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

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.