Coal Failures Make Australia World’s Most Volatile Power Market

(Bloomberg) -- Unplanned coal power plant outages, the impact of natural disasters on transmission lines and huge deployments of rooftop solar have made Australia the world’s most volatile power market, according to Rystad Energy. 

Price spreads on the National Electricity Market, which covers about 80% of Australia’s demand, were the highest among 39 markets studied globally, the industry consultant said Monday in a report. 

Australia is at the forefront of the energy transition, rapidly replacing its backbone of aging coal plants with solar and wind power. Renewables made up a record 39% of supply last quarter, according to the Australian Energy Market Operator, the country’s energy regulator.

The rapid rise in intermittent generation capacity has challenged the nation’s energy sector, and was among factors that led to last year’s unprecedented failure of Australia’s main power market. To handle the fluctuations, about 46 gigawatt-hours of new pumped hydro and utility-scale batteries are required by 2050, from just 2.8 gigawatt-hours currently, according to Rystad.

“The pipeline of new renewables, if supported by firming generation – batteries, hydro and gas – and transmission, will help meet reliability gaps and share low-cost, low-emissions energy to homes and businesses,” Violette Mouchaileh, AEMO executive general manager reform delivery, said in a statement.

Record renewable generation helped push down average wholesale prices by two-thirds last quarter, AEMO said. 

About 9.5 gigawatts of Australia’s 23 gigawatts of operating coal-fired power plants will close this decade as utilities aim to shift to cleaner energy sources, BloombergNEF said in a report this month. The sites also face challenges to their reliability from factors including the age of plants, a lack of profitability and inflexible operations.

“Australia should prioritize the enhancement of transmission infrastructure and invest in storage solutions to mitigate the impact of volatility,” David Dixon, a senior analyst at Rystad Energy, said in the report. The country’s government is investing A$20 billion ($13 billion) to modernize the electricity grid and other infrastructure to support adoption of more renewables.

Other power markets that exhibit high rates of volatility include Japan and the Philippines as well as regions of the US including Texas and California, Rystad said.

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