Electricity emissions and demand are both increasing

Infrastructure consultancy pitt&sherry has released its latest Carbon Emissions Index (CEDEX) update, revealing a return to increasing demand for electricity in Australia for the first time in five years.

The update reveals that the carbon price had very little direct effect on demand for electricity but a very big effect on emissions from the generators supplying demand. However, removal of the carbon price may be one factor supporting a return to increasing demand.

“Demand now seems almost certainly heading upwards again, and … for at least the next couple of years, all the growth in demand will be supplied by coal,” said Dr Hugh Saddler, principal consultant, energy strategies at pitt&sherry. “Looking back, it is now clear the carbon price had a big effect on emissions, via its effect on the generation mix, but no effect on demand for electricity, which is driven by other factors.”

In the year to June 2015, compared with the previous year, total electricity emissions in the NEM increased by 6.4 Mt CO₂-e, equivalent to 4.3% (and a little over 1% of total national emissions). The black coal share of total sent out generation increased by 1.1 percentage points to 51.5% and the share of brown coal by 2.1 percentage points to 24.3%. The total coal share in the year to June 2015 was 75.8%, well above its share of 72.7% in the year to June 2014, but below the 78.1% level in the year to June 2012, on the eve of the carbon price.

“The share of gas generation fell slightly over the year to 11.9% and seems almost certain to fall further,” Dr Saddler said. “Hydro of course fell very significantly over the past year, while wind generation increased steadily by 0.5 percentage points to 5.4%. Over the next year coal seems certain to increase its share at the expense of gas, while wind generation will inevitably stagnate because of the lack of new construction because of the policy turmoil over the past two years.

“It also seems likely that demand growth will provide a further stimulus to coal generation. The changes in demand totals for each state do not, of course, distinguish between demand from large individual users, such as aluminium smelters, and demand from the great mass of less electricity-intensive business and residential consumers.”

The most up-to-date estimates of demand in the year to June 2015, contained in the Australian Energy Market Operator’s (AEMO) recently published 2015 National Electricity Forecasting Report, indicate that general business and residential demand in Queensland, NSW and Victoria was higher in 2014-15 than in 2013-14, after falling in each of the previous four years in succession.  Total demand from these consumers in these three states equals nearly two-thirds of total NEM demand. AEMO expects the new trend of slow growth in this demand to continue.

“It seems as if the historically unprecedented era of falling electricity demand is, having lasted for four and a half years, now coming to an end,” said Dr Saddler.