Excess solar sends SA power prices negative in summer quarter, AEMO says

It may have been a mild summer but SA’s solar panels pushed prices so low generators were forced to pay retailers, and that could affect household bills.

There was so much excess energy from solar power in the mild summer this year, electricity wasn’t just free, generators had to consistently pay retailers in South Australia to take it.

For the first time anywhere in the national electricity market, prices averaged minus $12 per megawatt hour between 10am and 3:30pm over the entire March quarter in SA.

With rooftop solar from households and many businesses providing power for their own needs and feeding excess into the grid, there was insufficient demand on big generators.

Overall, for 16.8 per cent of the whole quarter, day and night, SA prices were negative – a potentially good result for consumers but a midday problem for the Australian Energy Market Operator, the body which runs the system.

AEMO chief markets officer Violette Mouchaileh

Households will not see bills cut immediately, but should do so when the falls affect the forward financial contracts electricity companies use to absorb the shock of wholesale price volatility.

Wholesale prices make up about a third of retail bills and SA replaced Queensland during the quarter as having the cheapest forward pricing for 2022.

The average daily price dip was a historic moment, AEMO chief markets officer Violette Mouchaileh said.

“At the same time, persistently low electricity prices below their cost of generation required AEMO to direct SA gas-powered generators on for system security for a record 70 per cent of the quarter,” Ms Mouchaileh said.

When the generators are ordered on – rather than bidding into the market to supply power – they are paid compensation. This cost $19m for the quarter.

AEMO needs to ensure there are sufficient generators online in case an unexpected fault occurs.

This vulnerability was demonstrated on March 12 when the Torrens Island Power Station and adjacent Barker Inlet were cut off by a fault.

Prices spiked above $5000/MWh for three hours, adding $14 to SA’s average price for the quarter of $41/MWh.

As well as ordering gas-powered generators to turn on, it can order renewable energy to turn off.

Electricity generation wholesale average prices for South Australia by time of day, March quarter 2021. Source: AEMO

On a mild, sunny Sunday, March 14, SA had record first quarter minimum demand of 358MW.

AEMO ordered 71MW of solar to be turned off – 14MW from thousands of residential rooftops and 57MW from solar farms.

Federal Energy and Emissions Reduction Minister Angus Taylor said there had been 19 months consecutively of wholesale price reductions in the national electricity market, and prices were back to 2012 levels.

“Prices falling to nine-year lows is an outstanding result,” he said.

“The Government expects these price falls to be passed on to Australian families and businesses.”

While SA has experienced frequent negative pricing in the half-hourly trading periods in which electricity is sold, this is the first time they have occurred so regularly it has made the average negative.

In the quarter between 10am and 3:30pm, renewables provided 82.4 per cent of electricity used in SA. Household solar provided 47.7 per cent, grid-scale solar 12.1 per cent, wind 22.6 per cent and gas 12.1 per cent.

SA’s sparse and scattered population means the cost of transmitting and distributing power remains high per capita.

Originally published as Excess solar sends SA power prices negative in summer quarter, AEMO says