Wind, Solar, and Household Electricity Prices

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From Watts Up With That?

Mike Jonas

In a recent conversation, I was shown a chart of Australia’s wholesale electricity prices, by state, in which South Australia had by far the lowest prices of all the states. The presenter of the chart claimed that this proved how renewables drove down the cost of electricity.

But there were two small problems:

1. The chart was a real time price shart, showing just the prices at that particular point in time, and

2. The South Australian electricity price was a very large negative number. In other words, they were struggling to find anyone to use the electricity even if paid to take it.

As many have pointed out, negative electricity prices don’t mean that electricity is cheap, it just means that the generator has costs that are not being recovered. Those costs will have to be recovered at some time or they will go out of business. In other words, negative electricity prices actually drive up the overall cost.

In order to see the full picture, you have to look at … the full picture.

I started by looking at the latest report from AEMO (Australian Energy Market Operator) .

AEMO report Q4 2022:

  • [East coast] Wholesale spot prices averaged $93 per megawatt-hour (MWh) across all National Electricity Market (NEM) regions, with Queensland, New South Wales and Tasmania at Q4 record highs. However, prices have eased from extreme levels seen early in the year. [Most of South Australia got separated following a transmission tower failure.]
  • New minimum operational demand records were set in Q4 … South Australia, Victoria and New South Wales all recorded new minimums for any quarter since NEM start, and Queensland its lowest Q4 operational demand since 2002.
  • Output from wind and grid-scale solar grew strongly as new facilities were connected and commissioned. Although the NEM’s wind fleet recorded its lowest recent quarterly utilisation rate, Q4 2022 was the highest wind generation for any Q4 on record. Queensland and New South Wales saw large increases in grid-scale solar, setting daytime prices more frequently than in the same quarter last year.
  • The instantaneous penetration of renewable energy for the NEM as a proportion of total generation reached 68.7% on 28 October 2022, exceeding the previous record of 64.1% (set on 22 September 2022).

So, wind and solar generation grew strongly, their penetration hit a record high, wind generation was at a Q4 record high, yet wind usage sank in percentage terms, demand sank to record lows, and prices hit a Q4 record high.

It really doesn’t look like wind or solar bring prices down.

Let me re-phrase that last sentence to make it a bit clearer: It looks like wind and solar are an absolute disaster.

OK, so that’s Australia. What about the rest of the world?

I expect that everyone here has seen this chart from ClimateDepot:

That chart is from back in January 2018, so I downloaded the latest available household electricity prices (June 2022) and wind and solar % equivalent primary energy data (2021), and put together an updated chart. Renewables are by % of energy, instead of by watts/capita, which is possibly more representative.  

Apologies for having electricity price as X axis instead of Y axis.

A few things stand out in the updated chart:

  • There’s definitely a visible correlation, with higher wind+solar relating to higher electricity prices.
  • Electricity prices in Denmark (DNK) and Germany (DEU) and some other countries have nearly doubled in the last five years. Greece (GRC) has done much better (I don’t know why – work looking at?)
  • Britain (GBR) is a disaster area.
  • Denmark has by far the most renewable energy (mostly wind), in percentage terms, yet is only the highest-cost country by a narrow margin. Maybe using Norway’s hydro as a battery, although expensive, helps to use more of the wind generation. Unlike South Australia, for example, which often can’t even give it away.
  • A lot of the countries with very low electricity prices are oil/gas producing countries which keep household electricity prices low through subsidies. That’s not a viable option for fuel-importing countries. Nevertheless, the implication is that the countries that do use a higher percentage of non-renewables energy (which must be mostly coal, gas, nuclear and some hydro) do tend to have lower electricity prices.

Conclusion: From all of the above, ie. from looking at the full picture, wind and solar demonstrably drive up the cost of electricity.

But then, everyone who reads outside the controlled media already knew that.