Demand for electricity in NEM falling

The latest carbon emissions index (Cedex), released by consultancy company pitt&sherry, finds that demand for electricity in the national electricity market (NEM) has been falling steadily since the introduction of the carbon price in June 2012.

Dr Hugh Saddler, principal consultant, energy strategies at pitt&sherry, said for the past two years, “The total fall in emissions has been 10.4%, or 18 million tonnes of CO₂e in absolute terms … Until 2008, electricity generation was the largest driver of growth in Australia’s emissions. Since then it has been the largest source of emissions reduction, almost completely offsetting increases from other emission source categories.”

According to Dr Saddler, one of the winners from the carbon price has been hydro, especially Tasmanian hydro. “However, over the long run, annual energy output from existing hydro systems, other than relatively modest increases from system optimisation investments, is limited by the availability of water,” he noted.

“So some of the recent above average increases may have to be offset by below average decreased output in future years, meaning that emissions reductions over the past year may have been ‘borrowed’ from the future. That said, during the period from 2006 to 2010, hydro output was severely affected by drought, so some part of the output increases since then represent just a return to the long-term average and not an above-average surge.”

Dr Saddler added that the share of gas generation has changed very little since June 2012, though it is certain to start falling soon as generators roll over their supply contracts to new, higher price levels. Wind generation has meanwhile increased steadily since June 2012, with each month’s annual output higher than the month before.

Total wind generation in the year to June 2014 was 8.43 TWh. Over the last week of the year, wind generation supplied on average 14.5% of all generation in the four states and 10.7% for the entire NEM, including Queensland. Proportions of generation were even higher in South Australia. According to Dr Saddler, these figures demonstrate that the NEM is sufficiently robust to be able to accommodate such large shares of wind generation, with no effect on the supply of electricity to consumers.

Shares of total generation in the year ended June 2014 were black coal 50.7%, brown coal 22.3%, gas 12.7%, hydro 9.6% and wind 4.7%. Dr Saddler concluded, “These are the lowest shares of both black and brown coal, and the highest shares of wind, since Cedex data started in 2006 and, in fact, almost certainly ever.”

For more information, visit http://www.pittsh.com.au/cedex/.