Renewable energy 'spilled' as generation outgrows demand

On a bright, breezy afternoon in Western Australia's agricultural south-west, something seems amiss. The wind is blowing, but in the distance, giant wind turbines — each capable of powering thousands of homes at a time — are barely moving at all.

A wind farm is producing next to no power, and it is not because there is not enough wind available. In fact, there is too much — or rather too much renewable energy supply and not enough demand in WA at this moment.

This is an example of curtailment, the process of throttling or spilling energy production in excess of demand, and it is a key feature to watch as Australia's electricity system evolves.

The reason it is happening is a profound surge of renewable energy generation in the country. In October, for the first time ever, clean energy trumped fossil fuels in supplying electricity to homes and businesses on the eastern seaboard.

So big is the gap at times between constrained demand and potential production that from July next year the Commonwealth will require retailers to give households free electricity for at least three hours a day to help deal with the excess supply.

But experts say until more storage is installed to soak up the waves of renewable energy flooding the grid, much of that power will occasionally have to be curtailed.

What is curtailment?

"Curtailment at its simplest is when an energy asset generates less than it would be capable of generating," explains Pete Tickler, the co-founder at Gridcog, an energy analysis and modelling firm. He says curtailment comes in two forms.

One form is capacity: when the transmission network of poles and wires is at capacity and cannot handle transporting any additional electricity — like a freeway that cannot handle any more traffic.

The other form is economic. Since generators sell their electricity supply to the energy market, when prices are too low to make any money, an owner may choose not to produce power at that time, Mr Tickler explains.

This type of "economic curtailment … has been around for ages", Mr Tickler says, and has traditionally affected things like gas plants that have needed high prices to justify running.

But it is now becoming much more common because renewable energy is pushing spot electricity prices to such low or even negative levels, meaning generators have to pay someone to take their output.

What both of these things share, Mr Tickler notes, is a strong correlation with renewable energy output. In other words, when wind and solar production are high — and particularly when they are high at the same time — curtailment is likely to happen.

Renewable energy booms in the spring

It is perhaps no coincidence, therefore, that the federal government's offer of free power covers the middle of the day when solar is at its peak.

Curtailment is most pronounced in the shoulder seasons of spring and autumn, when solar output is elevated but mild temperatures mean demand for electricity is often subdued.

University of New South Wales senior research associate Dylan McConnell says a clear picture is emerging amid the daily swings of energy supply.

"It varies quite a bit by jurisdiction and time of the year," Dr McConnell says. "But particularly in the southern states, Victoria and South Australia, we're seeing quite high levels of curtailment."

Across Australia, curtailment is increasingly becoming a feature of the way electricity systems operate. Driving it has been the rapid development of renewable energy across the country.

Take the National Electricity Market (NEM), which covers much of Australia's eastern seaboard and supplies power to more than 10 million homes and businesses. From its inception as a national market 27 years ago, the share of Australia's power that comes from renewable sources has gone from just 5 per cent to more than 40 per cent today.

In 1998, that renewable energy was hydropower, but it is now overwhelmingly solar and wind power, in that order. And, unlike hydroelectricity, the fuel for which (that is, water) can be stored for when it is needed, solar and wind simply produce when the sun is shining and the wind is blowing.

The result can be scarcity sometimes and abundance — or even overabundance — at other times.

Just this month, the Australian Energy Market Operator noted that yet another record had been set in the NEM, where renewable energy met 78.6 per cent of demand shortly before midday on October 11.

At various points in recent weeks, similar records have tumbled in the individual states as well.

In New South Wales, renewable energy briefly supplied almost 86 per cent of demand on October 3, while its contribution made up 82.5 per cent of Victoria's electricity mix at 2pm on October 16.

For all these records, observers point out renewable energy could have theoretically supplied a much greater share of demand in almost all of these circumstances.

A pair of obstacles stood in the way.

On the one hand, coal-fired generators, which have traditionally been the lifeblood of the market — and kept the system stable — can only reduce their output so much.

Below a certain floor, they have to switch off entirely — a costly and time-consuming exercise that coal plants tend to avoid at almost all costs. The market operator may also direct renewable plants to reduce their output at times to ensure coal plants can maintain minimum operating levels.

