The steady falls in both electricity demand and emissions across the NEM continued in the year to December 2013. On the supply side, the key feature was the sharp increase in hydro annual generation and the larger sharp fall in black coal generation (Figure 2). Brown coal and wind generation were both unchanged, while gas generation fell, but only very slightly.
Consequently, emissions continued to fall faster than generation, as has been the case consistently for the past year and a half, making a total fall of 8.9% since June 2012. The overall outcome was another decrease in the share of electricity supplied to the NEM by coal fired generators, to just under 74 per cent, and an increase in total renewable generation, to 14.3%.
Annual generation by each of the two major hydro generators, Hydro Tasmania and Snowy Hydro, showed an increase on the previous month. Overall, in a longer term perspective, total national hydro generation in the year ended December 2013 was higher than in any previous 12 month period.
There are, however, differences in how the two hydro systems are being operated. Snowy output for the year was at about the long term average, though markedly higher than during the drought period from 2006 to mid 2010. Major storages are at somewhat lower levels than the long term average, but well above the drought period levels.
In contrast, Tasmanian output is at record levels. Prior to the commissioning of Basslink in May 2005, output of the Tasmanian system was limited to electricity demand within the state. Drought conditions for several years thereafter meant that total system output was forced well below the long term average, giving Hydro Tasmania few opportunities to take commercial advantage of high price periods in the mainland market.
That is no longer the case and, helped by above average rainfall last spring, generation continues at the high levels established when the carbon price came into effect. Output reached its highest ever annual level in the year to December 2013, nearly 20% above the highest level reached prior to 2005. Total storage levels are lower than they have been over the past three years, but well above the lowest levels reached during the drought.
Turning to Queensland coal fired generation, it is interesting to observe that since the beginning of October median spot prices in Queensland have, for the first time ever, been consistently the highest in the NEM. This is a striking change because, except for the first few months of the NEM, in early 1999, Queensland spot prices have almost always been the lowest in the NEM. The February Update will look at prices and coal fired generation in more detail.
Figure 3 shows the relative changes in electricity demand in each state, while Figure 4 shows the changes in absolute terms. It can be seen that electricity demand is now consistently decreasing in all four mainland NEM states. In some months the difference was over 5%. Total NEM demand in calendar year 2013 was 2.6% lower than in2012.
It is sometimes suggested that month on month changes of this kind can be attributed to differences in weather (hotter in summer or colder in winter leading to higher demand or vice versa). With the annualised data used by CEDEX, any change from November 2013 to December 2013 is caused explicitly by a difference between December 2012 and December 2013.
Examination of Bureau of Meteorology data for the four state capitals shows that average summer conditions in the two Decembers differed very little. In Queensland, which showed the largest monthly demand fall, the average maximum temperature was 0.7 deg. C lower in Brisbane in December 2013 than in December 2012 and there were 14 rather than 16 days with maxima above 30 deg. C.
Comparisons were almost identical in Melbourne. In Sydney and in Adelaide the average maximum was actually slightly higher in December 2013 than December 2012 and there was one additional day in each city with a maximum above 35 deg C.
Another factor which affects month on month comparisons is the number of weekends. In December 2012 there were four full weekends (both Saturday and Sunday) before the Christmas holiday period, while in December 2013 there were four Sundays but only three Saturdays. Overall, these comparisons suggest that important variable factors affecting monthly electricity demand were almost identical in December 2012 and December 2013. However, total NEM demand was 2.0% lower in 2013 than in 2012.
There can be little doubt that the main and continuing drivers of decreasing demand are increased electricity use efficiency and fundamental changes in electricity using behaviour (rather than changes in spot behaviour caused by factors like weather). Further closures of electricity intensive industries are also likely to cause further reductions. For example, in the first week of January, however, Alcoa indicated that closure of its small, old Point Henry aluminium smelter is imminent; this will reduce NEM demand by nearly 2%.
Hugh Saddler is an analyst with energy consulting firm Pitt&Sherry.
