After months of very silly debate about clean energy, one thing is abundantly clear: the electricity market is evolving much faster than most politicians and commentators can understand it.
To be fair, highly technical issues aren't a good fit with politics in general. The detail is dead boring, so the media focuses on the warring political tribes, and it quickly becomes a breathless commentary about 'which side will win', devoid of crucial context.
So we have outrage-bait like federal MP Craig Kelly saying 'people will die' this winter because of renewable energy. Or shock jock Alan Jones saying the new head of the Australian Energy Market Operator, Audrey Zibelman, is 'ideologically constipated' and should be 'run out of town'.
As I explained last month, the story underneath all this distraction is that wind and solar have already changed the game. As that big Finkel report no one read made clear, 'there is no going back from the massive industrial, technological and economic changes facing our electricity system'.
Ultimately, it's a story about how the whole paradigm of the energy market is transforming.
The old paradigm, the one still lodged in the heads of most politicians, rests on 'baseload' power. The graph below, from a 2016 UNSW study (PDF), illustrates the concept. Coal generators operate 24/7, represented by that slab of blue at the bottom. When we need more electricity, other generators turn on, such as 'intermediate' or 'peaking' gas plants. Those are represented by the yellow part of the graph, rising and falling as required to meet fluctuating electricity demand.
Figure 1: J. Riesz, B. Elliston, P. Vithayasrichareon, I. MacGill (March 2016) '100% Renewables in Australia: A Research Summary'. CEEM Working Paper.
This is the paradigm that existed before large amounts of 'variable' renewable energy, like wind and solar power, entered the picture. It's Grid 1.0 — old, centralised and based around dirty fossil fuels.
Now let's look at Grid 2.0 — a cleaner, decentralised and more flexible system. Although wind has a variable output, it doesn't displace the yellow 'peaking' part of the graph. It displaces baseload. That gives us a new paradigm, an energy market of the future:
Now here's the shift together:
Why do variable renewables replace 'baseload' coal? It has to do with how our electricity market works. Each generator offers electricity to the market, and the cheapest is used first. This is called the 'merit order' dispatch process.
When the wind is blowing, wind power is virtually