20/11/2019 - 13:04

Pricing solution to solar pressure

20/11/2019 - 13:04

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Regulators will be considering moves to cut the amount thermal generators need to pay when the electricity market is oversupplied, as independent retailers warn they may soon need to charge customers for exporting solar energy into the grid.

Intermittent supply of electricity from solar panels has put pressure on coal generation.

Regulators will be considering moves to cut the amount thermal generators need to pay when the electricity market is oversupplied, as independent retailers warn they may soon need to charge customers for exporting solar energy into the grid.

State government owned Synergy is pressing for a reform to the Wholesale Electricity Market which would review, and likely lift, the minimum price generators can bid into the system.

The rule change was submitted in October and will be considered by the Rule Change Panel.

As it stands, generators can enter the market at prices between negative $1000 per megawatt hour to $250/MWh, and the price fluctuates between these points.

When the price is at the bottom end, generators effectively pay customers to offtake electricity because of a surplus in the market.

That happens increasingly often when solar and wind generation are in full flight during sunny, windy days.

But it disadvantages thermal generation such as coal, which is needed to back up intermittent renewables.

Synergy’s decision to shut down the Muja C coal generators by 2024, and a $430 million impairment earlier this year, show the pressure building on coal generators.

Synergy contends that the displacement of scheduled generation by renewable generation will soon render the (minimum price) unfit for purpose; and that leaving it unchanged will result in excessive and unacceptable financial loss for market generators that have generating plant in service at times of low scheduled load and/or are obliged to have generating plant in service for no other reason than to provide Ancillary Services,” the submission said. 

Synergy considers these losses may have a profound impact on short-term and long-term decision making in the market, adding considerable and unnecessary cost to the system.”

One retail market participant said Synergy was trying to make the transition away from coal less painful .

“(Coal generators) are competing to see which ones can stay on and which one has to turn off,” he told Business News.

He said the system was not symmetrical in how much generators could lose or gain. 

“On one hand (negative prices) are good for (retailers) because it means people are paying (retailers) to take the energy,” the retailer said.

“But I’m getting to the point now that my customers are net exporting at that time as well.”

That will put pressure on retailers, he said.

“Every customer that puts energy onto the grid now is using the grid as a free battery,” he said.

“Right now I pay my business customers about 4 cents feed in tariff.

“In a couple years that will be zero.

“In a couple years after that, if things don't change I’ll start charging them to put energy back on the grid because the price during the day will go negative.”

Regulators are also understood to have refined its plans to reform the reserve capacity market.

The market pays generators to standby in the system, ready to produce power when summer peaks hit and demand increases dramatically.

Under the previous government, the system was to move to an auction, but that plan was delayed by former energy minister Ben Wyatt.

Earlier this year, Business News revealed Energy Minister Bill Johnston was not keen to pursue auctions.

But regulators are consulting on a hybrid scheme, where existing generators will be grandfathered under the current system, and new generators will bid into an auction.

That is intended to reduce the price paid for reserve capacity.

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