Electricity consumers in the ACT will benefit from the ACT Government’s support for renewable energy, as earnings from recent periods of high electricity prices flow back to ACT households.
While Canberra sweltered during a record heat wave earlier in the month, the electricity network, and prices, were pushed to their limits as a result of surging demand for electricity. On several occasions, electricity prices in the National Electricity Market traded at the maximum cap of $14,000 per Megawatt-hour, as consumers turned up air conditioners during the heat.
While extreme electricity prices would be a matter of concern, Canberra households are increasingly protected from price spikes, and in fact, while benefit from payments made by renewable energy projects during periods when electricity prices are exceptionally high.
Under the ACT feed-in-tariff scheme, renewable energy projects are guaranteed a fixed price for the electricity they generate, under the terms of a “contract for difference” agreement.
According to the terms of the contract-for-difference arrangements, if the prevailing market price for electricity is below the guaranteed price, ACT consumers are obliged to pay the difference. This guarantee has helped underpin investments in renewable energy, such as the 20 Megawatt Royalla Solar Farm in Canberra’s south.
However, if the prevailing market price is surges above the guaranteed price, the renewable energy projects must return the excess amount back to consumers. This means that ACT consumers are effectively shielded from extreme spikes in electricity prices.
It is a model that is used frequently by retailers to manage the risk of price spikes in the electricity market. As the ACT moves towards sourcing 100 per cent of its electricity from renewable sources by 2020, the majority of the ACT’s consumption will be covered under the contracts for difference.
“This means that when wholesale market prices are high, like during a heatwave, instead of ACT consumers paying the solar farms, the solar farms instead pay them,” ACT Minister for Climate Change and Sustainability Minister Rattenbury said.
“Due to the high electricity demand being experienced across NSW during the recent heatwave, the wholesale price at times reached as high as $14,000 per megawatt hour and averaged $419 per megawatt hour. This is many times higher than the maximum feed-in tariff price of $186 per megawatt hour paid to the ACT’s solar farms.”
As a result of the prevailing high prices, the ACT Government has estimated that it earned $840,000 in a single week. The earnings will be used to offset the costs of the feed-in-tariffs, and would ultimately be used to keep residential electricity tariffs lower.
Minister Rattenbury highlighted the commercial benefits that have come from the ACT’s ambitious investments in clean energy.
“Three of our large-scale solar farms were generating electricity during the high price spikes experienced during the recent heatwave. An estimated $840,000 of earnings will flow back to ACT electricity users as an offset against future energy prices,” Minister Rattenbury said.
“The Federal Government’s comprehensive failure to manage the transition to a clean energy future—instead spruiking a ‘clean coal’ fantasy — makes it even more important that states and territories like the ACT lead the way in climate change action.”
“Far from being to blame for electricity supply problems during the recent heatwave, in times of peak electricity use, renewable electricity generation like wind and solar are the quiet achievers, helping reduce demand spikes that threatened the stability of the grid in difficult conditions.”.
Several Australian states have considered using the ACT ‘contract-for-difference’ model as a means of both supporting the increased adoption of renewable energy, as well as limiting the exposure of consumers to price spikes. The policy is actively being considered by the South Australian and Queensland Governments to underpin renewable energy investment.