Surprise, surprise, oversupply reduces prices in the NEM. Grey heads like me who were around when the NEM was established and understand how it’s supposed to work are pleased to see it actually doing what it was designed to do.

The electricity chatter in Australia this week centres on a moment early on Sunday afternoon when the spot price in every NEM region sat at or below $0/MWh.

Credit: Macquarie Capital’s Brian Morris, who captured this screenshot of the Australian Energy Market Operator’s data page and posted it on his LinkedIn account.

Some are high fiving at this outcome, as if this is the moment when wind and solar vanquished coal. But the reality is that many utility solar project developers will have their heads in their hands, wondering how they’re going to ever be able to convince anyone to finance their projects. 

Lyon’s hands are steady on the wheel. We’ve never seen traditional standalone solar or wind that provides intermittent and unstable energy to the electricity network as a sustainable business model. Yes, we must decarbonise our electricity system, and we need to and can speed this up. But successful energy transition requires {innovative and commercially sustainable solutions}.

Lyon’s project design philosophy, which we began implementing over six years ago now, including developing the world-first Lakeland Solar and Storage Project and more recently the Cape York, Riverland and Nowingi Battery Power Plants, is that new generation should meet the power system requirements of a modern and stable grid, as well as provide commercial returns to investors. 

It must now be becoming increasingly evident to even the most ardent supporters of renewable generation that the days of traditional standalone wind and solar are numbered.

Sagging solar peak pool prices (best illustrated by the classic duck curve below, or kangaroo curve, as our friends at Fluence like to say) are just one of the revenue challenges harming traditional standalone solar. Constraints and changes to MLFs are also having adverse revenue impacts, in some instances very large adverse revenue impacts.

Truly integrated solar battery stations address those revenue risks, as well as the threshold risk of getting connected to the network in the first place. The operational flexibility of integrated solar and battery storage creates revenue flexibility, as well as an ability to optimise across revenue streams, and between contracted versus uncontracted revenues, as market conditions change.

The future is bright for projects that are commercial in the current market, will get a major boost from both 5 minute settlement and the shifting FCAS supply/demand balance, and will benefit further as new markets and/or compliance obligations ensure that revenues reflect the real value of services to the market and to system stability.

It’s well past time that generation plant that strengthens the grid should be advantaged over generation plant that weakens the grid. The sun is fast setting on the period of traditional standalone wind and solar being able to push the cost of countervailing their grid impacts onto others.

Thankfully, not all renewables projects were created equal.

Only Lyon’s truly integrated battery power stations meet the power system requirements for a stable grid, shift low value daytime solar into high value peaking generation at or below the cost of gas peakers, and address the connection and revenue risks harming traditional standalone solar.

Smart integration of the most advanced technology creates power stations that deliver value greater than the sum of its parts. At the risk of labouring the point, I’d say that a pair of pictures is worth more than two million words to anyone pondering the relative rewards and risks of the different kinds of projects on offer to investors looking to back the new power generation that is both clean and smart.

Credit: AEMO, 2018

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