The observed cost of high penetration solar and wind electricity

Abstract

High levels of variable solar and wind must be balanced with alternative generation, storage, transmission and demand management to ensure continuous availability of electricity. The cost of balancing has been disputed, which militates against mass deployment of solar and wind to mitigate climate change. Australia is installing solar and wind 10 times faster than the global per capita average which constitutes a natural experiment in the real cost of balancing. The National Electricity Market (NEM) and the state of South Australia have reached combined solar and wind energy penetrations of 24% and 70% respectively and are tracking towards 40% and 100% respectively in 2024–25. Investment in new balancing infrastructure is predominantly in pumped hydro (without new dams on rivers), batteries and transmission. The current (2021) and market futures (2024) spot price for electricity in the NEM and South Australia is about AUD$40 (∼US$30) per Megawatt-hour. This suggests that the balancing cost of high levels of solar and wind is modest. Show more