Reports and theses by William Paul Bell
This report aims to assist the Sino-Australian bilateral relationship adapt to meet China’s new l... more This report aims to assist the Sino-Australian bilateral relationship adapt to meet China’s new low carbon emissions policies and to facilitate a smoother transition to a low carbon future. Southwestern University of Finance and Economics (SWUFE), Chengdu, China and the University of Queensland, Brisbane, Australia held a workshop at SWUFE to develop a guide to China’s low-carbon policies and their implications for the Sino-Australian energy trade and sectors. This report results from the workshop. Chapter 3 contains the guide to China’s low emission policies and discusses market-based experiments within China’s command-and-control electricity sector. Chapter 4 discuses Australia’s poorly implemented neoliberal policies within its energy sector and provides an informative market-based case study for China on what to avoid. Chapter 2 discusses the implications of Australia and China’s low emission policies. Chapter 5 discusses barriers to the transition to a low emissions economy.
Climate change is one of the world’s major challenges. Others include increasing inequality and poor economic growth, creating a decline in inclusive growth. Declining inclusive growth and climate change are interrelated wicked problems. Their solution is technically and economically viable given appropriate investment but the absence of a price on carbon in Australia is a major obstacle to directing investment consistent with a low emissions future.
Australia is transitioning from a mining to a more service orientated economy. However, Australia’s uncoordinated energy and climate change policy and poorly implemented neoliberal policies in the energy sector are undermining investment confidence and hindering both inclusive growth and the transition to a lower emissions economy. Energy and climate change policies need bringing together to restore investment confidence within the electricity sector. The Integrated Systems Plan has gone some way to address this problem.
Similarly, Australia’s uncoordinated growth and climate change policies are hindering inclusive growth and the transition to a lower emissions economy. Growth and climate change policies need bringing together to engender confidence and direct investment compatible with a low emissions future. Notably, Infrastructure Australia has gone some way to address this issue at the national level but the lack of transparency and independence in other jurisdictions undermines Infrastructure Australia’s effectiveness.
Poor policy coordination is also hindering solutions to a host of other interrelated wicked problems. These wicked problems include massive increases in retail electricity prices, private school fees and private health insurance, the inability to undertake major tax reform, such as introducing a tax on sugar or carbon or introduce road user charges to replace the declining revenue from fuel excise duty. There is ample and sound evidence-based research to solve these wicked problems but there is an inability to enact policy in the interest of the electorate.
The key findings of this report are four common barriers to enacting policy to solve these wicked problems.
(1) Political donations present a conflict of interest.
(2) Adversarial politics and political wedging reduce the ability to address complex problems.
(3) There is an absence of academic economists informing the public debate to provide impartial advice.
(4) Unrealistic models of the economy and human behaviour are misinforming policy.
This report investigates the effect of increasing the number of wind turbine generators on carbon... more This report investigates the effect of increasing the number of wind turbine generators on carbon dioxide emission in the Australian National Electricity Market’s (NEM) existing transmission grid from 2014 to 2025. This report answers urgent questions concerning the capability of the existing transmission grid to cope with significant increases in wind power and aid emissions reductions. The report findings will help develop a coherent government policy to phase in renewable energy in a cost effective manner.
We use a sensitivity analysis to evaluate the effect of five different levels of wind penetration on carbon dioxide emissions. The five levels of wind penetration span Scenarios A to E where Scenario A represents ‘no wind’ and Scenario E includes all the existing and planned wind power sufficient to meet Australia’s 2020 41TWh Large Renewable Energy Target (LRET). We also use sensitivity analysis to evaluate the effect on carbon dioxide emissions of growth in electricity demand over the projections years 2014 to 2015 and weather over the years 2010 to 2012. The sensitivity analysis uses simulations from the ‘Australian National Electricity Market (ANEM) model version 1.10’ (Wild et al. 2015).
