Revitalising the wind power induced merit order effect to reduce wholesale and retail electricity prices in Australia

Bell, William Paul, Wild, Phillip, Foster, John and Hewson, Michael (2017) Revitalising the wind power induced merit order effect to reduce wholesale and retail electricity prices in Australia. Energy Economics, 67 224-241. doi:10.1016/j.eneco.2017.08.003


Author Bell, William Paul
Wild, Phillip
Foster, John
Hewson, Michael
Title Revitalising the wind power induced merit order effect to reduce wholesale and retail electricity prices in Australia
Journal name Energy Economics   Check publisher's open access policy
ISSN 0140-9883
1873-6181
Publication date 2017-09-01
Sub-type Article (original research)
DOI 10.1016/j.eneco.2017.08.003
Open Access Status Not yet assessed
Volume 67
Start page 224
End page 241
Total pages 18
Place of publication Amsterdam, Netherlands
Publisher Elsevier
Language eng
Abstract This paper investigates the effect of increasing the number of wind turbine generators on wholesale spot prices in the Australian National Electricity Market's (NEM), given the existing transmission grid, from 2014 to 2025. We use a sensitivity analysis to evaluate the effect of five different levels of wind power penetration on prices, ranging from Scenario A, ‘no wind’, to Scenario E that includes existing and planned wind power sufficient to meet Australia's original 2020 41TWh Large-scale Renewable Energy Target (LRET). We find divergence in prices between states and similar prices for nodes within states. This supports the Garnaut Climate Change Review assessment on the prevalence of ‘gold-plating’ the intrastate transmission network and underinvesting in interstate connectivity. We find that increasing wind power penetration decreases wholesale spot prices but that retail prices have increased in deregulated South Australia and Queensland, similarly, in Victoria. We argue that there is a pressing need to split the large generator-retail companies into separate retail and generator companies and to reassess regulatory rules more generally. Interconnector congestion limits the potential for wind power to further reduce wholesale prices across the NEM. So the need for a high capacity transmission backbone in the NEM is becoming clearer and will become pressing when Australia moves beyond its current 2020 LRET.
Keyword Wholesale spot price
Wind turbine generator
Renewable energy planning
Large-scale renewable energy target
Interconnector
NEMLink
Q-Index Code C1
Q-Index Status Provisional Code
Institutional Status UQ

Document type: Journal Article
Sub-type: Article (original research)
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Created: Tue, 05 Sep 2017, 19:06:59 EST by Mr Paul Bell on behalf of School of Economics