The ACT is the only Australian mainline region that has been spared from large increases in electricity bills, and its energy consumers can thank the switch to 100% renewables and the structure of their agreements with wind and solar parks.
The ACT government has signed contracts with 11 wind and solar farms to supply the equivalent amount of electricity consumed by ACT homes and businesses each year.
The nature of these agreements – called contracts for difference (CfD) – means that if the wholesale market trades below the agreed strike price, the government (and consumers) make up the difference with the wind and solar farms.
But if wholesale prices are higher than the strike price — as they have been by a considerable margin over the past six months — wind and solar farms pass those windfall profits back to the ACT government and consumers in the territory.
And in the last quarter, as wholesale prices hit record highs – an average of over $300/MWh in New South Wales – wind and solar repaid a total of $58 million to consumers. electricity consumers from the ACT, protecting them from any significant rise in bills. .
The largest rebates came from the Crookwell wind farm in New South Wales, which returned nearly $14 million. The difference between its contract with the ACT government and the average wholesale price during the June quarter was $204/MWh.
Hornsdale’s three wind farms together brought in $27.4 billion, although the price difference between their contracts was smaller – around $110/MWh – as wholesale renewables prices dominated by Australia- South Wales were significantly lower than those in coal-dependent New South Wales.
Even the four solar farms have brought in excess revenue to ACT consumers, even though their contract prices of up to $180/MWh are very high as they were among the first to be built in Australia. Contracts for solar farms in Australia are less than a third of that price.
The ACT isn’t the only energy consumer to get a deep discount – steel giant Bluescope has also announced a $42 million bonus on the contract it has with the Finley solar farm in Nova Scotia. South Wales. It has a similar arrangement where windfall profits are returned to the customer.
What this has effectively done to provide certainty for consumers, whether in the ACT or corporate clients such as Bluescope, and has provided a shield when the impact of soaring fossil fuel prices forces the market to big to get out of control.
As this graph shows, the ACT has had to complete some of the payments to wind and solar farms in recent years, but it did so knowing it would be protected if the energy markets got out of hand.
This raises a question, however: if contracts with wind and solar farms can be tailored to ensure windfall profits accrue to the consumer, why can’t the fossil fuel industry be encouraged to do the same.
As the oil and gas industry walks away with what the UN describes as “grotesque profits”, it might be time for the Australian government to consider – as other governments are doing – the introduction of an exceptional tax to recycle part of these earnings to the consumers who pay them.
Note: For those interested in learning more about how production from contracted wind and solar farms matches consumption in the ACT, this story provides an interesting insight: dive into the 100% renewable energy goal of the act.
And for another explanation of how ACT feed-in tariffs work, you can read this story here: How 100% renewable energy will protect part of Australia from soaring electricity prices
Giles Parkinson is the founder and editor of Renew Economy, as well as the founder of One Step Off The Grid and the founder/editor of The Driven, focused on electric vehicles. Giles has been a journalist for 40 years and is a former economics editor and associate editor of the Australian Financial Review.
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