Pollie Watch: Wind farms save on peak prices

O'BrienMichael57250At the recent official opening of the Mortlake gas-fired power station, Energy and Resources Minister Michael O’Brien took a swipe at wind power. Quoted in the December 6 Warrnambool Standard, he said

“The wind energy can’t be as reliable in the same way as natural gas – it is intermittent.”Wind will supplement coal and gas generation, but it can’t replace them.
” On Thursday when power demand peaked, wind farms generated only eight percent of their installed capacity into the grid.”

It’s unclear which day O’Brien was referring to. Data sourced from the Australian Energy Market Operator shows that on the previous Thursday, November 29 (when the temperature reached 39.6° in Melbourne), wind farms generated around 40% of their capacity most of the day. 40% capacity is better than the annual average for most Australian wind farms.

The capacity for Victorian wind farms taken alone dipped to around 10% briefly during in the period 4-6PM that day, but held up through the rest of the peak time.

Of course, part of the point of having many wind farms over a large area is that while some in one area may be still, others can be spinning just fine. The data for November 29 appears to bear this out.

On Saturday December 8th, 37°C in Melbourne, wind farm output was around 60% all day, and better (60-80%) for Victorian wind farms taken on their own.


O’Brien appears to be cherry-picking data. It’s easy to do, but all that he’s proven is that you can’t run a grid on 100% wind power – but that’s hardly news. No-one was arguing that anyway.

On peak usage days when the wind does blow, there is no need to turn on those expensive gas peaker plants.

Gas prices are rising. Driven by the costs of CSG and shale gas production, and competition with overseas markets, gas prices are set to double and probably more.

Wind farms are a fuel saver. For much of the time they save the gas and coal that would have been burned.

Now that it’s been fairly thoroughly demonstrated that wind farms can displace coal and gas burning – like in South Australia – let’s use them to reduce greenhouse emissions, and power prices too.

That might make the gas plants less profitable. Such are the joys of a free market!

And of course, solar thermal power has free fuel (unlike gas) and performs very well on hot summer days, making a great complement to the variability of cheaper wind farms.

11 thoughts on “Pollie Watch: Wind farms save on peak prices

  1. Should we really be surprised that O’Brien cherry picks data or misrepresents the facts? He and Baillieu have an abiding hatred of wind energy. Wish I knew why they have sold out to ignorance and lies but they are unlikely to change until we change them. They are denying reality which will eventually turn around and bite them on the backside.

  2. If untruths in print media can be referred to AJA so that correction can be made in whichever journal, similarly for electronic media via ACMA, which body is in charge of correcting lies by Pollies? Must be more than Georgie porgie Pudding and Pell surely?

  3. Ben – a few points you might want to follow up on:

    1) You point out how the wind farms performed well on 29th November – here’s another case where they did not (and prices spiked, partly as a result):

    2) You also note that “Of course, part of the point of having many wind farms over a large area is that while some in one area may be still, others can be spinning just fine. The data for November 29 appears to bear this out.”

    Here’s a longer-term look at wind farm performance, right across the NEM:

    It is true that most of the time, the wind farm output is above zero for each day. However, there are days when – all the way across the NEM – the wind farms can be seen to produce almost nothing. This is the reason why AEMO, and the market, can’t rely in wind farms for meeting peak demand, and need to have thermal capacity available (at a cost) for cases where wind does not blow.

    3) You also note how increased wind production, when it happens, does drive down prices – which is also shown here:

    However it seems a bit odd to claim “That might make the gas plants less profitable. Such are the joys of a free market!” where the only reason wind farms are constructed instead of gas peakers is because of the subsidies they receive (i.e. not because it’s a free market).

    It’s understandable that you lobby for wind farms (and other renewables), on the basis of environmental benefits, but it seems to be counter-factual to claim benefits for lowering spot prices without also noting the higher capital costs consumers are paying for to get those lower spot prices.

    In the interests of everyone not “cherry-picking data”, you might want to take these factors into account.


