Graphing the price movements for South Australia, the state with the highest proportion of wind energy, against its reliance on wind energy, Dr Saddler finds "absolutely no relationship between the two". The Curtis Liquefied Natural Gas project site in Gladstone, Queensland. Credit:Patrick Hamilton/Bloomberg South Australian wholesale prices have moved both down and up as the share of wind power grew to 45 per cent. Ahead of the latest increase, real prices in South Australia were lower than they were a decade earlier when the share of wind generators was only 5 per cent. "More detailed analysis shows that market wholesale prices are consistently lower when there is a high level of wind generation, than when there is little wind. Over the past four or five years in the South Australia wholesale market, volume weighted prices received by wind generators have been around 20 to 30 per cent lower than volume weighted average prices for the market as a whole." In contrast, the correlation between wholesale electricity and gas prices is "striking". Both move down and up together.

"Higher wholesale electricity prices, and hence higher retail prices are almost entirely caused by higher gas prices," Dr Saddler concludes. Source: AER, AEMO, Hugh Saddler, Australia Institute "A similar, though less stark effect is seen in the other mainland national energy market states. This is not a malfunction of the market, but precisely how it was expected to operate." "The launch of the market in 1998 was followed by a rush of construction of gas turbine power stations in Queensland, NSW and Victoria and even in Tasmania, accelerated in Queensland by a gas generation mandate policy introduced by the state Labor government. "It was envisaged that both the much lower greenhouse gas emissions and the superior operational flexibility of these power stations compared with coal would make them ideally suited to supplying hour-to-hour and day-to-day variations in demand for electricity, while also reducing emissions, by using a then relatively low cost source of fuel."

Gas is is used to augment other supplies at times of peak demand, meaning that although most electricity is supplied by coal, it is the price of gas-fired power that determines the final price when prices climb. The price rose sharply from 2015 with the opening of three gas liquification plants at Gladstone in Queensland, allowing the bulk export of gas previously supplied only to the Australian market. Loading "It seems that the decision to allow so much of the gas resources of eastern Australia to be exported was made without considering the likely effects on the electricity market," Dr Saddler writes. "Household and business consumers of electricity are now paying the price." In June Prime Minister Malcolm Turnbull announced plans to impose export controls to try and guarantee supply and hold back prices.