Thursday, February 9, 2017

"I believe we have market failure"

South Australia has been a vocal point for watchers of the renewables experiment - this story struck me as extraordinary in exposing the themes of a final tale everywhere low capacity credit supply is prioritized.

SA heatwave: Blame game begins as state faces further power cuts
South Australian Premier Jay Weatherill promised to "intervene dramatically in the electricity market"...
Mr Weatherill's promise followed comments from Prime Minister Malcolm Turnbull earlier this morning, placing the blame for South Australia's blackouts entirely on the State Government.
"It has created a situation where that state has the most expensive and least reliable electricity in Australia," Mr Turnbull said.
"That is a fact. Of course they want to blame it on everybody else.
"When they have the biggest heatwave there is no wind and when there is no wind, all of their windmills are not generating electricity.
"They haven't planned for that."


But Mr Weatherill said South Australians were "not prepared to put up with being ridiculed and have the finger pointed at them by a Federal Government that has abdicated its responsibilities".
"One option is to completely nationalise the system, that is an extraordinary option," he said.
"It would involve breaking contracts and exposing us to sovereign risk and the South Australian taxpayers to extraordinary sums of money.
"It is not a preferred option. We are ruling nothing out at this point."
He said the State Government's plans were "well advanced" and there would be further meetings this afternoon.
"What we know at the moment is that we have a national electricity market which is all about dollars and cents," he said.
"It is not about people, it is not about businesses and jobs.
"It is a trading system where people are trying to maximise profit and minimise cost."
There's lots of intrigue, but one obvious lesson here too. The latest panic follows a short period of load shedding.
It looks like the tolerance for using load shedding as a tool to manage electricity systems is approximately zero.
It seems to me the tolerance for forcing supply with a capacity credit of approximately zero into what is intended to be a functioning market should therefore also be approximately nil.

It seems in South Australia the solution is to end the market.

Related:
Germany’s Energiewende: The End of Power Market Liberalization?  - which I cited in this 2014 post.
Reliable Electricity Generation Capacity declining in Ontario
The declining capacity value of solar in Ontario, and beyond

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