Another surprise demand drop may undermine renewables | RenewEconomy

Another surprise demand drop may undermine renewables

Australia’s Electricity Market Operator has been caught offside again, conceding that recent energy demand had fallen 3.1% below even is most recent revised forecasts. This could spell trouble for renewables in the current RET review.


Australia’s electricity demand has fallen sharply again, with the market operator conceding that power consumption will fall 3.1 per cent below even its most recent downgraded forecasts – made just in November.

In an update quietly posted on its website last week, the Australian Electricity Market Operator said falling demand in the industrial, commercial and residential sectors had continued in February, March and April.

This came after the first quarter of the financial year produced a result 3.5 per cent below expectations. That prompted AEMO to cut its forecasts for 2013/14 by 1.3 per cent, but the latest data shows actual consumption was 3.1 per cent below that revised forecast in the last three months.

AEMO says total consumption for the year to date is now 2.1 per cent below 2012/13. (See graph below)

aemo forecast demand

The changes highlight, again, the difficulty in estimating changing demand patterns. For the past five years, the Australian electricity industry has been over-estimating demand, resulting in the huge investment in networks, and the construction of numerous gas plants that are now under-utilised.

Incumbent fossil fuel generators, however, are using the changes in demand to push for a reduction, or even a removal, of the renewable energy target, arguing that the introduction of renewables into a crowded market will reduce profits and force out ageing generators.

That approach appears to have some sympathy with the Abbott government and the RET Review panel charged with reviewing the scheme. Climate sceptic/denier Dick Warburton, the panel head, has been refusing to entertain any discussion on climate change – he says the science is not settled – on a policy that originated as an environmental outcome and to hasten the much-needed transition to a low-carbon grid.

Generators such as Origin Energy have also complained that the RET was not designed to hasten the exit of current generation, a comment echoed by the Australian Energy Market Commission.

The renewables industry says that demand, as reported by AEMO, also reflects rooftop solar (households generating their own supply), and argues that it is no bad thing to go beyond 20 per cent renewables, as the policy originally allowed. They argue that electricity prices will rise if he policy is changed.

AEMO is expected to update its forecasts for the next 10 years in a formal document to be released early next week.

That could be crucial for considerations of the RET Review panel, which includes AEMO chief executive Matt Zema. It will also have a bearing on the proposed privatisation of electricity networks in NSW, and the call for co-investment in Queensland.

In its latest update, AEMO said the generation fleet “continues to evolve” in response to government renewable energy policies, future fuel cost expectations (including gas, coal, and water), and changing electricity consumption patterns.

“The RET scheme is currently a key driver of investment in renewable energy generation, and changes to the scheme may affect the viability of both current and future generation projects,” it noted (ominously for the industry).

AEMO said 21 previously proposed projects with a total capacity of 6,049 MW were no longer being pursued. Most of these (4,530 MW) relate to gas projects, primarily in Queensland, which are being either priced out of the market or not needed. Other projects include 466 MW of wind generation capacity, mainly in New South Wales.

This graph below highlights how consumption has fallen in the last five years.

aemo generation

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  1. Keith 6 years ago

    Only in Australia is reducing fossil fuel emissions a bad thing….elsewhere it is an aspirational goal and when targets are met, the goalposts are shifted to higher targets.

    Wake up Australia.

  2. Chris Fraser 6 years ago

    It’s near impossible to plumb the depths of gentailer hubris. They tolerated the RET because it allowed them to indulge in renewable projects. But they didn’t get how accessible this technology was to ordinary folk, that cared about their kids’ future. They are going to share generation along with those folk, and now all the arrogant bums have left is screaming. Nice to have them come down a peg or two.

  3. Alan Baird 6 years ago

    This energy billing mess has been brought to us by politics seeking to advantage the in group together complicated by the same politics wishing to privatise electricity supply at exactly the same time. Long before renewable energy became an issue, someone in various state governments decided to “fatten piggy for market” by raising something that wouldn’t raise overall electricity bills much especially if you were steadily using more electricity year by year: the “systems access charge” (the price of staying connected). By gradually raising THIS charge, the price for ELECTRICITY became a smaller and smaller proportion of the bill. It was also unavoidable. This one action over ten years (2000-2010) set up the market for failure. The price signal for increased usage was gradually diluted. Later, this charge was used as an excuse to “gold plate” the grid for “security of supply”, the situation became far worse. Politicians, above all, didn’t understand anything about the average electricity bill, and this was demonstrated amply when a bill sent in by a granny in WA was waved around by coalition pollies in federal parliament as evidence of the carbon tax impact. Sadly, the govt was no better informed and it took some considerable time before someone cottoned on that the old dear had used a lot more electricity to “assist” the bill along, enthusiastically getting into the spirit of the Opposition assault on the carbon tax by doubling her bill. Everybody here was suffering a total separation from reality, especially our esteemed leaders. Nothing has improved but much has deteriorated. Our energy system produces heat but very little light.

  4. biroses 6 years ago

    Giles how about an article pointing out the absurdity of setting a target, then as progress is made towards the target (i.e. NEM generation drops as rooftop PV increases under the small scale RET), then they claim the target should be adjusted to a percent of the reduced generation that is happening has a result of the target?
    This would entail separating out how much of the reduced demand comes from small scale solar used in-situ and how much comes from energy efficiency and how much from net change changes due to energy intensive industries closing down / starting up.

    But reductions due to energy efficiency have nothing to do with the original RET hard target, which relates to renewable generation. Energy efficiencies have been happening independently of the original hard RET target of 41,000 MWh and therefore should not be a consideration.

  5. Abraham 6 years ago

    Giles, could you elaborate on your comments about Dick Warburton “refusing to entertain any discussion on climate change”? Is this comment on record somewhere, and if so did he justify why he had changed his mind on how to conduct the review?

    In a Feb,17 Tom Arup SMH article – Mr.Warburton made a commitment to Prime Minister Tony Abbott that he would carry out the review in a ‘‘completely open fashion’’ and fully canvass all other sides. ‘‘I am not a denier of climate change. But I am sceptical about some of the aspects of global warming, and more particularly what might be causing it, and I don’t resile from any of those comments,’’ Mr Warburton said. ‘‘But I want to be very clear I will be having a very open position on this [the review] and want to make sure we do get all sides of the discussion tabled.’’

    Read more:

    • Giles 6 years ago

      Nothing is one record because all meetings have been held behind closed doors, in camera and with “Chatham house rules”. But i’ve talked to many people who have been in the meetings, and the story is the same when climate change is mentioned as an issue. Warburton reportedly gets into a huff and says that is not the subject at hand.

  6. patb2009 6 years ago

    how much of this demand drop is increased efficiency ? LED Lights, Smart Appliances, lower power devices? and how much of this demand drop is “Self Generation”? People putting in small PV or small wind, and just quietly shaving their utilization?

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