Efficiency programs a major factor in falling electricity consumption

by FM Media
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The fall in electricity consumption in Australia over the past three years is mainly due to the impact of energy efficiency programs, a shift in the economy away from electricity-intensive industries, and the response of consumers to higher electricity prices, according to Dr Hugh Saddler, Principal Consultant, Energy Strategies, at pitt&sherry.

The fall has been ‘relatively large’ in the National Electricity Market (NEM), which covers the five eastern states and the ACT, and in Western Australia. As an example, NEM demand in the 2013 financial year was almost eight terawatt hours (TWh), or 4.3 per cent lower than in the peak year of 2009.

There is no evidence of a reversal in this trend, Dr Saddler says in his report for The Australia Institute, Power down: Why is electricity consumption decreasing?

He says this is important as, if NEM electricity consumption had grown after 2005 at the same rate as it had for the previous 20 years, consumption would have been 37TWh higher in 2013 than it actually was – equal to output of almost 5000 megawatts (MW) of coal fired generation capacity, almost the combined capacity of the Bayswater and Eraring power stations in New South Wales, or, in Victoria, Loy Yang A plus Loy Yang B plus Hazelwood.

In terms of energy efficiency, the report says, Mandatory Energy Performance Standards (MEPS) and analogous energy efficiency requirements applied to new building works have, in total, reduced demand for electricity in 2013 by over 13TWh, or 37 per cent of the total shortfall. Appliance and equipment MEPS account for most of this reduction.

The partial or complete shutdowns of three major industrial electricity users – Port Kembla Steelworks, Kurri Kurri Aluminium smelter and Clyde oil refinery – between late 2011 and late 2012 removed about 3.6TWh of annual electricity consumption from the NEM, about 10 per cent of the 37TWh shortfall.

However, electricity consumption from 2010-2012 was relatively constant for all other companies. And ABS data of value added by each economic sector in Australia conveys a similar picture that manufacturing output in real terms has been fairly constant.

“This means, as is well known, that manufacturing is gradually declining as a share of the total economy, but is not markedly declining in absolute terms,” Dr Saddler said.

“Historically, Australian output of primary metals, such as aluminium and other electricity intensive commodities, has grown steadily. However, since 2006, there has been no growth in output, and in recent years absolute decline. Adding to the absolute decline caused by the closures, the lack of growth in output of electricity intensive commodities is contributing in the lack of demand for electricity, amounting to about 14 percent of the 37TWh shortfall. In contrast, declining manufacturing output is not, in general, causing an absolute fall in demand.”

The report says that the growth in output from rooftop photovoltaics and other small, distributed generators has contributed about 13 per cent of the shortfall.

In the consumer space, Dr Saddler says, in 2010 consumers responded abruptly to an increase in prices and the possible effect of a carbon price on electricity.

“The hypothesis is that the political attention being paid to electricity prices led consumers to pay more attention than they had previously done to their expenditure on electricity. When they did, they responded by reducing their consumption, so as to limit what they were spending, and the outcome showed up strongly in the total electricity demand figures from 2011 on,” Dr Saddler says.

Although growth in electricity consumption may resume in the next few years, he concludes, “it will be at much lower annual rates than those that prevailed for more than a century up to about 2004”.

Download the full report here.

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