We find increasing wind power penetration decreases carbon dioxide emissions but retail prices fail to reflect the decrease in carbon dioxide emissions. We find Victoria has the largest carbon dioxide emissions and of the states in the NEM Victoria’s emissions respond the least to increasing wind power penetration. Victoria having the largest brown coal generation fleet in the NEM explains this unresponsiveness. Wind power via the merit order effect displaces the more expensive fossil fuel generators first in the order gas, black coal and brown coal. However, brown coal has the highest carbon dioxide emissions per unit of electricity. This is suboptimal for climate change mitigation and the reintroduction of a carbon pricing mechanism would adjust the relative costs of fossil fuels favouring the fuels with the lower emissions per unit of electricity.
We find that uncertainty in electricity demand and the renewable energy target are hindering the deployment of wind power. Electricity demand uncertainty stems from permanent structural changes such as downward pressure on demand from the decline in manufacturing, price sensitivity, technological efficiency and meeting electricity demand behind the meter via solar PV and solar water heating. Electricity demand uncertainty also stems from cyclical uncertainty of the El Niño Southern Oscillation (ENSO). The recent reduction of the LRET from the 41 TWh to 20% of demand reflects both permanent and cyclic changes. Both the recent reduction and the annual review of the RET induces investment uncertainty for wind power generators. Introducing a 100% RET and making the percent a moving average of the demand of the last 10 years would encourage retailers to purchase the LRET certificates, help reduce investment uncertainty and accommodate the structural changes in electricity demand.
We find transmission congestion is reducing wind power’s ability to reduce emissions. This is particularly noticeable in South Australia (SA) where there are negative wholesale prices inducing spillage of wind power. Factors causing this situation are SA large wind deployment and relatively small demand base plus interconnectors between SA and VIC that quickly exceed their maximum capacity.
In further research, we (Bell et al. 2015b, 2015c) investigate augmenting the NEM’s transmission grid to reduce carbon dioxide emissions across the NEM and address the price differential between states under increasing wind power penetration.
This report investigates the effect of increasing the number of wind turbine generators on transm... more This report investigates the effect of increasing the number of wind turbine generators on transmission line congestion in the Australian National Electricity Market’s (NEM) existing transmission grid from 2014 to 2025. This reports answers urgent questions concerning the capability of the existing transmission grid to cope with significant increases in wind power. The report findings will help develop a coherent government policy to phase in renewable energy in a cost effective manner.
We use a sensitivity analysis to evaluate the effect of five different levels of wind penetration on transmission congestion. The five levels of wind penetration span Scenarios A to E where Scenario A represents ‘no wind’ and Scenario E includes all the existing and planned wind power sufficient to meet Australia’s 20% 2020 41TWh Large Renewable Energy Target (LRET). We also use sensitivity analysis to evaluate the effect on transmission congestion of growth in electricity demand over the projections years 2014 to 2015 and weather over the years 2010 to 2012. The sensitivity analysis uses simulations from the ‘Australian National Electricity Market (ANEM) model version 1.10’ (Wild et al. 2015).
We find congestion on only 14 of the 68 transmission lines in the ANEM Model (Wild et al. 2015). Notably, these 14 congested transmission lines include six of the NEM’s interstate interconnectors and eight of the intrastate transmission lines although only three of the intrastate transmission lines exhibited any significant degree of congestion. The increase in wind power penetration has an uneven effect on congestion. The two Queensland (QLD) to New South Wales (NSW) interconnectors QNI and DirectLink exhibit a complementary pattern. Wind power increases congestion on DirectLink but decreases congestion on QNI. BassLink, the interconnector that links Victoria (VIC) and Tasmania (TAS), and the Tarraleah-Waddamana line in TAS also exhibit a complementary pattern that reverses in the highest wind power penetrations scenario E. In contrast, the congestion on the interconnector Regional VIC-Tumut NSW shows volatility with increasing wind power penetration. Finally, the VIC to South Australia (SA) interconnector MurrayLink shows the greatest percentage increase in congestion with increase in wind power.