On the other hand, there are the limits of demand and the sheer overabundance of wind and solar power at various times.

Mr Tickler says the extraordinary take-up of rooftop solar in Australia is supercharging the trend. About one in three "small-use" customers in Australia — or more than 4 million homes and businesses — now have solar panels on their roofs.

Collectively, they generate up to half of Australia's electricity supply at times. And their number is still growing at a breakneck pace, with as many as 300,000 new installations every year.

Crucially, however, rooftop solar is largely beyond the control of the market operator and tends to flood into the system regardless of low prices. As a consequence, Mr Tickler says it squeezes out all other generators, including renewable energy but particularly large-scale solar farms.

"If you think about the solar story in Australia, it's really the rooftop solar story," Mr Tickler says. "It's a huge success. I mean, we shouldn't underestimate just what an amazing achievement it is to get 40 per cent of homes and businesses with rooftop solar.

"But it very much sets the rhythm for the wholesale energy markets in Australia because when there's a lot of rooftop solar, that suppresses the demand that the rest of the market sees.

"And so that means that there's less energy market to sell into if you're a utility-scale solar farm owner."

Mr Tickler notes some solar farms on Australia's eastern seaboard are losing as much as 30 per cent of their potential production to curtailment.

Dr McConnell suggests it may be even higher for some.

In light of such losses, Mr Tickler says solar farm developers are adapting their ways.

"It's unlikely, for example, that we'll see many, if any, standalone solar farms built in at least on the east coast of Australia going forward," Mr Tickler says. "There'll still be solar farms built, lots of them, but they will be developed, co-located with battery storage from the get-go."

The change is symptomatic of the much broader push towards batteries and storage underway across the country.

Batteries to play a critical role

Mr Tickler says batteries are in many ways an ideal complement to variable renewable sources such as solar, soaking up excess generation in the day so it can be used at night.

He says it is as true for the grid writ large as it is for households with their own solar panels. "That [storage] reduces the amount of curtailment for the solar owners," he says.

With more than 3 gigawatts of batteries installed across the country and a pipeline of further developments that is "very, very significant", Mr Tickler suggests Australia may already be getting curtailment in hand.

David Dixon from Rystad Energy says Australia is about to bring online vast amounts of grid-scale storage, which could soon slash the need to curtail much power.

Mr Dixon says those batteries in commissioning and under construction alone will more than offset the amount of energy Australia is currently spilling.

"The dynamics of the NEM are about to completely change, as 8 gigawatts of utility batteries … are set to be online in the next 12-18 months, mostly shifting energy from day to night," Mr Dixon says.

"Once all this capacity is commissioned, there will be 29 gigawatt hours of utility batteries operational. Assuming they cycle 0.8 times per day, that's an additional 8.5 terawatt hours per year additional demand, presumably mostly during the middle of the day. That's significantly more than the 6.3 terawatt hours of utility [solar] and wind we're currently curtailing each year."

To put that in context, to power eastern Australia at any one time, the most you need is about 35 gigawatts of electricity. Rystad estimates 15.4 gigawatts of batteries will come online within the next two years.

As global leaders gather in Brazil for COP30, the UN climate summit, Australia's leaps in small-scale solar and battery storage could well draw the world's attention.

An infinite resource

Mr Tickler says consumers themselves will also be a key part of the solution to the times when too much power is being generated.

By changing the way they use energy — either directly or through smart technology such as water heaters and electric vehicle chargers in their homes — he says consumers can also help avoid the need for curtailment.

In the end, though, he reckons at least some curtailment will simply become a normal part of an Australian electricity system running largely on renewable energy. "I think the general view is a modest amount of curtailment is … inevitable," he says.

"If you wanted to reduce that curtailment all the way down to zero, you would have to build out a lot of additional transmission capacity that would manage or help manage that physical side of curtailment, huge amount of storage, huge amount of load flex.

"The marginal cost of generating that excess kilowatt hour off a solar system on your house is zero, or very close to zero. And to that extent, no harm, no foul."

Dr McConnell agrees.

"I guess it's a shifting mindset around how we think about energy," Dr McConnell says. "It can seem like a waste, but it's not really a waste if it's not worth anything.

"In other aspects of life, it's quite common to not utilise infrastructure when you don't need it."