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Is Australia’s electricity demand falling?

Is Australia’s electricity demand falling?

Is Australia’s electricity demand falling?

Part 1 of a 2-part blog

Every year since 2010, Australia’s electricity demand (how much electricity the whole country has actually used) has been decreasing. What makes this remarkable, it has been happening alongside a growing economy, at a time when Australians have been buying more electricity-hungry appliances – like TVs, toasters, and microwaves – than ever before. So what’s the story, and what does it mean for consumers?

Let’s start by proving that electricity consumption and electricity demand are really declining. The information I will use is collected from the National Electricity Market (NEM). The NEM covers the five eastern states and the ACT. WA and NT are not included in their data, but it still paints a pretty conclusive picture (the excluded state and territory likely behaved in much the same way as their counterparts).

The NEM demand in 2013 was 4.3% lower than it was in 2009. Take a look at this graph:

Electricity Demand

Trends in total and per capita annual electrical energy consumption in the NEM – Hugh Saddler.

You can clearly see that electricity usage levelled out, and then it declined. The next graph shows what the economy was doing at the same time:

Electricity Demand

 

For the avoidance of doubt, energy consumption is the total amount of energy used within the Australian economy. It is equal to indigenous production, plus imports, minus exports. Now look what the GDP is doing. It has continued along its fairly consistent upward trajectory, while the light blue line representing energy consumption has simultaneously levelled off and then started to decline.

Now look at the line representing energy productivity, which is increasing – this line holds the secret to how we can use less electricity, while the economy is growing.

In layman terms, Australia has become more energy efficient.

So how did this happen? What technological marvels where unveiled in 2010 that changed the course of electricity history? Well, the decrease in usage can be attributed to a few factors:

  • the impact of (mainly regulatory) energy efficiency programs,
  • structural change in the economy away from electricity intensive industries,
  • since 2010, the response of electricity consumers, especially residential consumers, to higher electricity prices.

Mandatory energy performance standards

In the late 1990s the Mandatory Energy Performance Standards were introduced. They set minimum standards on common household appliances. As time went on the standards regulated the energy efficiency requirements applied to buildings, commercial appliances, and other equipment. You know the stars on your fridge or microwave? It might surprise you to learn that kind of stuff makes a real difference. It is estimated that these standards reduced the demand for electricity by over 13 TWh. To put that into perspective, 13TWh is about two coal fired power plants, that we didn’t need anymore.

Decreasing household electricity demand offset by rising costs

Higher electricity prices were also party responsible for the decrease in electricity usage. I don’t know if you remember but in 2009 and 2010 electricity prices were on the tip of every politician’s tongue, and they were frequently mentioned in the media. This was the year of the carbon tax and the massive focus on Australia’s electricity consumption that followed. On average the decreased household electricity usage entirely offset the increasing prices – in other words, as far as our home electricity bills are concerned, we’re pretty much breaking even. Unfortunately, this seems set to change…

What does the future hold for Australia’s electricity demand?

Australia has gone through an impressive decline in electricity demand, electricity consumption, and household electricity use, but this all started to change around February 2015 when demand grew, for the first time since 2009. It has been growing ever since. In fact, electricity demand is forecasted to grow until 2020. To find out what this means for you and your power bill, read Part 2 of our blog.

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