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Australian Power Prices Surge As The Country Attempts To Replace Coal

The energy transition in Australia is driving electricity prices higher due to increased volatility, Bloomberg has reported, citing a BHP executive.

“It’s a nervous time to be a major consumer of electricity on that particular grid,” Huw McKay, chief economist of the mining giant, told Bloomberg.

Australia is trying to replace coal power generation with alternatives such as solar, but this process appears to have compromised the reliability of electricity supply, leading to the greatest daily price fluctuations in the world amid unplanned outages at coal plants and challenges in integrating rooftop solar installations into the grid.

Meanwhile, last week Australian media boasted a record booked in electricity generation from solar: on Friday, solar provided 71.3% of the electricity distributed on the country’s main grid, for half an hour during trading hours.

One media report specifically pointed out the fact that this record—and the one before it, also hit last week—was booked on a weekday, when demand is higher. So far, low-carbon electricity output records had been recorded over the weekend, when demand was lower.

In the third quarter of the year, wind and solar accounted for 39% of electricity supply to the National Electricity Market, which was another record.

However, the fast expansion of wind and solar has turned into a challenge for the grid, Bloomberg said in an earlier report, citing data from Rystad Energy. The consultancy has estimated that in order to avoid a repeat of last year’s power market failure, Australia needs 46 GWh of pumped hydro and battery storage. Currently, the country has 2.8 GWh of these.

Transmission lines are also a challenge, as they are in every country witnessing a fast buildout in distributed electricity generation installations powered by the wind and the sun.

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“Australia should prioritize the enhancement of transmission infrastructure and invest in storage solutions to mitigate the impact of volatility,” senior Rystad analyst David Dixon said in the report.

By Charles Kennedy for Oilprice.com

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  • Peter Farley on October 24 2023 said:
    This is putting the cart before the horse.
    Energy prices surged because an average of 23% and a peak of 30% of coal was unavailable. Some of the lost energy was replaced by gas which had to be purchased in the spot market at US$30/GJ vs the normal price of $6-8.
    This year wholesale prices have collapsed, even in NSW the state with the oldest least reliable coal fleet down from an average of US$200/MWh in winter 2022 to US$63/MWh in winter just past. In Victoria (42% renewable) for the past three months they have averaged Less than US$29/MWh

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