The following is the latest report on Australia's energy emissions from pitt&sherry.
This is the third monthly update looking at what has been happening in the NEM since the introduction of a price on emissions. It contains CEDEX graphs for electricity up to the end of August 2012.
As described in the July 2012 CEDEX update, what is called demand in the NEM is the total electricity generated by all power stations dispatched by AEMO. It includes all ‘big generators’, including large wind farms and hydro generators, as well as the major coal and gas fuelled generators. Regular CEDEX readers will know that most data is presented on a moving annual total basis.
Demand for electricity supplied by NEM generators fell again, but only very slightly. Significantly, however, total emissions from electricity generation continued to fall sharply, and are now at their lowest level since 2003.
This is directly attributable to the changing mix of electricity generation: less black and brown coal, more gas, hydro and wind. While it is of course too early to say that there has been a definitive change in the generation mix, this change is exactly what placing a price on emissions is intended to achieve.
In July 2012, hydro supplied 11.7 per cent of electricity generated in the NEM in that month, up from 9.2 per cent in June and 6.9 per cent in May. It fell back to 11.1 per cent in August, but it is still at a higher monthly level than it has been for many years. Almost all the higher output was from the Snowy and is likely, at least in part, to reflect the commercial opportunity presented by the higher than expected (including the effect of the carbon price) average wholesale prices seen during July.
On an annualised basis, hydro output in August was 7.4 per cent of NEM generation, which is somewhat lower than it was during the first half of 2011. As the weather shifts towards drier conditions for the next few years under the influence of El Nino, a fall in hydro output may be expected.
That is unlikely to be the case with wind. Output of wind generators, on an annualised basis, has been growing every month for 10 years and in the year ending August 2012, reached 3.7 per cent of NEM generation. In the month of August itself, the wind contribution to NEM generation was 5.0 per cent. As installed wind generation capacity continues to increase, so too will the share of wind in total NEM electricity generation.
Annualised output from the Latrobe Valley brown coal generators fell again, as a result of the continued effect on annual totals of the Yallourn mine flooding. However, month-on-month, output at Yallourn increased appreciably from July to August.
Over the longer-term, output from brown coal generators has been stubbornly stable. With both gas and wind generation increasing and demand for electricity from NEM generators now almost unchanged from demand in the year ending June 2006, where has the brown coal electricity been going? Out of Victoria, to NSW and SA, where it has been displacing higher cost black coal generation in both states.
For several years CEDEX has been recording the steady fall in output from NSW coal-fired generation and the closure of Munmorah. The increase in net interconnector flows from Victoria to NSW mirrors this fall. In the year to August 2012, 4.3 per cent of NEM demand in NSW came from Victoria, up from zero (in net terms) four years ago. Last month’s update noted the seasonal closure of Northern, the last coal power station in SA. The shortfall in supply was met by increases in both output from gas power stations and interconnector flows from Victoria.
The overall effect is seen in the last figure. For the past six years, gas-fuelled and wind generation have steadily grown, the hydro supply has fluctuated with rainfall, and total demand rose for the first two years, since then it has steadily fallen. All adjustments have been accommodated by changes in output from black coal power stations.
In Victoria, as electricity supplied by local wind generators has increased, surplus electricity from brown coal generators has been sent north to displace NSW black coal generation in steadily increasing quantities. In Queensland, increased gas generation, under the 15 per cent gas policy, has also displaced black coal, while at the same time additional electricity flowing south to NSW has remained at high levels. In the year to August 2012, 8 per cent of electricity generated in Victoria was exported (mostly to NSW, but some also to SA and Tasmania), and 11 per cent of electricity generated in Queensland was also exported to NSW (all figures in terms of net flows). Imports accounted for 12 per cent of electricity supplied in NSW.