The system allows wind and solar producers still to generate revenues through renewable energy certificates, while coal and gas generators avoid the cost of shutting down and restarting plants.



But historically sub-zero prices have occurred rarely, overnight or perhaps Boxing Day morning, when industry is shut down and household use is at a minimum. Were negative or very low prices to become commonplace, the reverberations would be felt across the market.

Queensland has almost 1500 megawatts of solar projects committed or under construction, almost 13 times more than the 116MW now online, estimates consultancy Rystad. None of those include storage, so all generation will occur during the day in a market where demand is "relatively static", notes Rystad's Ben Willacy, who expects the price impact to become more evident in the coming months.

Concerns for future

With memories still fresh of the demise in 2016 of Alinta's old Northern coal power station in South Australia, which was unable to cope with the impact of low-cost renewables, some are raising questions about the long-term profitability of Queensland's coal plants.

Others point to risks to new solar projects that are either fully or partly reliant on the merchant market, where prices may turn out to be much lower than assumed.

Queensland's wholesale power prices dropped to -5c/MWh on June 19. GlobalROAM, NEMWatch

"There's a hell of a lot of solar going into Queensland," said one industry insider.

"I don't expect in the next five to six years we will see Queensland prices frequently going to negative levels but I think pool prices will go low. .. so perhaps $15 to $20 a megawatt-hour, in the middle of the day at weekends, some weekdays too."


The expectation is that as solar grows in Queensland, the clearing price for electricity on the wholesale market during the daytime will increasingly be set by coal generators, rather than higher-cost gas, leading to a sharp drop.

While that sounds like good news for consumers suffering from escalating bills, the risk is that coal plants will be forced to shut down, leading to price spikes as occurred after the shutdown of Hazelwood last year.

Solar panels on schools, factories and houses are trimming demand from the grid.

Price gap emerges

In the meantime, a gap is already emerging between average prices for solar or wind projects and average prices on a 24-7 basis, something highlighted this week by major US-based renewables investor Capital Dynamics.

McArdle calls it the "solar correlation penalty", where PV farms across a region all start churning out electricity as the sun rises and all power down at dusk, within a few minutes of each other, even allowing for clouds or geographic location. Millions of rooftop solar panels on houses add to the impact by trimming demand for electricity from the grid.

"As more [solar] comes onstream it will have real impact," McArdle says. "At more times prices in Queensland should return to coal-set prices rather than gas, so a real drop."

It is already happening in wind, despite wind being more variable than sun. The "wind discount" in South Australia was 17.1 per cent in 2017-18, according to the Australian Energy Council, down from 30 per cent the previous year after an increase in the ability to export power to Victoria.

Average market prices for wind power are already much lower than the average in Victoria and SA. Australian Energy Council

Investments in the transmission grid and in energy storage will be vital to mitigate the impact of the surge in solar in Queensland, industry sources say.

"The situation in Queensland will need to be well managed; investments in transmission are absolutely critical," said one power industry player. "If not there will be a problem."