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SA power play backfires

  • 26 August 2016


What a lovely day for scaremongering. On 7 July this year, South Australia experienced a cold snap. As residents turned on their heaters, the still and cloudy conditions meant wind and solar power couldn't contribute much to meeting electricity demand. The last coal plant at Port August had closed a few months before, pushed out of the market by renewable energy.

What would happen? The fossil fuel lobby was watching closely because it doesn't want South Australia's wind farm boom repeated around the country. If anything went wrong, could renewables be blamed?

As if on cue, the spot electricity price spiked, reaching $8898 a megawatt hour at 7:30pm. (For comparison, the average price in South Australia is about $60 a megawatt hour.) The cold weather continued the next week and prices spiked again, sparking gleeful headlines about an 'energy crisis' in the Murdoch press. Clearly, went the line, the price rise happened because South Australia was too reliant on wind power. Why else?

Why else indeed.

A month later, the story that's emerged in reports from energy industry academics, data from the market operator, and reams of expert analysis isn't the one the fossil fuel lobby wanted told.

Instead of a lesson about the danger of too much wind power, it's about the danger of too much market power in the hands of a few big players. Energy behemoth AGL, among others, stands accused of unscrupulous practices to inflate the price of electricity.

So what really happened? Here's the historical context, which the tabloids tend to leave out. Isolated at the end of our National Electricity Market and reliant on expensive gas generation, South Australia has traditionally had more volatile wholesale electricity prices. (The wholesale price isn't what households pay, but does flow through to residential power bills.)

South Australia also has excellent conditions for wind power, which can lower the wholesale electricity price because, unlike coal or gas, wind turbines don't have to pay for fuel. Under the federal Renewable Energy Target and state government policies, investment in clean energy boomed. Wind power now provides about 34 per cent of the state's electricity, and rooftop solar about 7 per cent.


"The transition to clean energy has to be handled carefully so that closing a coal power station does not give the remaining generators a market stranglehold."


This has wreaked havoc with the business models of the state's fossil fuel generators — particularly coal power. Many of the larger