Wind and Solar Droughts Push Prices Up—But Don’t Threaten Grid Reliability

📉 The Myth of Renewable Energy Droughts

You’ve probably heard of “wind droughts” or “solar slumps” as scary moments when the lights might go out. But let’s set the record straight: wind and solar droughts aren’t nearly as severe or long-lasting as many think—especially when compared to real weather droughts like rainfall shortages.

In fact, using 2035 data from the Australian Energy Market Operator (AEMO), it’s estimated that wind and solar output will drop below 66% of normal for just 6% of the time, with four-day dips occurring less than 0.5% of the time. That’s not a system failure. It’s more like a cloudy weekend.

⚡ What Really Happens During Low VRE Periods?

While renewable generation might temporarily dip, the lights stay on. Why? Because electricity spot prices are more sensitive than system reliability.

When output drops for several days, 8 GW of dispatchable energy (like gas or diesel) running non-stop can easily cover the gap. So, while prices may spike during these periods, the reliability of the system remains intact.

Shorter dips—say over 4 or 8 hours—are more frequent and where batteries come in. These moments are when energy is most valuable, and short-duration storage can earn its keep.

🔋 4-Hour vs. 8-Hour Batteries: What’s the Smarter Investment?

Here’s where it gets interesting. Not all storage is equal—and longer doesn’t always mean better.

• 2 GW of 4-hour batteries: ~$3.2 billion, faster deployment (~18 months)

• 2 GW of 8-hour batteries: Estimated under ~$5 billion

While 8-hour batteries can store more energy, they do so at lower power, which is fine during prolonged dips but less helpful during short, sharp events. That’s why 4-hour batteries remain cost-effective and more flexible in day-to-day grid balancing.

🏔️ Why Pumped Hydro Might Not Be the Answer

Pumped hydro sounds like a dream—store water when it's cheap, generate when it’s expensive. But the reality?

• Snowy 2.0 is already projected to cost $12 billion

• It requires two dams, tunnels, long lead times, and lower efficiency

Compared to the modular, scalable nature of batteries, pumped hydro might be too slow and too costly to keep up with market needs by 2035.

🔍 Looking at Real-World “Drought” Data

Let’s use real metrics. A “wind and solar drought” day—defined here as one where output is in the lowest 10% of daily averages—still delivers about 68% of typical daily energy (443 GWh). That’s far from zero.

There are no months where output is below 80% of median. So even the “worst months,” like June to August, aren’t catastrophic—they're just slightly weaker performers that require traders and planners to be cautious.

📈 Trading and Planning Insights

Between March and September, there tend to be more below-average days than above. For energy traders, this could mean going short might work more often than not—but there’s always risk in being caught off-guard during unexpected generation surges.

🧠 Why Longer Storage is Cheaper (Per MWh)

Long-duration storage is cheaper per energy unit, but it sacrifices power. That’s the trade-off:

• Long-duration = low power, low cost per MWh

• Short-duration = high power, higher cost per MWh

With lithium batteries, costs are split between cells and inverters. Scale brings savings when more cells are added in parallel, reducing the need for expensive inverters.

With hydro, dam size increases volume at a cubic rate, but double dams and long tunnels mean higher total project costs—and longer waits.

🧪 Methodology Snapshot

This analysis uses 2035 wind and solar capacities from the 2024 ISP’s Central Scenario applied to 12 years of weather data across 408 simulated years. Each half-hour slot across 34 REZs was modeled, creating more than 2.5 billion data points.

No rooftop solar, curtailments, or MLFs were included—this is purely utility-scale wind and solar data.

🟩 Final Verdict: Prices Spike, But The Grid Holds Steady

Wind and solar variability is real—but manageable. The key takeaway is this: Australia’s grid doesn’t need to panic about multi-day VRE droughts. Instead, smart planning with moderate dispatchable backup and well-placed battery storage can ensure reliability—while keeping price volatility in check.

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