Judith Sloan, Contributing Economics Editor to the Australian, has a brilliant op-ed in the paper today (see Energy price reveals folly of renewables) criticising policies targeting renewable energy, following the wholesale electricity price spike that occurred in South Australia last week:
“What is clear is that overdevelopment of variable generation using renewable resources is a recipe for higher prices and lower than expected reductions in emissions because of the increasing costs of ensuring system stability and reliability.
Feasible storage options are down the track and, in any case, likely to be expensive.”
The high cost of renewable energy is likely to be one reason that energy giants such as BP are forecasting that, while renewable energy will grow strongly over the next two decades, it will not come to dominate power generation (see chart below based on BP Energy Outlook data).
I have previously questioned the wisdom of the Queensland Government’s 50% renewable energy target (Qld Renewable Energy Taskforce asked to achieve impossible 50% target), and last week’s electricity price spike in SA makes me even more confident that the policy should be reconsidered. Indeed, it probably will be reconsidered as the high cost of the policy becomes apparent.
Queensland Economy Watch 
The principal cause of recent wholesale electricity price spikes in SA was caused by the surge in gas prices. For insights into how renewables are reducing these price spikes read “How wind and solar removed major price spikes in South Australia” by Giles Parkinson at http://reneweconomy.com.au/2016/wind-solar-removed-major-price-spikes-south-australia-48504
Thanks Paul for evening out this argument a bit. Terrible journalism from the Murdoch press, but I guess they really already know what they want to say, so doing a bit of research into price spikes wouldn’t really enter into their thinking. Cheers!
As usual, I expect that the truth is somewhere in the middle between the shrill claims of Judith Sloan and the cheer squad for renewals. I loved the comments from the big users that generally benefit from the energy market whinging about short-term variability in price (isn’t that why your get in an efficient market based on real-time supply and demand?). But the non-synchronous nature of renewable generation (need wind or sunlight) is an issue that needs to be considered as part of the efficient portfolio of supply options until the cost of storage reduces to commercially viable levels.
I would like to see some serious work done by the energy geeks to see the potential for an efficient electricity market after the removal of ALL implicit and explicit subsidies for ALL technologies and the inclusion of ALL externalities across the whole energy supply chain (including generation, distribution, storage (for renewables) and distribution). Until someone bites the bullet on some work like this, we will suffer from lots of partial analysis and lots of misguided policy and market design advice. Perhaps it has been done. I simple don’t know.
Great points, Jim. That would be an excellent study to do. I’ve never seen anything like it. The PC would probably be best placed to do it. It would require a huge research effort.