Renewable Energy and Power Prices
Gas and high coal penetration are the drivers of expensive, volatile power prices.
The evidence in observed data and modelled projections shows that delaying renewables does not save money:
It prolongs high prices and entrenches fossil fuels.Analysis of National Electricity Market (NEM) price data reveals a strong relationship between the share of gas and coal generation and wholesale electricity prices.
- When gas-fired generation exceeds 6% of the supply mix, nearly all volume-weighted prices (VWP) rise above $100 per megawatt-hour (MWh).
- Once the gas share passes 10%, the VWP typically approaches or surpasses $150/MWh.
- When coal maintains a share above 55%, the average price not only increases, but the market also experiences more pronounced volatility.
This is a result of inflexible base-load operations and the ongoing costs associated with maintaining ageing coal infrastructure.
NEM data also demonstrate that when renewable energy consistently provides more than approximately 50% of electricity supply, wholesale prices fall below $100/MWh.
Author's summary: Renewable energy reduces power prices.