Wind generation’s share of non-coal merchant revenues increased 30% in three years

The energy transition is having a significant effect on merchant revenues for different generation types across the NEM. Research from Cornwall Insight Australia suggests wind generation captured almost half of the total spot market revenues in New South Wales (NSW) last quarter, accounting for more than gas and hydro’s share combined (40%).

The research found:

  • Wind’s share of non-coal merchant revenues rose from 17% in Q217 to 46% last quarter (Q220).
  • At the same time, gas’s share of this revenue fell to 18% in Q220 from 42%.
  • In Q217, gas and hydro’s total share of merchant revenues (excluding coal) in the state was ~76%, and wind and solar had a total share of 24%.
  • In Q220, gas and hydro saw their combined share of these non-coal merchant revenues drop to a total of 40% whilst wind and solar increased to 60%.
Non-coal merchant values

Whilst solar’s share of this revenue pot has also increased from 7% in Q217 to 14% in Q220 Cornwall Insight analysis shows that wind is achieving more than four times the increase in revenue of solar for each MW increase in capacity. 

Lumi Adisa, Lead Consultant – Market Analysis and Business Development at Cornwall Insight Australia, said:

“Recent weeks have seen renewables hit new highs. The Australian Energy Market Operator (AEMO) indicated that around noon on the 20 August, wind and solar contributed 11.7GW – 46.5% – of total energy for that settlement period.

“Looking at this analysis you can fully appreciate how rapid the rate of transition has been in the merchant market. Now wind and solar are increasingly displacing dispatchable assets on the system.

“This growth in renewable capacity (especially wind) in the state now means gas and hydro must compete for valuable periods within the day to dispatch. With wind now consistently capturing over 35% of merchant revenues since Q318 (except for Q1 this year), gas and hydro are increasingly feeling the squeeze in the merchant market.

“Given the higher run costs of gas units, they have always been expected to run during peak periods (early evenings just after sunset). However, with many planned wind projects and the potential for Renewable Energy Zones (REZs) in the state, it is left to be seen how far wind (and storage) can push gas out of the merchant market.”