In a fluke moment SA and Vic have got cheap electricity (but only thanks to Black coal, and a screwed market)

He must be aiming for 12 year old voters, or perhaps dogs and cats, with genius comments like this:

 Nationwide, wind and solar including rooftop solar supplies 20% of our needs. It turns on and off at will.

The spike in NSW electricity prices that Martin builds his case on, was minor and temporary. According to the AEMO Quarterly report, the wholesale costs went up in NSW last quarter because it was the quietest quarter of the year, and plant managers decided to catch up on maintenance (see figure 6). Up to 3,000 MW of  its black coal generators were offline. Thus, it follows, if they had more coal they would have been even cheaper than SA and Vic. Doesn’t fit the narrative…

It also follows that the AEMO knows Peter Martin is wrong. When will they speak up and serve the public that pay them?

Why is that left to unpaid bloggers?

More solar PV is the system vandal that makes coal power more expensive

Critics may argue that Solar PV on rooftops doesn’t bid, but “sets” the price by reducing demand. But renewables and coal are not swappable services. Being cheaper at noon can mean being more expensive at most other hours of the day. Random “free energy”, just steals profits from coal, makes a whole lot of infrastructure and staff sit around doing nothing on a long lunch, and run less efficiently when it tries to fill in for the energy vandal forced on the system. When the sun goes down the whole solar team and capital sit around powering nothing too.

Coal plus solar can not possibly be cheaper than coal alone. It takes more people, more capital, more land, more maintenance. In the hours solar runs, all the useful coal infrastructure has to still be there, waiting to step in. The only cost “savings” to the large coal plants is a few truckloads of coal. All the other costs are the same or higher. The solar electrons are simply surplus random supply that “is the part of the jigsaw that doesn’t fit in” (to use Peter Martin’s words).

Coal also used to provide all that frequency stability we need for free and on call 24/7 and then feed our crops free fertilizer as an unlisted bonus.

How to create market chaos and a price spike

After Hazelwood shut in 2017, the cheapest form of electricity (brown coal) suddenly couldn’t supply enough electricity to set the final price of supply very often. That’s why the system price leapt. Hazelwood was in Victoria but the effect can even be seen in South Australia in Figure 3 above, where brown coal stops setting the price as often from Q2 onwards in 2017. That was “the Hazelwood effect”.

Brown coal fired generators are still sometimes setting the final winning bids at under $10/MWh. Its unbelievably, unbeatably cheap. No wonder all the junk expensive system vandals want to close brown coal stations.

The screwed market — a world of negative prices

The low quarterly prices in South Australia were partly due to negative prices, which “cut South Australia’s average by $8.7/MWh.”

This is a graph below of the main fuels setting wholesale prices in South Australia.  The brown coal average winning bids are so low they are hard to see. Gas power and hydropower are obviously setting higher prices. The black coal winning bids have settled now in the new post Hazelwood bountiful world of renewables, at a higher price than they were. Genius.

But sometimes solar and wind power win bids too. Have a look at what happens to this same graph when their winning bids are added in (below). The effect of the large deeply negative bids changes the scale of the graph and pretty much defies any sense at all. Why would anyone pay money to provide electricity?  In a normal market we only pay people to take away rubbish.

Is this craziness entirely a product of the subsidies? Is that what makes it possible to bid so deeply negative and “still make a profit” or are some of the players trying to game the system but losing?

 

On the NEM, suppliers bid in the hope that someone bidding a lot higher than them wins the last successful ticket in the stack. Then all successful bidders all get paid at that same top winning rate. Obviously, generators don’t want to bid too high, or they earn nothing at all. But the race to the bottom seems kinda odd (to say the least). If they win at minus $1,000/MWhr, then they have to supply the electricity AND pay til it burns for it too.

In the end, if the negative bids reduced the wholesale price of electricity by $8/MWh but that’s only due to subsidies, it’s not a savings at all, it’s just a redistribution. Someone else had to pay. It’s false advertising yet again.

The AEMO report remarks on the record amount of negative prices in Q4 last year.

1.3.3 Negative wholesale electricity prices
During Q4 2020, negative and zero spot prices occurred in 7% of all trading intervals, surpassing the
previous record set in Q3 2020 (4.6%), with calendar year 2020 averaging 4.4% compared to 1.7% in 2019.
Negative spot prices were most prevalent in South Australia and Victoria, with both states reaching record
quarterly levels. South Australia’s spot prices were negative 17% of the time during Q4 2020, exceeding the
previous quarterly of 10%, while Victoria reached a new record of 10%.

Despite the record occurrence of negative spot prices, the impact on the quarterly average prices was limited.
Negative prices cut South Australia’s average by $8.7/MWh, while the impact was less in Victoria ($2.4/MWh)
and Queensland ($0.9/MWh) due to fewer very low prices below minus $100/MWh

Peter Martin — economist of some sort, thinks negative pricing means being paid to “turn off”. His junk commentary is “not even wrong” but for 17 years he was the ABC’s economics correspondent. He is so wrong he was awarded an Member of the Order of Australia (AM). Flinders uni taught him economics. They have a lot to answer for.

Peter Martin says: