Are renewable energy sources driving down electricity prices?

Earlier in the year, Australians experienced huge heat waves that resulted in increased demand for electricity.

What you might not know is that renewable energy sources such as solar and wind power managed to reduce wholesale electricity prices.

What were the effects of wind farms?

Wind farms managed to reduce electricity prices to a figure 40 per cent lower than what they would have been otherwise. This is according to a study conducted by Sinclair Knight Merz on behalf of New Zealand based renewable energy company Meridian Energy and its subsidiary PowerShop.

The research company examined the contribution of wind farms located in both South Australia and Victoria during this period and said this analysis is likely to be conservative because of its modelling.

"Wholesale electricity prices are set every 30 mins by finding the plant to supply the last bit of demand at the lowest price (at which price that plant will run).  Once built, wind farms will run at a price of zero," states PowerShop's blog.

On the hottest days, wind farms were able to provide an 6 per cent of the overall supply of electricity in these states, which was able to reduce wholesale prices by 40 per cent.

What are wholesale prices?

The wholesale market is made up of major generators, such as wind, solar and coal plants that sell to electricity suppliers.

This is then sold to the individual consumer on the retail market, and it is up to the supplier to create any mark ups. If you think you may be able to get a better deal, you could consider doing an electricity comparison to see what other suppliers could offer you.

How did solar power help?

Solar panels can be placed on buildings by home and business owners, and a spokesperson from the South Australian electricity distribution network says these play an important role during heat waves to shift the peak of demand.

Rather than the peak time for electricity use being 5 p.m, solar panels have meant this has shifted to 7 p.m, a Spark Infrastructure spokesperson told Renew Economy on February 24.

These panels managed to reduce stress on the network during the heatwave, the Spark spokesperson said during an analysts presentation earlier in February.

"This, and greater preparation, meant that the network suffered little more than a "few blown fuses" this year despite two separate weeks of 5 consecutive days of 40C plus temperatures (and warm evenings), compared to a significant "loss of assets" in the last major heatwave in 2009," a company representative told Renew Economy.

This could be because consumption has decreased as many people are now able to generate their own power through solar panels and do not have such a strong need for power off the grid.

Posted by Liam Tunney.