Are political leaders to blame for return of rising electricity demand?

Print Friendly, PDF & Email

Just when falling electricity demand was becoming an accepted fact in Australia, it is over. There is now enough data to say unequivocally that demand is on the way up again.

share
Shuttershock
Print Friendly, PDF & Email
Shuttershock
Shuttershock

Just when falling electricity demand was becoming an accepted fact in Australia, it is over.  There is now enough data to say unequivocally that demand is on the way up again.  The following graphs provide different perspectives on supply and demand for electricity in the National Electricity Market (NEM) which accounts for nearly 90% of the country’s total electricity consumption.

Understanding the key underlying trends is made difficult because of the masking effect of discrete changes in consumption by a few very large individual consumers.  Two such changes have occurred in the past two years.

First, the Point Henry aluminium smelter in Victoria closed in July 2014, removing about 3 TWh of annual demand.  It was therefore not until July 2015 that the full impact of the closure was seen in moving annual NEM consumption figures.

Second, in late October 2014 the switch to electric motor drive for pumps, compressors and other equipment began in the Queensland coal seam gasfields.  This is a gradual process which is projected to add about 8 TWh of annual consumption by the end of 2017.

Figure 1
Figure 1

Figure 1 shows monthly changes in electricity consumption, measured as moving annual total energy sent out from transmission connected generators, i.e. consumption as seen by the NEM.  It also shows the additional consumption provided by rooftop solar and the underlying trend in NEM consumption, adjusted to remove the effect of the Point Henry closure (using very precise data from AEMO) and the new coal seam gasfield demand (using approximate estimates only).

Two points are very clear.  Firstly, underlying consumption has been rising slowly but steadily for nearly two years.  Secondly, the rise started in July 2014.  These two observations are examined in turn.

Further, more detailed analysis of trends uses annual data from network businesses, reported to and published by the AER.  Victorian businesses use a different reporting cycle, meaning that data for Victoria currently lags that for other states and is not covered by the graphs which follow. However, the NEM demand data behind Figure 1 show that trends in Victoria are no different from those in the rest of the NEM.

Figure 2
Figure 2

Figure 2 is based on data from network operators on the quantities of electricity they supply to three main groups of consumers.  Large industry is defined as all consumers with average loads greater than 10 MW.   General business is all remaining non-residential consumers.  Total consumption by all three groups fell prior to 2014, with residential consumption falling fastest.

Major decreases and increases in consumption by large industry are mainly related to the closure and opening respectively of major industrial establishments, and that is certainly the case with these data.  Apart from the previously mentioned Point Henry smelter closure and the coal seam gasfield electrification, the data include the effect of the earlier closure of the Kurri Kurri aluminium smelter in NSW, offset for most of the period by increasing consumption by other large users, such as coal mines.

However, it is the increase in demand from general business and residential consumers, together accounting for nearly three quarters of total demand, which is more significant from a long term perspective.  As Figure 3 shows, declining total demand prior to 2014 was driven by large falls in electricity use intensity, measured as demand per capita for residential consumption, and demand per dollar of Gross State Product for general business consumption.

It is most significant that intensity appears to have stopped falling.  In other words, individual consumers have stopped reducing their electricity consumption, as they were over the preceding four or so years.  If this continues, total residential demand will grow in line with population growth, while business demand will grow at the same rate as the economy.  State by state analysis of the data in Figure 1, and adjustment for the effects of the large industry changes, confirms that this is just what is happening.  Why?

One contributory factor has been a slow-down in the growth of savings from energy efficiency programs.  This is in part an expected consequence of the fact that, for obvious reasons, most of the big and easy opportunities to improve the efficiency of appliances and buildings were realised earlier in the life of the national energy efficiency program.

Poor enforcement of building efficiency regulations has also contributed.  In addition, as appliances and buildings become more efficient, further tightening of performance standards delivers diminishing returns in absolute terms.  A slow-down in the introduction of new regulations over the past three years has also contributed to slowing growth in electricity savings.

More importantly, however, it cannot be a coincidence that the return of demand growth and the abolition of the carbon price, to the accompaniment of much political fanfare, occurred simultaneously.  Carbon price removal was accompanied by modest, but immediate and across the board, reductions in electricity prices in three states:  NSW, Victoria and Tasmania.

Other factors meant that prices were unchanged in SA, according to ABS data, while in Queensland consumer electricity prices actually increased because of other decisions by regulatory authorities.

