Dramatic changes in Australia illustrate the future of the American electricity system

A fossil fuel price spike: In the past few months, average wholesale spot prices in Australia’s National Electricity Market have spiked 6-fold to a remarkable $US250 per MWh. This is caused by unavailability of large amounts of coal and gas capacity (caused by fires, breakdowns and scheduled maintenance in old clapped-out coal & gas units) coupled with high international coal and gas prices. The spike is causing intense interest to move quickly to dominance by solar & wind.

Australia has a new Government. In May, Australia elected a centre-left Government after a decade of conservative anti-renewables rule. The new Government quickly implemented 2030 targets of 83% renewable electricity and a 43% cut in emissions. These targets are likely to be met early because of the compelling economics of solar & wind coupled with a newly supportive Government.

Figure 1: Renewable electricity generation in Australia’s National Electricity Market

Australia is by far the global solar leader. On a per capita basis, Australia has more deployed solar and is installing solar faster than in any other Gigawatt-scale electricity system. Australia now generates nearly twice as much solar electricity per person as the other global leaders (Netherlands, Germany, Japan, Belgium, Spain). Australia is far ahead of the USA for speed of deployment of renewable capacity.

Australia is a global renewable energy pathfinder. The state of South Australia generates about 70% of its electricity from solar and wind and is tracking towards 100% in 2025. Australia as a whole is a global leader in solar & wind energy deployment. Australia is physically isolated and cannot share electricity across national boundaries. Australia has no nuclear or geothermal and little capacity for hydroelectricity (about 7% of annual generation). About 99% of new generation capacity in Australia is solar & wind (which together constitute three quarters of global annual net generation capacity additions).

The steps that Australia takes to manage the rise and rise of variable solar & wind in its electricity system has global significance as a pathfinder. Measures include (i) lots more high voltage transmission; (ii) lots more utility storage (pumped hydro and batteries); and (iii) measures to manage and take advantage of distributed generation, storage and demand management.

Australia is demonstrating that achieving and managing a solar & wind dominated grid is easier than most people think.

Figure 2: deployment speed for new renewable capacity per person per year (averaged over 2018-21)