Renewables forecast to halve wholesale energy prices over four years
Analysis shows 7,200MW of renewables added to grid after closures of coal-fired plants
A solar farm in Port Augusta. Extra capacity commissioned after the closure of large coal-powered generators in South Australia and Victoria is bringing down wholesale energy prices. Photograph: The Guardian
While the Morrison government has identified lowering power prices as a key early priority, a new analysis says wholesale prices will almost halve over the next four years because of the technology many Coalition conservatives oppose – renewables.
The latest renewable energy index compiled by Green Energy Markets confirms analysis by the Energy Security Board that wholesale electricity prices are on the way down because of an addition of 7,200 megawatts of extra large-scale supply from renewable energy.
Tristan Edis from Green Energy Markets says the political debate in Canberra is lagging behind practical developments in the national electricity market. The national energy guarantee was scuppered in part because government conservatives were concerned the mechanism didn’t do enough to reduce power prices, and because of claims that renewables were inflating power bills.
“What I think is extraordinary given recent political events is that we’ve actually turned the corner on wholesale electricity prices and they’re now headed downward and will continue to decline substantially over the next few years,” Edis told Guardian Australia. “This doesn’t seem to have sunken in at all in our political debate.”
The new analysis charts movements in prices in the energy market. It says prices began to rise when large amounts of supply were withdrawn from the market in South Australia with the closure of the Northern power station, and because of the closure of the Hazelwood plant in Victoria.
It says new investment in large-scale renewable energy projects during that period had stalled because of Tony Abbott’s efforts to wind back the renewable energy target. “It was only after prices began spiking upwards with the announced closure of Hazelwood that we saw significant commitments to construct new large-scale renewable energy supply.”
The analysis says price reductions have followed more renewable projects coming on stream. “Prices have since continued to decline in anticipation of increasing amounts of renewable energy supply reaching construction completion and contributing power to the grid.”
Edis says the trends in the market aren’t connected to Canberra’s debate about coal versus renewables – “this is a simple case of economics 101” – meaning taht when supply is withdrawn, prices rise. “It seems we’ve dumped a prime minister based on completely false pretences.”
Morrison has told his newly appointed energy minister, Angus Taylor, that his pressing priority is driving power price reductions. The national energy guarantee that proved catalytic in Turnbull’s demise is on ice, and the new prime minister has split the environment and energy portfolios in recognition of the Liberal party’s difficulty reaching a landing point on an energy policy that includes emissions reduction.
Taylor, a conservative and former McKinsey consultant, has previously campaigned against renewable energy projects – a posture that has alarmed people in the renewables sector and environment groups.