Australian price cannibalisation of renewable assets climb: Research from Cornwall Insight Australia shows that the growth of variable renewable energy (VRE) generation in Australia significantly impacts their captured price. In fact, in FY18, 98% of the grid-scale solar generation volumes captured prices above $50/MWh. However, this has reduced to 12% in FY21.
On top of this, wind and solar generation volumes with negative captured prices have increased over the years. Generation volumes in negative price bands have increased to ~5% in FY20 and ~10% in FY21 from virtually nothing just four years ago.
The below graph examines the captured price band by the percentage of wind and solar generation volumes in the National Electricity Market (NEM) over the last four financial years.
George Wong, Modelling Consultant at Cornwall Insight Australia, said:
“In the last decade, the rapid decline in deployment cost of variable renewable energy (VRE) generation capacity has given renewables an advantage over fossil fuels for new builds. However, as more VRE enters the market, price cannibalisation is inevitable and starting to occur in the Australian market.
“VRE installed capacity has been growing steadily over the years, and between FY18 and FY21, grid-scale solar PV capacity grew 1,800%, from 274MW to 5,203MW. With wind capacity growing 116% from 4,070MW to 8,815MW over the same period. With the price falling rapidly for solar PV across Australia there has been record installing levels of rooftop solar PV year on year.
“As a result of this rapid expansion of VRE, their captured price has fallen with very little grid-scale solar able to capture prices at $50/MWh. With rooftop capacity now more than double the capacity of grid-scale PV, this cannibalisation effect has been increased with impacts on both demand and supply during the day.
“Wind is also seeing a similar trend with 46% of wind generation volumes captured prices above $50/MWh in FY20, but only 21% of wind generation volumes captured prices above $50/MWh. Despite wind capacity having more than 3,000MW capacity than grid-scale solar, wind can capture slightly more generation volume above $50/MWh. This is due to the wind’s ability to capture evening and morning peak period prices and the impact of rooftop generation on grid-scale PV generation.
“This trend of downward pressure on the price will likely continue with increasing VRE capacity and the continuation of falling costs for these technologies. Exactly how retirements from coal plants will impact this trend is left to be seen.”
Australian price cannibalisation of renewable assets climb