Frontier Economics Managing Director Danny Price was featured in media in regards to energy markets. Below is his commentary on his views presented in the media.
Over the past few days, I’ve been asked by several media outlets to comment on South Australia’s recent electricity price surge.
Today’s headlines from Australian Energy Market Operator (AEMO) that renewables and batteries powered more than 50% of the grid in the December quarter risk covering up the real story: the key issue is not renewables versus any other technology — it’s system design.
I’ve said it time and time again: consumers ultimately pay for the entire system — generation, storage, transmission and backup — and systems that lack sufficient firm capacity will be more expensive and less reliable over time.
On Monday evening, wholesale electricity spot prices in South Australia spiked to almost $20,000 per megawatt hour, with the Australian Energy Market Operator issuing a low-reserve warning at 8:42pm. Gas and coal-fired generators filled the supply gap and capitalised on higher market prices, which ultimately flow through to consumers’ bills.
Our electricity system is increasingly being tested at precisely the moments when reliability matters most — and we have been running on sheer good luck.
In recent years, multi-state heatwaves have been relatively rare, and when they have occurred, they’ve often fallen on weekends or public holidays. That good fortune has helped mask a steady decline in system reliability.
I’ll keep saying it: just because one form of generation is useful for a particular purpose doesn’t mean it should be used all the time, for everything.
The economics point consistently to one conclusion: the least-cost, most resilient electricity system is built around a balanced mix of technologies — renewables alongside firm, dispatchable supply — rather than reliance on any single solution.
Read an article from Paul Starick here:
Author: Danny Price. Industries: Climate Change & Sustainability, Energy & Renewables, Public Policy & Government. Expertise: Biodiversity & Environmental Economics, Economic Models, Public Policy Advisory.
