Read 'Em and Weep: Australian Power Edition
batteries and renewables make prices go down in practice and theory
There is a lot of renewables FUD in Australia at the moment that is apparently driven by a concerted campaign by One Nation and their sponsors (Gina Reinhart et al). So in the spirit of this meme I thought I would post some data.
Firstly, prices at the wholesale level are absolutely going down and that is all the more remarkable because it is happening while LNG-linked gas prices are rising everywhere because of the misadventures of yet another US government in the Middle East.
The chart below shows baseload contracts for NSW and Victoria and the price of caps for NSW.
Caps pay out at the sum of all prices above $300 in a quarter hourly divided by hours in a quarter. Full contract details here. Simplistically caps price how spiky prices are above $300 per MWh, baseload takes the time weighted average. Both are going down - a lot, and that seems to be driven by the reducing in spikes that is caused by batteries competing with gas.
This is now filtering down to “all-in” prices for retail - outright nominal deflation while everything else is off to the moon thanks to Trump’s Iranian adventure. Original documents here.
For small businesses the cuts are into the double digits in most areas
So:
Wholesale prices are going down
Retail prices are going down
This seems to be driven by storage dynamics pricing out gas
There is a great graph of this showing what types of generation make up the peak in Queensland now:
As they say at the poker table, read ‘em and weep.
Thank you, Alex.
For users, very positive and welcome!
Two nuances:
1. A retailer trader recently cautioned me to still expect a sawtooth of pricing, with lower price phases followed by tighter markets when coal exits, followed by easing. Still plausible even with the pre-build approach to avoid super high prices.
2. What does the lowering of wholesale prices do for the investability of new renewables? They should also expect to be able to achieve more value with their midday output thanks to the storage. Steady value from physically or financially integrated RE+batteries may be more important than a narrowing arbitrage. But I wonder if all this worsens the outlook for wind (at least without something to recognise system value?)