Renewable energy integration into the Australian National Electricity Market: Characterising the energy value of wind and solar generation

This paper examines how key characteristics of the underlying wind and solar resources may impact on their energy value within the Australian National Electricity Market (NEM). Analysis has been performed for wind generation using half hour NEM data for South Australia over the 2008-9 financial year. The potential integration of large scale solar generation has been modelled using direct normal solar radiant energy measurements from the Bureau of Meteorology for six sites across the NEM. For wind energy, the level and variability of actual wind farm outputs in South Australia is analysed. High levels of wind generation in that State have been found to have a strong secondary effect on spot prices. Wind generation‟s low operating costs will see it displacing higher operating cost fossil-fuel plant at times of high wind. At the same time, the increased variability of wind may impose additional challenges and costs on conventional plant which will also be reflected in wholesale spot market prices. It is shown that this is proving particularly important during high wind penetration periods,which are contributing to an increased frequency of low or even negative prices.The solar resource in South Australia is shown to be highly variable; however, as seen with wind power, geographical dispersion of generators can significantly reduce power variability, even with as few as six sites. The correlation of the solar resource with spot prices also appears to be superior to wind generation. Modelling using the Adelaide solar resource showed that, for electricity sold into the spot market, two-axis tracking solar generators would achieve an average price that is over twice that received by wind generators over the year 2008-9 analysed. Of course, significant solar generation deployment might drive similar price impacts as seen with wind generation, thereby reducing this advantage. Considering the potential implications of both major wind and solar generation within South Australia, the solar and wind resources within the State appear, on average, to be non-correlated for the magnitude, and the change in magnitude, across half an hour. The analysis shows that solar and wind resources within the NEM have key characteristics that can markedly impact on their energy value within the wholesale electricity market. High levels of renewable electricity are already affecting spot prices, highlighting the need for low bidding renewable generators to attain power purchase contracts and for developers to consider this effect when choosing a site location for renewable generators. Other generators within the NEM may also be significantly impacted by major renewable energy deployment. The long-term success of renewable generation will likely depend on maximising the energy value that it contributes to theelectricity industry.