    1. In response, Paul:

      Your blog was less parsimonious than your comment here, in relation to the normal output of wind energy: “median daily production volumes appear to be approximately 30%-40% of the peaks – and that these median levels are fairly consistently reached.”

      It’s worth considering that the NEM excludes WA, and there are no large wind farms (just one smallish one) in northern QLD. These areas are less likely to follow the same still periods as the current NEM wind farm area. If we linked wind farms in WA and North QLD to the NEM you might ameliorate those low wind generation patches (which occur typically when a midwinter high pressure sits over most of Australia, becalming us). WA may be expensive to link, but it’s entirely do-able as the Zero Carbon Australia report has outlined.

      However, on those “few random days (not all that often) when total production volumes dropped much lower than those median levels (down towards 0MWh for the day)” as your blog puts it, wind won’t supply our peak or even go part way.

      That’s exactly what I acknowledged in my blog above: “you can’t run a grid on 100% wind power – but that’s hardly news.”

      Nevertheless, wind farms still frequently ameliorate peak demand incidents, and lower wholesale prices more generally.

      It’s true wind farms (and all new renewables) are subsidised via the LRET and SRES. Is the cost of their subsidy greater than their benefit in fuel savings and reducing peak pricing events ie the Merit Order Effect? Unlikely, as Dylan McConnell has written here:

      1. Hi Ben

        Thanks for your thought-provoking comments. I’ll see if I can find some time, in the next couple weeks, to pull some more numbers together (and, if I can, will post them at http://www.WattClarity.com.au).

        Essentially, it seems that there are three related challenges:

        1) The degree to which wind farm intermittency can be ameliorated, and the value this increase reliability would deliver, and at what cost (as you say, connecting in large farms in WA or QLD would help reduce the intermittency, but the additional transmission cost could be huge – such as in the previously proposed CuString project for North Queensland).

        [apologies if my comment was seen as any different than my prior post – the main challenge is that “fairly consistently” is good enough, in energy terms, but not good enough, in reserve capacity terms – so the provision of wind energy incurs cost in still requiring thermal plant to be there when the wind does not blow. With lack-of-wind experienced across whole days, on rare occasions, these durations are probably too long for current Demand Response to provide a benefit]

        2) Second, there is interest in the degree to which wind farms are helping to reduce wholesale (spot and contract) prices. Doing a simple comparison of 2007/2008 (drought-affected prices) to 2011/12 (relatively awash with hydro) and assuming it’s all due to wind is overly simplistic. Hydro and wind (with a relatively minor contribution by solar currently) are only three of a number of factors at play.

        3) Third, there is interest in what the wind energy costs to supply.

        Each is an interesting question in their own right.


      2. Paul, so what is reducing spot price if it’s not due to wind, solar and hydro? The experience from South Australia seems to suggest that wind does indeed lower costs and emissions.

  4. In response to Paul again, those 3 points are indeed important questions. I don’t have a definitive answer or solution on any of them, but here’s a few thoughts.

    I think it’s still important to see wind as a “fuel saver” when it is working – whether that ‘fuel’ is the chemical energy stored in gas and coal, or the thermal energy stored in molten salts in a solar thermal plant, or even the potential kinetic energy of a hydro dam. This could potentially also be a significant money saver.

    New, long transmission lines like Copperstring are expensive to build, but bear in mind that areas like far north QLD experience large energy losses in transmission because they are so far from power stations. This is an identified factor in making wind farms attractive for that region. Building wind there and upgrading the transmission lines would have beneficial side-effects. Like many renewable and clean technologies, the big cost upfront can blind us to some of the savings/benefits later.

    Lastly, your point about reserve capacity is important. Finding the optimum balance between wind’s variable output and the cheapest configuration of firm generation capacity and/or demand management to complement it is a challenge for a renewables-only scenario. We need more data and we need to think creatively about what we can do!


    1. Thanks Ben – will post more when I have time to work through some numbers.

      In response to the question from Blair Donaldson above, some initial numbers are posted here:

      As noted, wind farm output has had some effect – though hydro does seem to have a more significant effect, and this does not even consider factors such as the more moderate peak demands (post 2009) due to La Nina etc…

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