> This outcome is in a particularly distorted badly operated market, one where for no very good reasons regulatory power is not being applied . . .
You described most energy markets on the planet.
You described most energy markets on the planet.
Australia despite having abundant reserves of coal, gas and uranium as well as excellent solar and wind locations has some of their most expensive electricity prices in the world.
It’s clear from the AEMO market makeup etc. that almost all the cost increase was attributable to the cost of gas (due to Santos having contracts to export more gas than they had supply for to Japan etc., while the international gas price has fallen. So they are sucking up gas on the domestic market pushing up domestic prices and their liquefication operation is unprofitable anyway). But the Coalition instead chose to use the cost of electricity as a political tool in a bizarre anti-renewables push.
Economists have suggested that a large enough gas reservation policy (like WA has) would rectify that. The LNP could legislate it in a few weeks at worst. This would also benefit industrial gas users that have been struggling with big increases.
A more minor part (like what this battery is helping to stop) is the privatised generators gaming the market by constraining supply artificially to push up prices at certain high-demand times. Some of this also naturally happens with some of the older coal stations tripping out and falling off for a few hours (I think Liddel is only achieving something like 46% capacity on average or something?).
Pull the other one, the risk is something like what happened in Germany. The cheap, reliable option in Australia is coal. So an investor has 2 options:
1) Invest in coal. At some point a Labor-Green government gets in and copies the German model - all your capital now makes a loss (ie, the plant you just built).
2) Invest in something else. This isn't as politically risky, but if the government decides that high power prices have to go and pours money into something (eg, new coal plants) then you just got set up as a marginal producer.
I mean, I haven't crunched the numbers, but unless wind/solar are legitimately the most cost effective options (which historically they most certainly have not been) then you would have to be a real risk taker to get involved.
Blaming that situation on the Coalition is too much; the political risks go way beyond them. The issue is that the Coalition wants cheap, the greens want clean, and Labor isn't committed either way as far as I know. And the regulator is a long way from perfect.
The problem for both the US and Australia is that private investors have no appetite for coal, because the same money can just continuously install solar and get a better return - with no real problems with environmental lobbies, access to fuel, or anything. We're probably a few years away from grid expansions being built on the basis that they'll make money from people installing solar farms in the new areas.
"Ah! But China is subsidizing it's solar industry!" you say - well "who cares?" says I, the investor who China is effectively paying to build solar plants, and who gets to take a bunch of good PR from it.
Does the government just say "no" to letting wind and solar producers add capacity?
I watched this Melbourne University video which discussed this issue in detail. It went into detail on the economics of the Australian electricity market.
Renewable energy only takes pressure off this demand (i.e. solar is fairly well correlated with hot weather, so actually helps a lot in reducing the peak on hot days (presumably from air-conditioning etc.) by hundreds of megawatts).
Australia's number 2 problem is all our power plants are aging and shutting down. I addressed that; because you seemed to be talking to it (eg, Liddel is only achieving something like 46% capacity). That is a looming issue. The problem here is also not the Coalition, as I mentioned.
Now SA appears to have a tertiary problem which is they have lots of wind energy and not enough storage to balance out the grid. The battery is addressing that and seems to be going well. This is also nothing to do with the Coalition, because the SA state government controls SA and the majority bounces between the two majors. The Weatherill government seems to have had the battery installed extremely quickly despite whatever you think the Coalition did to prevent it.
You aren't assigning blame correctly here. The big picture problem isn't that gas prices are high, and power problems aren't happening because of "mostly the Coalition".
In telecoms wholesale pricing in Australia, there would frequently be adjustments to the claimed capital costs to remove this gold plating incentive, but the energy side seemed to be much more accepting of whatever the distributors claimed.
https://reneweconomy.com.au/plunging-costs-make-solar-wind-a...
The Coalition doesn't want cheap - they've spun coal so hard it's no longer politically tenable to unspin it.
Really?
The 2017 Lazard report (which I think is generally pretty well regarded) has them at:
Coal, min: 60, max: 143
Wind, min: 30, max: 60
https://en.wikipedia.org/wiki/Cost_of_electricity_by_source#...
There are plenty of other sources on that page. You'll quickly find that most show wind power being cheaper than coal since around 2012 (even without a carbon price).
Unfortunately natgas prices determines price because it's often the price at the margin.
If policy makers care about efficiency, fairness, and reducing pollution, they would better-allow, or outright demand, price signals flow through to the marketplace.
Generation is far from the only factor in power prices, anyway, and Australia is not nearly so blessed when it comes to the economics of power transmission.
Really, people in AU don't pay 14$ per kWh making 14$ per MWh meaningless. They are really paying to keep generating capacity online not for actual power. A backup generator that's never used costs infinite dollars per W, that does not make it useless.
PS: Well under 1 million beause people can generate more power in short periods.
Agreed that consumers don't pay wholesale pricing - but disagreed it's meaningless. Consumers do (of course) end up paying an amount that includes the amortised cost of wholesale power over the course of their contract.
Additionally, there are a range of incentives that result from these kinds of significant, if ephemeral, variations in wholesale pricing. Some of these incentives are bad for consumer, planet, etc.
> They are really paying to keep generating capacity online not for actual power. A backup generator that's never used costs infinite dollars per W, that does not make it useless.
A backup generator that's never used actually is useless.
Having a backup generator for your data-center means you can have less batteries. Even if you never directly use it you are benefiting by reducing overall capital costs while still mitigating the same risks.
Put another way owning a generator can provide a revenue stream because you can sell that risk reduction to someone else. That's not a theoretical benefit that's cold hard cash.
This seems like the wrong unit to use.
[EDIT:] I mean that power is already a "per time period" measure; there's no reason to say "joules per second per hour".
Saying a human produces 100W/hr is wrong. What I assume he meant is this:
A human can produce 100W for 1 hour, on average. This is reasonable, since humans produce about 1/8 Horsepower, on average; and 1 HP = 746W.
Being slightly faster in a factory is often not very useful, but being slightly slower will quickly cause problems.
With Australia's minimum wage, it's likely to be at least double this.
Anyway ~20$ /h * 24 h a day * 1 million people / -123 MW (Tesla capacity) = ~3,900,000 $ / MWh which is closer than I thought it would be.
Regardless, there is a good point to be made that South Australia was a strong competitor in the hypothetical 2017 Worlds Most Expensive Electricity Competition. It is possible that the batteries success is due to some quirk of their particularly poorly run grid. It is also possible that wind-battery combinations are now a competitive option. The situation continues to unfold.
[1] https://www.aer.gov.au/wholesale-markets/wholesale-statistic...