Renewables are grabbing a growing share of the National Electricity Market, as we saw this week when the combine output of wind, solar and hydro accounted for more than 50 per cent of net demand for the first time.
But market prices, other than in a few specific examples, like South Australia, have not been showing signs of coming down much.
The good news is that they will. The futures market, particularly in Victoria, may be too high, according to ITK analysis, because new supply will drive down prices over the next couple of years.
At ITK, we think that the futures market is overestimating flat load Victorian prices, particularly in 2021 and 2022, but also in the current financial year.
Utility scale solar may or may not have a lower cost than wind. And, in general, we don’t think it does. But in any case we do expect average spot prices achieved by wind to be well ahead of those achieved by solar plants, which is good news for those wind farm developers.
Already, it’s clear that new solar will struggle to earn its cost of capital without access to some form of storage, because of some of the negative pricing events that are being seen in South Australia and Queensland.
It should be remembered that there are 20 large renewable energy plants that are still under construction, and not yet contributing to the grid. Wind and solar projects in the ITK database total 4487MW, so there is still a lot of new supply coming and this will impact prices and revenue adequacy of existing providers.
David Leitch is principal of ITK, co-host of the Energy Insiders podcast and a regular contributor to RenewEconomy. Readers interested in seeing more of ITK’s latest price forecasts, quarterly and annual, flat load, peak and forecast prices for wind and solar generation as well as detailed forecasts of new supply by fuel, quarter and region should head over to www.itkservices.com.au.