Power shortages in South Australia’s heavily wind-reliant electricity market have highlighted the urgency of developing backup capacity, the grid operator warned. Prices had surged tenfold to hit $14,000/MWh amid severe supply shortages, prompting policy makers to plea for the restart of a mothballed gas power station.
At normal times, power prices for the South Australia region hover around $100/MWh, while peakload prices can rise above $1,000/MHh in the National Electricity Market (NEM). Yet, peakload prices in the tens of thousands Australian dollars are a novelty – clearly indicating the capacity crunch.
Overreliance on renewables and a decline in coal generation is causing this price volatitily, according to Spark Infrastructure’s new chairman, Doug McTaggart who called for the “stable back-up.”
His views are mirrored by the Grattan Institute public policy think tank that urges the Australia’s national government to consider paying subsidies to keep back-up power sources such as gas-fired electricity available.
“It is like an insurance policy: you may not need it but if you have paid out the money, you are pretty glad you had it there just in case you did,’’ Grattan Institute’s Tony Wood told local radio.
“The physical plants are there, it's a matter of giving them the financial incentive to be there when we need them.”
Market upheaval
Price spikes in South Australia come at time when the country’s wider electricity market is in disarray. Gas prices surged after a fierce cold snap in the southeast, hence operators of combined-cycle gas power plants were initially reluctant to dispatch their assets.
Power supply shortages were exacerbated by a sudden, unforeseeable drop in wind power supply – causing record price spike which would earn CCGTs millions in just a few hours.
Imports of electricity are not an option this time: There is an outage in the Heywood interconnector, the South Australia’s energy lifeline to Victoria. Works are ongoing upgrade the line to 600MW so is will not be back in service until July 25 at the earliest.