20% comes before 100%

Clean energy progress has been exciting over the past few years but we must be realistic in our push toward 100 per cent renewables and remain focussed on the 20 per cent milestone.

Last week Daniel Palmer identified five factors that are causing electricity forecasts to be downgraded yet again – high prices, solar PV, manufacturing weakness, more efficient buildings and appliances and a disconnect between demand growth and economic growth. His two part analysis can be read here and here.

Electricity demand has now been declining for four years whilst the economy continues to grow, and the combination of these five factors mean it is likely to decline further. There is a clear and unmistakeable trend – we are using less electricity. More of what we do use is coming from renewable sources.

This trend is reflected in a similar decline in greenhouse emissions. The 2012 December quarter National Greenhouse Accounts and three other reports recently submitted to the UN as part of Australia’s obligations under the Kyoto treaty, provide detailed evidence for each sector:

-- National Inventory Report 2011,

-- National Inventory by Economic Sector 2010-11

-- State and Territory Greenhouse Gas Inventories 2010-11

These reports show that overall Australia’s total greenhouse gas emissions declined by 0.2 per cent for the year to December 2012 compared to the previous year. A big reduction in electricity emissions offset emissions growth in other sectors, largely attributed to the 3.4 per cent growth in real GDP and the resources boom.

For the major sectors covered by the carbon pricing mechanism – electricity, other stationary energy, fugitive emissions, industrial processes and waste – total emissions decreased by 1 per cent over the six months to December 2012 compared with the same period in 2011.

This is all good news, but it is probably too early to attribute all the changes to the carbon price in its first six months. The NEM data show the overall 8.6 per cent reduction in electricity greenhouse emissions was due to two factors.

Firstly, Australians used 2.7 per cent less energy than in the same period of 2011.

Some attribute this decline to the state of the manufacturing sector due to the high dollar and the push for business spending cuts as much as energy savings as an end in itself. However, Energy Australia has also recently reported that its residential consumption in 2012 was down 5 to 10 per cent on 2011 – suggesting consumer behaviour is changing.

These household efficiency improvements are largely the product of policies implemented several years ago that are now starting to bite – including building standards, efficient new appliances and lighting, the boom in solar panels, solar hot water heating, higher power prices and even the million homes insulated through the dreaded pink batts program.

A major report is being prepared by Climateworks in Melbourne to look in detail at each industry sector and their energy saving opportunities. This may throw some light on exactly where the efficiency gains are being made – and what can be achieved in future.

Secondly, cleaner electricity was produced thanks to more renewables and less coal, with around six per cent less carbon per kilowatt-hour – down to 0.86 tonnes of pollution per megawatt hour.

Climate change minister Greg Combet highlighted a telling graph which shows the small but significant trend towards renewables.

Graph for 20% comes before 100%

Annual electricity demand in the National Electricity Market by fuel, 2008-2012: National Greenhouse Accounts Dec 2012 pg 7, Figure 10

Since 2008, renewables (including hydro) have grown by 57 per cent to deliver 22,800 GWh; whilst coal has dropped 14 per cent to 153,400 GWh in 2012. This is more directly attributable to the RET encouraging supply and the carbon price pushing distributors to lock in renewable energy contracts while reducing the production of some of the worst emitters.

It is important to note that as energy demand has fallen in recent years, brown coal generation has remained relatively stable. Since the introduction of the carbon price, we now have less generation from brown coal power stations as well as black coal ones.

There is a strong trend towards renewables and the carbon price and the RET will ensure its share continues to grow. This highlights the strong potential to achieve the target of 20 per cent renewable sourced electricity by 2020 – up from the current level of 11.4 per cent.

The renewable share could reach 25 per cent if demand continues to stall and the fixed RET target is maintained (a total of pre-existing and new renewables generating 60,000 GWh).

However there is a long way to go and many obstacles lie in the path of continued growth in the renewables market – not least the big shift in policy that would come from a Coalition success in the September election. Uncertainty is severely undermining further investment in renewables and key Coalition commitments, such as the repeal of the carbon price and the loss of the $10 billion investment funds held by the Clean Energy Finance Corporation could stop the growth of renewables in its tracks.

The Coalition says it supports the 20 per cent target and a 5 per cent reduction in greenhouse emissions but has yet to adequately explain how its Direct Action plan will succeed in delivering this.

Yet, many in the environment movement have latched onto the ideal of 100 per cent renewables at the expense of more immediate issues – a classic case of running before one can walk. Wrestling with the potential economic and technical issues involved in having entirely renewable based supply is becoming a massive diversion – and possibly a refuge from grappling with the thorny state of the energy debate in Australia.

The focus for advocates of renewables should return to what needs to be done to achieve the 20 per cent target as a first step. Ideally, if the solar panel gold rush continues (and out of pocket prices are still coming down) then it will play a big part in reducing total demand and increasing the proportion of energy from renewables. Hopefully wind will be revived by better planning laws and become more competitive as gas prices head towards world parity.

It is important for climate campaigners to be realistic and look at the facts. The latest figures confirm there is small but significant progress being made on renewable energy. Australia needs to stay on course to get to the first milestone of 20 per cent.  

Andrew Herington is a former Labor Ministerial Adviser now a Melbourne freelance writer.

InvestSMART FORUM: Come and meet the team

We're loading up the van and going on tour from April to June, with events on the NSW central & north coast, the QLD mid-north coast and in Perth, Adelaide, Melbourne, Sydney and Canberra. Come and meet the team and take home simple strategies that you can use to build an investment portfolio to weather any storm. Book your spot here.

Want access to our latest research and new buy ideas?

Start a free 15 day trial and gain access to our research, recommendations and market-beating model portfolios.

Sign up for free

Related Articles