As discussed in a Reneweconomy.com article on 25 November 2016: “Gas-fired generators in South Australia have again sent electricity prices soaring towards the $14,000/MWh mark in the state – the most recent occurrence because of the need to meet just 10 MW of extra demand.”
“The latest event occurred in the early morning of November 1, Melbourne Cup Day. In its report, the AER says demand was running about 100 MW ahead of predictions, but a small increase in demand at 7.20 am, along with a small decrease in supply from wind generation, gave the peaking plants the opportunity to pounce.
The AER said most of the available capacity was priced above $10,000/MWh, and because the majority of these plants take more than five minutes to come on, the increase in demand resulted in just 10 MW of high-priced capacity being dispatched, sending the price soaring from $89/MWh to $13,462/MWh for the 7.20 am dispatch interval.
That took the average price for that 30 minute interval to $2,300, adding some $1.5 million to the cost of wholesale electricity in the half hour period.”
In an ABC News article posted 25 August 2016, Moody’s vice-president and senior analyst Spencer Ng said: “The evolving generation mix, coupled with the network’s limited interconnection capacity, will restrict the market’s ability to respond to supply and demand shocks, leading to increased price volatility. ”
and went on to state:
“If most of the backup supply comes from relatively expensive gas peaking power stations, electricity prices will increase.”