Power demand drop: coal out, renewables in

As renewables surge, total electricity supplied by coal-fired generators is at its lowest level since the start of the NEM, in 1998. Meanwhile, electricity demand and emissions continue to drift lower.

The following is the latest report on Australia's energy emissions from pitt&sherry.

Demand for electricity from NEM generators, and associated emissions from the electricity generation sector, continued to fall in the year to April 2013 (Figure 1). Annualised total electricity sent out by NEM generators was 10.3 TWh, equivalent to 5.2 per cent, below the mid-2010 peak. It has fallen 3.1 TWh since June 2012, i.e. since the introduction of a price on emissions, but, as can clearly be seen in Figure 1, there has been no change in the rate of fall of demand, established well before July 2012. Hence there is no evidence in the demand numbers of any effect on demand of the additional electricity price increases caused by the carbon price.

Graph for Power demand drop: coal out, renewables in

It is a different story, however, with emissions. The decrease has accelerated since last June and the total fall in annualised emissions over the ten months is more than 10 million tonnes, equivalent to over 6 per cent of NEM emissions for the year to June 2012 (and nearly 2 per cent of Australia’s recent total annual emissions). There can be little doubt that the carbon price is strongly affecting the supply side of the electricity market.

Electricity supplied by both black and brown coal generators again fell on an annualised basis, though, in the case of brown coal, only very slightly. Total electricity supplied by coal-fired generators is at its lowest ever level since the start of the NEM, in 1998. At that time, however, coal supplied over 90 per cent of NEM electricity, whereas it is now supplying less than 75 per cent.

Graph for Power demand drop: coal out, renewables in

Operators of coal-fired power stations appear to have accepted that reduced demand will last for some time and are changing the way they operate their power stations. For example, in NSW, Macquarie Generation, which operates Bayswater and Liddell power stations in the Hunter Valley, operated all four units at both stations over the summer. Over the past two months, however, it has shut down three of the four units at Liddell, the older and less efficient of the two stations. As mentioned in an earlier Cedex, one of the two units at Wallerawang, near Lithgow, was shut down in late January. In South Australia, the anticipated complete shutdown of Northern, the only coal-fired power station in the state, occurred with the first unit in late March and the second in mid-April.

For the first time in nearly two years, annualised output from gas-fired generators also fell (Figure 2). The two states with the largest gas generation, Queensland and South Australia, both recorded lower gas generation. Wind and hydro, however, continued to grow, very strongly in the case of hydro.

Annualised hydro generation has increased for eleven months in a row, i.e. from just before the start of carbon pricing. The increase over the financial year 2011-12, i.e. since June 2012, is 3.95 TWh, equivalent to 31 per cent. Snowy system output increased by 1.68 TWh, equivalent to 57 per cent. Output from the Tasmanian system, which is about twice the size of the Snowy in terms of energy output, increased by 1.97 TWh, equivalent to 25 per cent. Over the longer term, availability of water is the limiting factor for hydro system output. Australian hydro systems have only been able to maintain higher levels of output because of the replenishment of water storages during recent wet years. Sooner or later, unless higher rainfall returns, prudent long-term system management will require output to be reduced, notwithstanding the financial rewards which carbon pricing is currently delivering to system operators.

Recent Updates have emphasised the importance of falling demand as a driver of changes in the NEM. The steady fall continued in April, with only Tasmania recording an increase in annualised demand (Figures 3 and 4). The fall in demand has been much larger in NSW, both in absolute and relative terms, than in other states. Why is this? The most obvious, and probably the largest contributor has been closure of the Kurri Kurri aluminium smelter. Prior to closure this used on average over 2.5 TWh per annum. It closed in September 2012, so the drop in demand is still working its way through the annualised figures.

Also in September, Shell closed its Clyde oil refinery; while using much less electricity than Kurri Kurri, this was also a major source of demand. Another less well appreciated factor has been the reduced generation of coal-fired power. Coal-fired power stations use a large proportion of the electricity they generate for their own operation, and this electricity consumption is included in NEM total demand. Since December 2011, output from NSW coal-fired power stations has fallen by over 6 TWh, which would have contributed about 0.5 TWh to the fall in NEM demand in the state. 

Graph for Power demand drop: coal out, renewables in

Graph for Power demand drop: coal out, renewables in

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