Forrest, I think what Jerome is referring to is discussed in this document:

EWEA – Wind Energy and Electricity Prices, April 2010
http://www.ewea.org/fileadmin/ewea_documents/documents/publications/reports/MeritOrder.pdf

Wind could finish up at the top of the merit order because it has no fuel or carbon cost. The actual impact on the coal plants will depend on the amount of wind power available in any dispatch period but it is possible that wind could reduce the return from coal plants. Whether the wind farms can make money in the electricity market without the RET scheme is another matter. In any event, nuclear power is a much bigger threat to coal than wind.

Forrest, I should have been clearer. Geothermal is definitely an option in Australia, despite its competition – it just has to go through certain stages to prove itself. You’re an accomplished sleuth; check out Geodynamics media releases or preferably, their quarterly reports.

As far as the topic is concerned, sure ... horses for courses. It’s complex though, there are many horses and many courses ... the riders and trainers, owners or syndicates, and innumerable stakeholders, all conflate the issues even more.

I find the articles and discussions on this website http://tinyurl.com/Barry-Brook more informative than OLO’s, despite the best intentions of its contributors and commenters, me included.

Nuclear for the big energy users, it's happening now.

I also believe that geothermal has a lot of opportunities for baseload generation in Australia. While HDR still has a few bugs, we shouldn't forget that shallow geothermal is alo a viable option and can probably be found closer to the grid. Although Geodynamics activities seem to be grabbing attention, Australia already has one modest geothermal station at Birdsville. Its well is 1230 metres deep and generates a 120 kW net power output. Small I know, but the plant saves about 160,000 litres of diesel fuel, clearly displacing CO2 emissions.

Tuscany has also had geothermal power since 1904, so it is a well proven technology. The State has 810 MW installed geothermal capacity. You can read more at http://www.cegl.eu/index.php?option=com_content&task=view&id=41&Itemid=64.

Also with ground source heat pumps (GSHP), you can generate energy (or more correctly displace energy usage for heating and cooling) from as little as 60m. This 2001 paper http://geoheat.oit.edu/bulletin/bull22-2/art4.pdf found that there were between 110,000 and 140,000 GSHPs in Europe at the end of 1998 representing almost 1,300 MW thermal capacity.

This all goes back to my earlier point that it is unwise to dump all renewables into one bucket and say that "no one has shown that green electricity supplied to an operating power network actually reduces emissions", based on examples of wind power in two or three places.

Thanks for your post, Martin N, of Saturday, 29 May 2010 at 5:21:23 PM, and for the link therein. I have downloaded the PDF document titled "Wind Energy and Electricity Prices: Exploring the ‘merit order effect’", and have attempted to come to grips with it.

I can't quite make up my mind whether the Merit Order Effect represents a sophisticated energy management tool, or a piece of finance industry sophistry. It would be logical for the finance industry to emphasise any merit, real or imaginary, in the wind energy field, as it is a field suited to the mobilisation of much smaller units of funding (like self-managed personal superannuation funds of near-retirement politicians and senior public servants) than the very large loans to governments generally made at lower interest rates for other sorts of electricity-generation infrastructure.

It does seem to me that the plugging-in of wind generators into any electricity market is dependent for its viability upon existing, or impending, inadequacies of base load generation capacity, or at least a widely held belief that such inadequacies exist. Talking up shortage in any market tends to increase prices. Is that what has been happening in Australia?

Mark Lawson's contention that wind-generated electricity is likely to be more expensive than hydro, coal, or gas powered generation may well be supported at least in the case of NSW wind-generated electricity. With the completion of construction of the Capital Wind Farm near Bungendore, which will supply 'offset' power for the Kurnell desalinator of Sydney Water, seven eigths of all NSW wind-generated power will come from that source. A current OLO article by Kellie Tranter, 'Dead in the water', http://www.onlineopinion.com.au/view.asp?article=10492&page=0 , is the source of this information.

The comments thread to that article yields some interesting insight into the possible extent of NSW government price-support for 87.5% of wind-generated electricity in that State. See: http://forum.onlineopinion.com.au/thread.asp?article=10492&page=0

Is government focus upon maintaining artificial shortage for price manipulation, rather than developing competitive renewable base load capability?

Forrest,

The merit order effect is neither particularly sophisticated or sophistry. It is something much more prosaic.

To understand the merit order effect it is necessary to know how electricity markets work. Most electricity networks have a trading market where generators can offer to supply a certain quantity of electricity in a given period during the day. The price offered into the market is based on the marginal cost of the generator. Marginal cost is the cost of producing an additional unit of electricity (eg MWh) and mainly reflects the fuel and additional operational costs.
Which generators are used in any given period is based on the price offered by the generator, with the cheapest getting first priority. This is called the merit order and ensures that electricity is delivered to the market’s customers (typically retail suppliers like AGL or Origin) at the lowest possible cost.
The price actually paid to the generator operators (and charged to the customer) for electricity in that period is based on the highest-price generator used in that period. This gives incentive to the generator operators to have the most efficient equipment as the lowest-cost generator earns the most profit. I cover more about electricity markets in my next book - yet to be released.

Continued in next post ...

The reason wind can upset the merit order is that wind has no fuel cost and low marginal operating costs. So if wind is bid in a period (and available in that dispatch period of course) then it could get highest dispatch priority. Coal plants need to run continuously and prefer to run as fully loaded as possible. So wind accepted in a period is likely to reduce the demand for coal output and so reduce coal profitability.

Mark is probably correct when he says wind is more expensive than coal or gas but he is referring to the life-time cost not the marginal cost. Coal plants could always bid a zero (or even negative) cost to ensure high priority but there is still a risk that the introduction of signficant wind will lower the price paid to all the generators in the period.

Sorry if this sounds like trying to explain the RSPT but it is relatively complex but important to understand.

It's early days for Australia accepting wind power into the wholesale market so we are probably yet to see what the real impact will be on wholesale prices. At current wind penetration I suspect it hasn't had much effect at all. Don't forget the article I suggested to you is produced by the European Wind Association so it relates to Europe and is hardly an independent assessment.