The Effect of Increasing the Number of Wind Turbine Generators on Wholesale Spot Prices in the Australian National Electricity Market from 2014 to 2025

56 Pages Posted: 29 Jan 2016

See all articles by William Bell

William Bell

Griffith University

Phillip Wild

University of Queensland

John Foster

University of Queensland - School of Economics

Michael Hewson

University of Queensland

Date Written: January 29, 2016

Abstract

This report investigates the effect of increasing the number of wind turbine generators on wholesale spot prices in the Australian National Electricity Market’s (NEM) existing transmission grid from 2014 to 2025. This reports answers urgent questions concerning the capability of the existing transmission grid to cope with significant increases in wind power. The report findings will help develop a coherent government policy to phase in renewable energy in a cost effective manner.

We use a sensitivity analysis to evaluate the effect of five different levels of wind penetration on wholesale spot prices. The five levels of wind penetration span Scenarios A to E where Scenario A represents ‘no wind’ and Scenario E includes all the existing and planned wind power sufficient to meet Australia’s 2020 41TWh Large Renewable Energy Target (LRET). We also use sensitivity analysis to evaluate the effect on wholesale spot prices of growth in electricity demand over the projections years 2014 to 2015 and weather over the years 2010 to 2012. The sensitivity analysis uses simulations from the ‘Australian National Electricity Market (ANEM) model version 1.10’ (Wild et al. 2015).

We find divergence in the prices between states and similar prices for nodes within states. This pattern reflects the findings in our transmission congestion report (Bell et al. 2015a). Only 14 of the 68 transmission lines in the ANEM Model (Wild et al. 2015) are congested but these 14 congested transmission lines include six of the NEM’s interstate interconnectors and eight of the intrastate transmission lines although only three of the intrastate transmission lines exhibited any significant degree of congestion. This supports Garnaut’s (2011, p. 38) assessment on gold plating intrastate transmission and under investing in interstate transmission.

Suggested Citation

Bell, William and Wild, Phillip and Foster, John and Hewson, Michael, The Effect of Increasing the Number of Wind Turbine Generators on Wholesale Spot Prices in the Australian National Electricity Market from 2014 to 2025 (January 29, 2016). USAEE Working Paper No. 16-242, Available at SSRN: https://ssrn.com/abstract=2724936 or http://dx.doi.org/10.2139/ssrn.2724936

William Bell (Contact Author)

Griffith University ( email )

St Lucia
Brisbane, Queensland 4101
Australia

Phillip Wild

University of Queensland ( email )

St Lucia
Brisbane, Queensland 4072
Australia

John Foster

University of Queensland - School of Economics ( email )

Brisbane, QLD 4072
Australia
61 7 3365 6780 (Phone)
61 7 3365 7299 (Fax)

Michael Hewson

University of Queensland ( email )

St Lucia
Brisbane, Queensland 4072
Australia

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