Over the last six years,the electricity market in South Australia has changed remarkably.Wholesale energy prices doubled,the production from wind and solar increased to become 48% of generation in the State,the last coal-fired power station closed,and gas prices almost doubled.To understand the wholesale electricity prices we apply an econometric analysis to identify the contribution of higher gas prices,higher renewable electricity production,coal generation closure,changing demand and the entry and demise of a carbon tax.The analysis contributes to the merit order effects literature by distinguishing seasonal effects,variable rooftop solar,30-minute prices and the effects of coal generation closure.The analysis shows that the growth in renewables is responsible for a $AUD 37/MWh reduction in 2018 prices,while coal generation is associated with a $24/MWh increase in prices from what they otherwise would have been.In addition,we find that price reductions attributable to renewables were more than three times larger than the value of their subsidies,and encouraging new renewables is likely to have a bigger impact in reducing prices than extending the life of existing coal generators.
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