Australia slashes power emissions 17%, but heading back to coal

As Barack Obama wins plaudits for his commitment to reduce power emissions in the US by 30 per cent by 2030 from 2005 levels, new research shows that Australia has already achieved a 17 per cent cut in just the last six years.

The Carbon Emissions Index, prepared by energy consultants Pitt & Sherry, says the combination of the carbon price, the renewable energy target, and changing demand patterns has reduced emissions from Australia’s electricity sector by 32.4 million tonnes of CO2 equivalent since its peak in 2008.

Over the same period, demand has fallen by 9.2 per cent, or 14.6TWh. The fall in demand continued in the month of May, partly due to the mild weather across Australia, and was 2.6 per cent below the same period last year. Pitt & Sherry’s Hugh Saddler says Australia’s electricity emissions are now 13 per cent below 2005 – the base year for the US target.

It underlines the point made by many analysts in both the US and Australia that large gains can be made at relatively little cost. The RGGI carbon trading scheme, based in north-east US, has been ridiculed by its detractors for having an extremely low carbon price, but it has helped achieve a 40 per cent reduction in electricity emissions already since 2005 and will expand this to 50 per cent by 2020.

Excel Energy, a US utility that operates in the Mid West and the Rocky Mountains, has slashed its emissions by 19 percent since 2005 and is on track to reduce its emissions by 31 per cent by 2020, according to the New York Times. Australian companies such as AGL Energy have increased their emissions because of purchases of large coal-fired generators.

Saddler notes that Australia’s electricity market  has been marked in the past year by a continuing fall in output from both brown and black coal. (See graph below). Gas generation continued to rise, but Saddler says this will likely be reversed soon as gas generation is priced out of the market.

It notes that the absence of significant high pricing events – the arrival of rooftop solar has reduced those significantly – means that most gas generators are struggling to make money at a gas price of more than $5 per gigajoule. In some cases, gas prices have already moved well above that.

“It is not hard to see why … several of these power stations are expected to be closed indefinitely once wholesale gas prices rise to levels set by the new LNG export plants at Gladstone,” Saddler writes.

“When that happens, Australia’s electricity generation is likely to move towards coal ‐ precisely the opposite direction from that planned for its US counterpart.”

This will be accentuated by the removal of the carbon price, and further exacerbated by any move to lower the renewable energy target.