Australian electricity demand suffers another dramatic fall

The fall in Australia’s electricity demand has accelerated significantly, forcing the Australian Energy Market Operator to make a significant downward revision to its 2013/14 demand forecasts less than six months after its previous downgrade.

The AEMO said in an update issued overnight that electricity demand for the first quarter of the current financial year had been a whopping 3.5 per cent below its forecast issued in June.

It cited significantly warmer-than-average temperatures, meaning less consumption for heating, and reductions in large industrial load (which was down 4.7 per cent). It also reported reductions in residential and commercial electricity usage.

As a result of this, it has downgraded its forecasts for annual consumption by 1.3 per cent, or 2,444GWh. The annual number is evenly split between a reduction in industrial load and a reduction caused by reduced residential and commercial electricity usage and warmer weather.

This downgrade comes on top of a forecast 2.4 per cent reduction in demand released by the AEMO in its National Electricity Forecasting Report in late June. In that publication, it cited rooftop solar and energy efficiency regulations in buildings as the main reasons for cutting its forecast demand across the National Electricity Market.

A year earlier, AEMO slashed its forecasts for 2012/13 by nearly 10 per cent, and the result came in 1.1 per cent below even that forecast.

AEMO did not include a revised forecast for 2020 in its most recent update, but it is certain that incumbent coal and gas generators will seize on the data to intensify their push for the renewable energy target to be diluted.

Static and even falling demand is a feature of most electricity markets in the developed world. But while most other governments are responding by accommodating the increased penetration in renewables into higher targets, the new Abbott government has expressed its sympathy with the fossil fuel industry’s argument that the fixed target should be diluted.

Prime Minister Tony Abbott has also expressed his concern about the proliferation of wind turbines “appearing like mushrooms”, and has cut finance to the Australian Renewable Energy Agency, and vowed to close the Clean Energy Finance Corporation. And, of course, he intends to repeal the carbon price.

Origin Energy recently claimed that Australia was already “getting close’ to a 20 per cent target, although the legislation stipulates that all electricity generation should be considered, including the WA grid, other isolated grids such as the Pilbara and Mt Isa, and off-grid generation, which is rising significantly.

There would be a certain irony if the fossil industry used record-high temperatures as an excuse to diminish one of the key policy initiates to encourage clean energy investment and reduced emissions. But in the current political environment, pretty much anything goes.

This graph below suggests that AEMO thinks that the gap between its previous and updated forecasts will narrow as the financial year continues. That may infer that it thinks that the unseasonably warm weather impact will be lost as the season turns to summer. Indeed, a hotter-than-average summer would suggest higher demand as air conditioners are switched on through the nation.