South Australia: take a ride on the electricity price roller coaster

Observers of Australia’s National Electricity Market (NEM) would be forgiven for thinking the era of high prices has left us for the time being (at least until the next coal plant closes). A minor dampening of demand from COVID and a more significant one from a mild summer has coincided with growing renewables on our rooftops and in our paddocks over the last year to deliver low wholesale prices. This has manifested in both low average prices and a dearth of price spikes. With what summer weather we had seemingly behind us, it was a surprise to see South Australia hitting the price cap of $15,000/MWh on Friday evening. Demand was not notably high, but a confluence of factors led to high prices for several hours from 6pm on.

  • No renewables to speak of – the price surge started close to sunset, so both rooftop and utility-scale solar were done for the day. But wind also disappeared, with several hours of output below 100MW and a minimum of 21 MW.  Remarkably, only four hours earlier there was plentiful wind and sun, providing almost 90 per cent of demand.
  • Some gas plants were unavailable – a fire at AGL’s Barker Inlet put that plant offline and also restricted output from Torrens Island B.
  • Planned work on the Heywood interconnector which reduced the availability of imports from Victoria. This would normally be a reasonable time of year for this kind of outage.

The generation mix over this period is shown below. Notice the rare appearance of output from distillate plants- basically the most expensive fuel in the NEM.

Figure 1: generation and prices, South Australia, 12 March 2021

Source: OpenNEM

Despite the constraints, no load shedding was required, but it was a close-run thing. At one point, AEMO called a “lack of reserve”, with a forecast of only 97MW spare capacity available.

So, crisis averted. Because most load is hedged, a typical customer would see no price impact from this sort of spot price spike. However, there are a few retail offers emerging, for both household and business customers, that offer pass-through wholesale spot pricing. Hopefully such customers were able to carry out some kind of demand response on Friday night!

As if this wasn’t enough excitement for the weekend, there was more today with a new alert from AEMO. This time the problem was too little demand, or to frame it another way, too many renewables. It’s clearly a sunny windy day across SA, but not warm enough for aircon to soak up renewables output. Normally, in these situations, Victoria would helpfully take some of that excess output off SA’s hands, but of course exports are constrained by the work on Heywood…

Several hours of prices around $-500/MWh has been enough to induce some utility-scale renewables to turn off, but several of them clearly have contracts that pay out whatever the price (for example, the Hornsdale wind farm, which has a deal with the ACT government).  Naturally, rooftop solar owners are indifferent to the wholesale price, as they will get the same feed-in tariff for solar exports whatever the price. Controversially, it seems that AEMO will get the ability to remotely turn off rooftop solar in these kinds of scenarios. This heavy handed tool seems unlikely to eb a genuine long-term solution, though.

A further factor (but one that has been known for a while) is the need to keep a couple of gas plants on for system security. This constraint will be eased in due course when ElectraNet has the four synchronous condensers it is currently installing up and running. Of course, on days like Friday, this may result in gas having to ramp up even faster and from a standing start. Similarly, the planned SA/NSW interconnector will increase options on both these types of situations, but it is also forecast to drive some of the in-state gas plants to retirement so it could be a mixed blessing.

Figure 2: generation and prices, South Australia, 14 March 2021

Source: OpenNEM

Once again, the lights stayed on. But behind the scenes these rapid swings in renewable resources are straining the grid. While we will no doubt learn how to manage them better over time, it could be a bumpy ride in the interim. In the near term, the Heywood works are due to continue to the 19th, so South Australia may not be quite out of the woods yet.