Big energy suppliers playing the market – not generating electricity for a period, to push up prices, then boosting output to get higher rates – are artificially inflating power costs in South Australia.
A new research report by the Melbourne Energy Institute (MEI), commissioned by the Australian Conservation Foundation, identifies 41 occasions where this practice occurred at a single power station in 2015.
Following a spate of media stories blaming SA’s nation-leading renewable energy for the price spikes, the MEI report says companies taking advantage of the concentration of the SA market is a key factor in recent price rises. By carefully choosing when to supply electricity to the grid and when to withhold supply, the generators are making a fortune.
The report finds electricity in SA would be more expensive if wind wasn’t in the mix, even if the recently closed Northern coal fired power station was still open.
Prior to 1 June this year the average margin for electricity supplied to the grid in SA was $18.74 per Megawatt Hour. Since mid-June that average has skyrocketed to $70/MWh.
The MEI report describes this as ‘broadly consistent with an exercise of market power’.
The report finds since June 2016 electricity generators in SA have made between $40 million and $60 million in ‘monopoly rents’ – supernormal profits made by restricting supply to raise prices, without fear of rivals entering the market.
ACF’s CEO Kelly O’Shanassy said next week’s meeting of state and federal energy ministers was the perfect place to kick start a coordinated national plan to transform Australia’s energy system and address the lack of competition in South Australia.
“South Australia’s situation is different from other states, with a lot of renewable power and concentrated market power,” she said. “A coordinated national plan can help clean energy grow while avoiding the price spikes we’ve seen recently in South Australia.
“ACF is encouraged by AGL’s plans for a network of 1,000 residential and business battery storage systems, which will improve grid stability.
“South Australia should go further – a big solar thermal plant with storage would deliver power day and night and challenge the monopoly of gas generators.
“A growing chorus of voices – including the Australian Industry Group, the Grattan Institute, the Clean Energy Council and major electricity generators like AGL – is calling for a coordinated national approach to energy transformation.
“The clean energy revolution is here and it’s unstoppable. But it needs a plan to avoid disruption, look after communities and stop power price spikes that happen when companies play the market.”