Solar and wind are providing nearly 90% of South Australia’s electricity

During October, 86.9% of South Australia’s total electricity demand¹ was met by renewables. While this is not, of itself, globally significant (especially in regions with significant hydroelectric resources), it is remarkable that this milestone has been achieved with only solar and wind (and immaterial contribution from any hydroelectric, geothermal or biomass). South Australia is the first jurisdiction of this any real size to achieve this milestone and it is unmatched anywhere in the world.

Further, all of South Australia’s renewable generation has been installed since 2007. This challenges the misconception that wind and solar will never make a material contribution to electricity generation (presently solar and wind account for 3-4% and approximately 6% of global electricity generation).

While remarkable, this achievement does not come as a complete surprise. In October 2020 we reported that South Australia had become the first major jurisdiction globally to meet its entire electricity need using solar power for at least one hour.

Looking ahead, ElectraNet (the state’s transmission company) forecasts that 100% net renewables² will be achieved within four years and that total electricity generation will nearly double by 2030.

Why is this significant?

South Australia has achieved what other jurisdictions haven’t been able to – it has achieved significant scale of renewable electricity generation while maintaining a stable, reliable grid.

There has been a lot written about:

• the negative impacts that renewables have on the stability of electricity grids (renewables are blamed for frequency and voltage anomalies;
• overloading of transmission lines and contributing to demand and supply mismatches; and
• ‘connection issues’ (and the significant additional costs and delays to tying-in renewables projects).

In some cases, these issues are being blamed for projects being abandoned. In the United States it is estimated that more than 10,000 clean energy projects (representing approximately 1,350 gigawatts of generation and 680 gigawatts of storage capacity) were queued and awaiting connection at the end of 2022 and the typical lead time had increased to five years, compared with three years in 2015.

South Australia’s achievement is significant because it challenges these criticisms.  

This is further underscored by ElectraNet reporting that it is receiving interest from ever more and increasingly large renewable energy generation developments. It cited that eight of the currently proposed developments exceed 1000 megawatts (putting this in context, the typical wind farm is 150 megawatts and the typical utility-scale solar farm is only c.5 megawatts and requires up to 12 hectares of land). These are big projects and they would not be progressing without sound economics or if they were imperilling the grid.

What are the benefits for South Australia?

Investment in renewables has structurally improved the state’s energy security. South Australia has never been energy self-sufficient and has always depended on imported electricity (as recently 2017 it was importing up to one-third of its electricity needs from Victoria via the Heywood and the Murraylink interconnectors). South Australia now profits from being a net exporter of electricity.

We believe South Australia’s endowment will have considerable appeal to domestic and international corporates seeking to improve their own energy security (and reduce their emissions footprint and associated risks). During 2022 in the United States, corporates contracted 20 gigawatts of renewable electricity capacity, continuing a 5-year trend growing at 50% per annum. South Australia would appear to be a great location for energy intensive industries (from data centres to heavy industry).

How will this evolve in the future?

Beyond attracting additional commercially-motivated demand for electricity, South Australia will benefit from exporting increasing amounts of electricity (either via the existing interconnectors or the new link to New South Wales which is expected to be completed by 2026).

Ultimately it will be able to retain a portion of this electricity using energy storage (today, the majority of energy storage is not economically viable). Energy storage will allow South Australia to achieve complete energy security by making its renewables dispatchable (baseload equivalent) by combing it with short-duration storage to manage daily peak demand and long-duration storage to manage seasonality (intuitively, considerably more electricity is generated from solar during the summer than the winter). This will likely be a combination of grid-scale and distributed small-scale energy storage.

Conclusion

South Australia is a case study in the benefits of investing in clean energy at the provincial level. It can be achieved without sacrificing grid reliability and  demonstrates that grid connection issues can be overcome. This should serve as a roadmap for other jurisdictions.

T8 Energy Vision invests in a portfolio of companies which will contribute to and benefit from the continued evolution of this thematic in South Australia and rest of the world. Our key focus areas are renewable energy generation, energy storage and electrification (from critical raw materials to consumer products and services) on the basis that we believe they represent an extraordinary investment opportunity at this stage of evolution and especially at the present time given the extremely attractive valuations which have emerged as a result of a period of low market risk appetite.

Footnotes

¹ The main East Coast Australian grid was 45.1% renewables (including hydroelectric) during October and has a target of 82% by 2030.

² The ‘net’ means that while South Australia will generate sufficient renewable electricity to match its volume of demand, it will still require electricity generated from conventional sources (such as natural gas) at times when renewables are either not available or insufficient to meet total demand. The surplus renewable electricity will be exported. On the typical day between 8am and 5pm, South Australia is generating surplus electricity. A new transmission link to New South Wales is expected to be completed by 2026 which will facilitate this surplus being exported.