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Integration of solar generation into electricity markets: an Australian National Electricity Market case study

Integration of solar generation into electricity markets: an Australian National Electricity Market case study

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Historically, solar photovoltaic (PV) generation has been able to claim a significant ‘premium’ in revenues over other generation types because of its correlation in operation with peak demand (and therefore high priced) periods. However, similar to many international markets, recent conditions in the Australian National Electricity Market, including low demand, high levels of rooftop PV generation and oversupply of capacity, are found to have eliminated the revenue premium for solar. Half-hourly modelling to 2030 illustrates that historical premiums are unlikely to resurface. Storage is shown to increase solar revenues at high penetrations, but can have a detrimental effect on solar revenues at lower solar penetration levels. Therefore at high solar penetration levels, solar generators will be incentivised to develop storage assets, since they can capture additional portfolio market benefits by minimising the decline in solar premiums because of the merit order effect. In contrast, most other market participants will find storage detrimental to revenues because of increasing competition during high priced periods, and will therefore have less incentive to include storage in their portfolios.

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