The high congestion in the interconnectors raises issues over the suitability of the current regulatory and institutional arrangement to accommodate increases in wind power. Namely, the transmission companies being contained within each state provides little focus or incentive for increasing the capacity of the interconnector to accommodate the increase in wind power penetration. Additionally, the complementary congestion pattern between DirectLink and QNI suggests that DirectLink requires augmenting and to a lesser extent QNI with increasing wind power penetration. The complementary congestion between BassLink and the Tarraleah-Waddamana line with a reverse in congestion in the highest wind power penetration level suggests relocatable energy storage may offer an alternative solution to transmission augmentation.
In further research we (Bell et al. 2015b, 2015c) investigate augmenting the NEM’s transmission grid to address the congestion under increasing wind power penetration.
This report primarily aims to provide both dispatch and wholesale spot price forecasts for the pr... more This report primarily aims to provide both dispatch and wholesale spot price forecasts for the proposed hybrid gas-solar thermal plant at Collinsville, Queensland, Australia for its lifetime 2017-47. These forecasts are to facilitate Power Purchase Agreement (PPA) negotiations and to evaluate the proposed dispatch profile in Table 3. The solar thermal component of the plant uses Linear Fresnel Reflector (LFR) technology. The proposed profile maintains a 30 MW dispatch during the weekdays by topping up the yield from the LFR by dispatch from the gas generator and imitates a baseload function currently provided by coal generators. This report is the second of two reports and uses the findings of our first report on yield forecasting (Bell, Wild & Foster 2014b).
This report’s provides yield projections for the proposed hybrid gas-Linear Fresnel Reflector (LF... more This report’s provides yield projections for the proposed hybrid gas-Linear Fresnel Reflector (LFR) technology plant at Collinsville, Queensland, Australia to replace the decommissioned coal fired generator. The techniques developed in this report to overcome inadequate datasets at Collinsville to produce the yield projections are of interest to a wider audience because inadequate datasets for renewable energy projects are commonplace.
Papers and Book Chapters by William Paul Bell
There has been significant debate about the potential role that supply side and demand side polic... more There has been significant debate about the potential role that supply side and demand side policy initiatives might exert upon key participants within the National Electricity Market (NEM) in attempts to curb growth in carbon emissions. From the perspective of supply side policy initiatives, most debate and analysis has been focused upon assessing the impact that a ‘Cap-&-Trade’ carbon trading scheme, and more recently, a carbon tax scheme, might have on changing marginal cost relativities in order to promote increased dispatch and investment in less carbon emissions intensive types of generation technologies including gas-fired generation and renewable generation technologies. However, with any forthcoming move towards a carbon constrained economy, there are many uncertainties over policy settings that are required to achieve the environmental goal of reduced greenhouse gas emissions and about the resulting impact on the National Electricity Industry more generally. A complete understanding of the impacts on the electricity industry of carbon abatement policies requires that new renewable technology proposals be incorporated in a model containing many of the salient features of the national wholesale electricity market. These features include intra-regional and inter-state trade, realistic transmission network pathways, competitive dispatch of all generation technologies with price determination based upon marginal cost and branch congestion characteristics. It is only under such circumstances that the link between carbon emission reductions and generator based fuel switching can be fully explored and the consequences for carbon emission reductions and changes in wholesale and retail electricity prices can be determined.
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Reports and theses by William Paul Bell
Climate change is one of the world’s major challenges. Others include increasing inequality and poor economic growth, creating a decline in inclusive growth. Declining inclusive growth and climate change are interrelated wicked problems. Their solution is technically and economically viable given appropriate investment but the absence of a price on carbon in Australia is a major obstacle to directing investment consistent with a low emissions future.
Australia is transitioning from a mining to a more service orientated economy. However, Australia’s uncoordinated energy and climate change policy and poorly implemented neoliberal policies in the energy sector are undermining investment confidence and hindering both inclusive growth and the transition to a lower emissions economy. Energy and climate change policies need bringing together to restore investment confidence within the electricity sector. The Integrated Systems Plan has gone some way to address this problem.
Similarly, Australia’s uncoordinated growth and climate change policies are hindering inclusive growth and the transition to a lower emissions economy. Growth and climate change policies need bringing together to engender confidence and direct investment compatible with a low emissions future. Notably, Infrastructure Australia has gone some way to address this issue at the national level but the lack of transparency and independence in other jurisdictions undermines Infrastructure Australia’s effectiveness.
