Winds of change: An analysis of recent changes in the South Australian electricity market

 Over the past decade, the South Australian electricity market has undergone a dramatic change in supply mix. Prior to 2005, energy generation needs were predominantly sourced from gas and brown coal power stations. Since then, over 1500 MW of wind capacity and 680 MW of rooftop solar has been installed. At the same time, 770 MW of brown coal capacity has exited the market.

These developments have substantially reduced the greenhouse gas emissions from South Australian electrical power generation. Recent steep increases, especially in the winter of 2016, has seen record high prices set, in what some have called the South Australian “energy crisis”. Recent media attention has focused on the relationship between the high level of penetration of renewable energy and the energy crisis. Much of the reporting has been framed in ideological terms - renewables are either ‘good’ or ‘bad’ - with little reference to quantitative analysis of the dynamics of the wholesale electricity market or movements in associated markets such as gas.

This report explores the evolving dynamics in the electricity market in South Australia and how it is impacting wholesale prices. In particular, the report focuses on the growth in renewable energy generation, the impact of a changing gas market and market power concentration and competition issues.