in place to guide future investment. And this lack of policy certainty could slow new projects, even though they do not require a subsidy.

“While new investment no longer requires subsidy, it does require long-term energy policy certainty. As the year closes, we are no closer to national, bipartisan energy and climate policy. If anything we are further away than when we started,” Thornton said.

The Coalition government has no policy for either climate or energy, threatening only to impose a series of government interventions in the workings of the energy market, including the forced divestment of coal-fired generators that their owners want to close, such as the Liddell coal generator in NSW.

The Coalition had sought to introduce a National Energy Guarantee, comprising of emissions and reliability obligations. But the emissions component of a 26 per cent cut in emissions by 2030 – even though it would have been largely met before it was put in place – was abandoned by the Coalition under the weight of its Far Right MPs.

Labor has promised to try to resurrect the NEG, on the condition it includes a 45 per cent emissions reduction target, and proposes a 50 per cent renewable energy target by 2030. This, however, would likely see less investment in new wind and solar over the next decade than occurred this year.

Pending the outcome of the next federal election, which will likely be held in mid May, if not in early March, that leaves only states and territories with individual targets.

The newly re-elected Victorian government has a 40 per cent target by 2025, rising to 50 per cent by 2030, and the Queensland and Northern Territory Labor governments also have a 50 per cent renewable energy target by 2030. The ACT’s 100 per cent target will be met through investments already made, as will Tasmania’s target.

That leaves NSW, where neither major party has a renewable energy target, but both recognise that the state will have to make huge investments in wind, solar and storage to replace the ageing fleet of coal generators that are due to retire over the next 15 years. More policy announcements may be made before the March election.

Western Australia is also making noises about finally introducing a long-term climate policy and target, which may include a renewables component. South Australia is already beyond the previous Labor government’s 50 per cent renewable energy target by 2025, and the pace of investments in that state could see it supplying near 100 per cent of its local demand within a decade.