Electricity demand falls as hydro growth continues

The pitt&sherry Carbon Emissions Index (CEDEX) for April indicates that demand for electricity, and associated emissions from the electricity generation sector, have continued to fall in the past 12 months.

Electricity from NEM generators was 5.2% below the peak in mid-2010. Since the introduction of a price on emissions in June 2012, the rate of fall in demand has been steady, a trend that was well established in the preceding months.

According to Dr Hugh Saddler, Principal Consultant, Energy Strategies, pitt&sherry: “There is no evidence in the demand numbers of any effect on demand of the additional electricity price increases caused by the carbon price.”

He added, however, it was a different story with emissions. “The decrease has accelerated since last June and the total fall in annualised emissions over the 10 months is more than 10 million tonnes.

“This is equivalent to more than 6% of NEM emissions for the year to June 2012 and nearly 2% 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.”

The April figures reveal that total electricity supplied by coal-fired generators is at its lowest level since the NEM’s launch in 1998. At that time, coal supplied more than 90% of NEM electricity, whereas now it supplies less than 75.

“Electricity supplied by both black and brown coal generators again fell on an annualised basis, although only very slightly in the case of brown coal,” explained Dr Saddler.

“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.”

An example of this was Macquarie Generation, which operates the Bayswater and Liddell power stations in the Hunter Valley region of New South Wales.

“Macquarie Generation operated all four units at both stations during the summer, but during the past two months has shut down three of the four units at the less-efficient Liddell station,” said Dr Saddler.

“One of the two units at Wallerwang, near Lithgow, was also shut down in late January, while the closure of the Northern power station in South Australia was completed by mid April.”

Queensland and South Australia, the largest gas-generation states, both recorded lower results, as output from gas-fired generators fell for the first time in two years.

In contrast, wind and hydro grew strongly, particularly in the case of hydro. Annualised hydro generation has increased for 11 straight months, and by 31% this financial year.

Snowy system increased output by 57%, while production from the larger Tasmanian system was 25% higher.

“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,” Dr Saddler said.

Recent CEDEX reports emphasised the importance of falling demand as a driver of changes in the NEM. This steady downward trend continued in April with only Tasmania recording an increase in demand.

In NSW, the fall has been much larger than in other states, both in absolute and relative terms. Dr Saddler said the most obvious contributor had been the closure of the Kurri Kurri aluminium smelter, and to a lesser extent the shutdown of Shell’s Clyde oil refinery, in September 2012.

“Another less appreciated factor has been the reduced generation of coal-fired power,” Dr Saddler added.