The demand response differed widely between the five states.  In NSW the increase began immediately.  But demand also increased immediately in Queensland, at about the same rate as in NSW, even though prices were increasing, not decreasing.

In Victoria, and also in Tasmania, demand increases did not start until the early months of 2015, by which time prices were also increasing again.  Finally, in SA, as in NSW, demand followed a conventional economic path, not changing significantly until prices began to fall, which did not happen until April 2015, after which demand increased quite fast.

Previous analysis of the period when demand was falling strongly suggested that consuming behaviour, including consumer responses to higher electricity prices, is strongly influenced by the general level across society of awareness of and support for decisive action to address climate change.

Falling levels of concern about climate change, complete disappearance of energy efficiency and even, in some quarters, advocacy for increased energy consumption were all features of the national political climate during 2014 and 2015.  In such an environment, it is hardly surprising that many electricity consumers appear to have lost interest in taking further steps to use electricity more efficiently.

Overall, lack of political leadership, or leadership in the wrong direction, especially when political leaders are telling the public that electricity has got cheaper, even if it has not, is a more convincing explanation of increasing electricity demand than simple economic models of direct consumer responses to changing prices.

Hugh Saddler is an advisor with energy consultancy Pitt & Sherry. This report is extracted from his monthly Cedex report on Australia’s electricity sector.

Print Friendly, PDF & Email

12 Comments
  1. Tim Forcey 4 years ago

    The electricity use in our home was greater over the past winter, vs the previous one, as we used reverse cycle air cons (heat pumps) for space heating instead of gas.

    See: https://reneweconomy.com.au/2015/its-cold-in-my-house-and-the-price-of-gas-is-going-up-what-can-i-do-95309

    • neroden 4 years ago

      We should remember that switching gas equipment to electricity, while it
      increases the total electricity usage, is generally good for stopping
      climate change. I think this is probably going to be part of the increase.

  2. suthnsun 4 years ago

    I wonder if a principal contributor to falling demand in the previous period was a small cohort of intense reducers of emissions, who have largely completed their efforts to achieve ultra low emissions and now have no impact. i.e most consumers have continuously and blithely paid no regard to their emissions..hence my pessimism..

    • Chris Fraser 4 years ago

      … or if the efficiency gains the cohort made was lost in other lifestyle items, like EVs – or pool heaters.

      • Pfitzy 4 years ago

        Increase in number of consumers is also something to discuss. With population growth, more houses and apartments are being built.

        Domestic consumers – even though they’re only part of the equation – will grow organically and therefore total increased is assumed.

        What we need to address this is policies like San Francisco with compulsory solar panels on buildings 10 storeys or under. All standalone housing in Australia should have panels as a minimum, along with pre-wiring for battery, and compatible inverters.

        If you want market penetration, go where the capital cost is lowest. In Sydney, adding $15-16K for a 5kW system with battery storage to a $300k build (not even considering value of land) is tiny in the big scheme of interest charges and mortgage life.

      • suthnsun 4 years ago

        Chris, a fundamental and prized plank of my 250kg personally attributable emissions is my PHEV. Lifestyle you may term it but a (costly) and valuable and responsible part of my ‘lifestyle’ I think.

        • Chris Fraser 4 years ago

          Very responsible. My 3.0L family wagon does (an offsetted) 8t CO2e/yr. 250kg would make me extremely happy to offset.

        • JeffJL 4 years ago

          I don’t think that the take up of EVs (even a PHEV bastard 🙂 such as yours) would be even noise on the noise of the electricity market in Aust (get yourself a pure BEV you half pregnant greenie).

  3. neroden 4 years ago

    Has Australia’s lighting switched to LEDs? In other countries this causes a very large reduction in electricity usage, but it’s a one-time thing.

    • Pfitzy 4 years ago

      Personally speaking, yes I have. And I tell all my friends to do the same. Some balk at the cost but when I point out they don’t have to change the damn things for years, they come around. Especially when I tell them to look at their electricity usage cost increases over the last few years.

  4. Phil 4 years ago

    EV’s will push this even further up.

  5. MaxG 4 years ago

    Looking at electricity alone is useless. Other factor such as substitutions; e.g. gas consumption moved to electricity consumption — play a significant role too.

Comments are closed.

Get up to 3 quotes from pre-vetted solar (and battery) installers.