Poor policy coordination is also hindering solutions to a host of other interrelated wicked problems. These wicked problems include massive increases in retail electricity prices, private school fees and private health insurance, the inability to undertake major tax reform, such as introducing a tax on sugar or carbon or introduce road user charges to replace the declining revenue from fuel excise duty. There is ample and sound evidence-based research to solve these wicked problems but there is an inability to enact policy in the interest of the electorate.
The key findings of this report are four common barriers to enacting policy to solve these wicked problems.
(1) Political donations present a conflict of interest.
(2) Adversarial politics and political wedging reduce the ability to address complex problems.
(3) There is an absence of academic economists informing the public debate to provide impartial advice.
(4) Unrealistic models of the economy and human behaviour are misinforming policy.
We use a sensitivity analysis to evaluate the effect of five different levels of wind penetration on carbon dioxide emissions. The five levels of wind penetration span Scenarios A to E where Scenario A represents ‘no wind’ and Scenario E includes all the existing and planned wind power sufficient to meet Australia’s 2020 41TWh Large Renewable Energy Target (LRET). We also use sensitivity analysis to evaluate the effect on carbon dioxide emissions of growth in electricity demand over the projections years 2014 to 2015 and weather over the years 2010 to 2012. The sensitivity analysis uses simulations from the ‘Australian National Electricity Market (ANEM) model version 1.10’ (Wild et al. 2015).
We find increasing wind power penetration decreases carbon dioxide emissions but retail prices fail to reflect the decrease in carbon dioxide emissions. We find Victoria has the largest carbon dioxide emissions and of the states in the NEM Victoria’s emissions respond the least to increasing wind power penetration. Victoria having the largest brown coal generation fleet in the NEM explains this unresponsiveness. Wind power via the merit order effect displaces the more expensive fossil fuel generators first in the order gas, black coal and brown coal. However, brown coal has the highest carbon dioxide emissions per unit of electricity. This is suboptimal for climate change mitigation and the reintroduction of a carbon pricing mechanism would adjust the relative costs of fossil fuels favouring the fuels with the lower emissions per unit of electricity.
We find that uncertainty in electricity demand and the renewable energy target are hindering the deployment of wind power. Electricity demand uncertainty stems from permanent structural changes such as downward pressure on demand from the decline in manufacturing, price sensitivity, technological efficiency and meeting electricity demand behind the meter via solar PV and solar water heating. Electricity demand uncertainty also stems from cyclical uncertainty of the El Niño Southern Oscillation (ENSO). The recent reduction of the LRET from the 41 TWh to 20% of demand reflects both permanent and cyclic changes. Both the recent reduction and the annual review of the RET induces investment uncertainty for wind power generators. Introducing a 100% RET and making the percent a moving average of the demand of the last 10 years would encourage retailers to purchase the LRET certificates, help reduce investment uncertainty and accommodate the structural changes in electricity demand.
We find transmission congestion is reducing wind power’s ability to reduce emissions. This is particularly noticeable in South Australia (SA) where there are negative wholesale prices inducing spillage of wind power. Factors causing this situation are SA large wind deployment and relatively small demand base plus interconnectors between SA and VIC that quickly exceed their maximum capacity.
In further research, we (Bell et al. 2015b, 2015c) investigate augmenting the NEM’s transmission grid to reduce carbon dioxide emissions across the NEM and address the price differential between states under increasing wind power penetration.
We use a sensitivity analysis to evaluate the effect of five different levels of wind penetration on transmission congestion. The five levels of wind penetration span Scenarios A to E where Scenario A represents ‘no wind’ and Scenario E includes all the existing and planned wind power sufficient to meet Australia’s 20% 2020 41TWh Large Renewable Energy Target (LRET). We also use sensitivity analysis to evaluate the effect on transmission congestion of growth in electricity demand over the projections years 2014 to 2015 and weather over the years 2010 to 2012. The sensitivity analysis uses simulations from the ‘Australian National Electricity Market (ANEM) model version 1.10’ (Wild et al. 2015).
We find congestion on only 14 of the 68 transmission lines in the ANEM Model (Wild et al. 2015). Notably, these 14 congested transmission lines include six of the NEM’s interstate interconnectors and eight of the intrastate transmission lines although only three of the intrastate transmission lines exhibited any significant degree of congestion. The increase in wind power penetration has an uneven effect on congestion. The two Queensland (QLD) to New South Wales (NSW) interconnectors QNI and DirectLink exhibit a complementary pattern. Wind power increases congestion on DirectLink but decreases congestion on QNI. BassLink, the interconnector that links Victoria (VIC) and Tasmania (TAS), and the Tarraleah-Waddamana line in TAS also exhibit a complementary pattern that reverses in the highest wind power penetrations scenario E. In contrast, the congestion on the interconnector Regional VIC-Tumut NSW shows volatility with increasing wind power penetration. Finally, the VIC to South Australia (SA) interconnector MurrayLink shows the greatest percentage increase in congestion with increase in wind power.
The high congestion in the interconnectors raises issues over the suitability of the current regulatory and institutional arrangement to accommodate increases in wind power. Namely, the transmission companies being contained within each state provides little focus or incentive for increasing the capacity of the interconnector to accommodate the increase in wind power penetration. Additionally, the complementary congestion pattern between DirectLink and QNI suggests that DirectLink requires augmenting and to a lesser extent QNI with increasing wind power penetration. The complementary congestion between BassLink and the Tarraleah-Waddamana line with a reverse in congestion in the highest wind power penetration level suggests relocatable energy storage may offer an alternative solution to transmission augmentation.
In further research we (Bell et al. 2015b, 2015c) investigate augmenting the NEM’s transmission grid to address the congestion under increasing wind power penetration.
Papers and Book Chapters by William Paul Bell
Climate change is one of the world’s major challenges. Others include increasing inequality and poor economic growth, creating a decline in inclusive growth. Declining inclusive growth and climate change are interrelated wicked problems. Their solution is technically and economically viable given appropriate investment but the absence of a price on carbon in Australia is a major obstacle to directing investment consistent with a low emissions future.
Australia is transitioning from a mining to a more service orientated economy. However, Australia’s uncoordinated energy and climate change policy and poorly implemented neoliberal policies in the energy sector are undermining investment confidence and hindering both inclusive growth and the transition to a lower emissions economy. Energy and climate change policies need bringing together to restore investment confidence within the electricity sector. The Integrated Systems Plan has gone some way to address this problem.
Similarly, Australia’s uncoordinated growth and climate change policies are hindering inclusive growth and the transition to a lower emissions economy. Growth and climate change policies need bringing together to engender confidence and direct investment compatible with a low emissions future. Notably, Infrastructure Australia has gone some way to address this issue at the national level but the lack of transparency and independence in other jurisdictions undermines Infrastructure Australia’s effectiveness.
Poor policy coordination is also hindering solutions to a host of other interrelated wicked problems. These wicked problems include massive increases in retail electricity prices, private school fees and private health insurance, the inability to undertake major tax reform, such as introducing a tax on sugar or carbon or introduce road user charges to replace the declining revenue from fuel excise duty. There is ample and sound evidence-based research to solve these wicked problems but there is an inability to enact policy in the interest of the electorate.
The key findings of this report are four common barriers to enacting policy to solve these wicked problems.
(1) Political donations present a conflict of interest.
(2) Adversarial politics and political wedging reduce the ability to address complex problems.
(3) There is an absence of academic economists informing the public debate to provide impartial advice.
(4) Unrealistic models of the economy and human behaviour are misinforming policy.
We use a sensitivity analysis to evaluate the effect of five different levels of wind penetration on carbon dioxide emissions. The five levels of wind penetration span Scenarios A to E where Scenario A represents ‘no wind’ and Scenario E includes all the existing and planned wind power sufficient to meet Australia’s 2020 41TWh Large Renewable Energy Target (LRET). We also use sensitivity analysis to evaluate the effect on carbon dioxide emissions of growth in electricity demand over the projections years 2014 to 2015 and weather over the years 2010 to 2012. The sensitivity analysis uses simulations from the ‘Australian National Electricity Market (ANEM) model version 1.10’ (Wild et al. 2015).
We find increasing wind power penetration decreases carbon dioxide emissions but retail prices fail to reflect the decrease in carbon dioxide emissions. We find Victoria has the largest carbon dioxide emissions and of the states in the NEM Victoria’s emissions respond the least to increasing wind power penetration. Victoria having the largest brown coal generation fleet in the NEM explains this unresponsiveness. Wind power via the merit order effect displaces the more expensive fossil fuel generators first in the order gas, black coal and brown coal. However, brown coal has the highest carbon dioxide emissions per unit of electricity. This is suboptimal for climate change mitigation and the reintroduction of a carbon pricing mechanism would adjust the relative costs of fossil fuels favouring the fuels with the lower emissions per unit of electricity.
We find that uncertainty in electricity demand and the renewable energy target are hindering the deployment of wind power. Electricity demand uncertainty stems from permanent structural changes such as downward pressure on demand from the decline in manufacturing, price sensitivity, technological efficiency and meeting electricity demand behind the meter via solar PV and solar water heating. Electricity demand uncertainty also stems from cyclical uncertainty of the El Niño Southern Oscillation (ENSO). The recent reduction of the LRET from the 41 TWh to 20% of demand reflects both permanent and cyclic changes. Both the recent reduction and the annual review of the RET induces investment uncertainty for wind power generators. Introducing a 100% RET and making the percent a moving average of the demand of the last 10 years would encourage retailers to purchase the LRET certificates, help reduce investment uncertainty and accommodate the structural changes in electricity demand.
We find transmission congestion is reducing wind power’s ability to reduce emissions. This is particularly noticeable in South Australia (SA) where there are negative wholesale prices inducing spillage of wind power. Factors causing this situation are SA large wind deployment and relatively small demand base plus interconnectors between SA and VIC that quickly exceed their maximum capacity.
In further research, we (Bell et al. 2015b, 2015c) investigate augmenting the NEM’s transmission grid to reduce carbon dioxide emissions across the NEM and address the price differential between states under increasing wind power penetration.
We use a sensitivity analysis to evaluate the effect of five different levels of wind penetration on transmission congestion. The five levels of wind penetration span Scenarios A to E where Scenario A represents ‘no wind’ and Scenario E includes all the existing and planned wind power sufficient to meet Australia’s 20% 2020 41TWh Large Renewable Energy Target (LRET). We also use sensitivity analysis to evaluate the effect on transmission congestion of growth in electricity demand over the projections years 2014 to 2015 and weather over the years 2010 to 2012. The sensitivity analysis uses simulations from the ‘Australian National Electricity Market (ANEM) model version 1.10’ (Wild et al. 2015).
We find congestion on only 14 of the 68 transmission lines in the ANEM Model (Wild et al. 2015). Notably, these 14 congested transmission lines include six of the NEM’s interstate interconnectors and eight of the intrastate transmission lines although only three of the intrastate transmission lines exhibited any significant degree of congestion. The increase in wind power penetration has an uneven effect on congestion. The two Queensland (QLD) to New South Wales (NSW) interconnectors QNI and DirectLink exhibit a complementary pattern. Wind power increases congestion on DirectLink but decreases congestion on QNI. BassLink, the interconnector that links Victoria (VIC) and Tasmania (TAS), and the Tarraleah-Waddamana line in TAS also exhibit a complementary pattern that reverses in the highest wind power penetrations scenario E. In contrast, the congestion on the interconnector Regional VIC-Tumut NSW shows volatility with increasing wind power penetration. Finally, the VIC to South Australia (SA) interconnector MurrayLink shows the greatest percentage increase in congestion with increase in wind power.
The high congestion in the interconnectors raises issues over the suitability of the current regulatory and institutional arrangement to accommodate increases in wind power. Namely, the transmission companies being contained within each state provides little focus or incentive for increasing the capacity of the interconnector to accommodate the increase in wind power penetration. Additionally, the complementary congestion pattern between DirectLink and QNI suggests that DirectLink requires augmenting and to a lesser extent QNI with increasing wind power penetration. The complementary congestion between BassLink and the Tarraleah-Waddamana line with a reverse in congestion in the highest wind power penetration level suggests relocatable energy storage may offer an alternative solution to transmission augmentation.
In further research we (Bell et al. 2015b, 2015c) investigate augmenting the NEM’s transmission grid to address the congestion under increasing wind power penetration.
We calculate correlations between wind speed and electricity demand data for the years 2010 to 2012 using Weather Research & Forecasting Model (WRF 2015) wind speed data and Australian Energy Market Operator (AEMO) electricity demand data. We calculate state level correlations to identify potential bottlenecks in the interconnectors that link each state’s transmission network. The transmission lines within each state tend to be less of a constraint.
We find a small temporal increase in correlation between electricity demand and wind speed. This we attribute to an unwitting renewable energy portfolio effect with the increase in solar PV and solar water heating. Strengthening this portfolio effect is the decline in manufacturing that makes household domestic demand relatively larger. Comparing our study with an earlier correlation analysis by Bannister and Wallace (2011) tends to confirm our initial findings.
We find the most advantage from the lack of correlation between wind speed between the NEM’s peripheral states including Queensland, South Australia and Tasmania. Additionally, the correlation between electricity demand and wind speed is strongest between these states. Similarly, we find the most advantage from the lack of correlation between electricity demand in each of these states. The self-interest groups within Victoria and New South Wales and the transmission companies geographically contained within each state hinders the development of optimal interconnector capacity to maximise the benefit of wind power in the peripheral states and the NEM generally.
We use a sensitivity analysis to evaluate the effect of five different levels of wind penetration on wholesale spot prices. The five levels of wind penetration span Scenarios A to E where Scenario A represents ‘no wind’ and Scenario E includes all the existing and planned wind power sufficient to meet Australia’s 2020 41TWh Large Renewable Energy Target (LRET). We also use sensitivity analysis to evaluate the effect on wholesale spot prices of growth in electricity demand over the projections years 2014 to 2015 and weather over the years 2010 to 2012. The sensitivity analysis uses simulations from the ‘Australian National Electricity Market (ANEM) model version 1.10’ (Wild et al. 2015).
We find divergence in the prices between states and similar prices for nodes within states. This pattern reflects the findings in our transmission congestion report (Bell et al. 2015a). Only 14 of the 68 transmission lines in the ANEM Model (Wild et al. 2015) are congested but these 14 congested transmission lines include six of the NEM’s interstate interconnectors and eight of the intrastate transmission lines although only three of the intrastate transmission lines exhibited any significant degree of congestion. This supports Garnaut’s (2011, p. 38) assessment on gold plating intrastate transmission and under investing in interstate transmission.
We find increasing wind power penetration decreases wholesale spot prices but retail prices fail to reflect the decrease in wholesale spot prices. Victoria is the only state in NEM with a deregulated retail sector and the retail sector has increased profits rather than through the savings to retail customer. The other states are regulated and unable pass through the savings. There is a requirement for simply better regulation or increased competition by breaking up the large generator-retails companies into separate retail and generator companies.
Wind power has the potential to further reduce wholesale prices across the whole of the NEM but the congestion in the interconnectors limits this potential. There is a requirement for a high capacity transmission backbone that can link the NEM’s peripheral states via Victoria and NSW (Bell et al. 2015d). This requirement will become more pressing as Australia moves beyond its current 20% LRET. However both the regulatory and institutional arrangements require some adjustment before such a project becomes feasible and for the NEM to avail itself of the full benefit of wind power to reduce both wholesale spot prices and carbon emissions.
In further research, we (Bell et al. 2015b, 2015c) investigate augmenting the NEM’s transmission grid to reduce wholesale spot prices across the NEM and address the price differential between states under increasing wind power penetration.