(Updated March 2015)
- Australia is heavily dependent on coal for electricity, more so than any other developed country except Denmark and Greece. Three-quarters is derived from coal.
- Australia's electricity has been low-cost by world standards, but this has changed.
- Natural gas is increasingly used for electricity, especially in SA and WA.
- After many years of low investment, there is a major challenge to build more generating capacity.
Electricity consumption in Australia has been growing at nearly double the rate of energy use overall. In 2008-09 about 11,000 kWh per capita was used, including that incorporated into exports. However, growth has since levelled out driven by price rises, due to network costs, and also in 2013-14 rooftop PV resulted in 2.9% reduction in grid supply.
Electricity generation takes 44% of Australia's primary energy, and in terms of final energy consumption, electricity provides 24% of the total.
Energy in Australia
Much of the energy exported from Australia is used for generating electricity overseas; three times as much thermal black coal is exported as is used in Australia, and all of the uranium production is exported.
Australia also exports a significant amount of energy in mineral products. Exports of aluminium metal* alone embed some 27 TWh of electricity per year, about 10% of the country's total gross production. Some 43 TWh is used in non-ferrous metals (aluminium smelter production uses 29 TWh/yr), over half of the industry total of 80 TWh in 2012.
Most of the growth in value-adding manufacturing in the past 20 years has come from industries which are energy- and particularly electricity-intensive. The growth has occurred in Australia because of relatively low electricity prices coupled with high reliability of supply and the proximity of natural resources such as bauxite/alumina.
In 2013 Australia's power stations produced 247 billion kilowatt hours (TWh) of electricity, 59% more than the 1990 level, but only 185 above 2000 level, and slightly less than in 2011 and 2012.
Of this gross amount, about 15 TWh is used by the power stations themselves, leaving 234 TWh actually sent out (net production). Then about 12.6 TWh is lost or used in transmission and 12 more in energy sector consumption, leaving 209 TWh for final consumption (or 182 TWh apart from aluminium exports).*
In 2012 the electricity was produced from 63 gigawatts (GWe) capacity, of which 30.3 GWe (48%) was coal-fired, 18.1 GWe gas or multi-fuel, 8.8 GWe hydro and 4.0 GWe other renewables.
Most of this is associated with the grid-connected National Electricity Market (NEM) in the southeast and east of the country (see below), the second grid being the South West Interconnected Supply area in Western Australia. A smaller grid is in the Pilbara.
In 2013, 64.5% of the power was produced from coal, 20.5% from natural gas, 7.4% from hydro.
In Victoria the main fuel is brown coal (lignite), in NSW and Queensland it is high quality black coal, and in WA and SA it is much lower quality black coal. Nationally in 2012, 12.9 Mt black coal (331 TJ) produced 32.7 TWh, while 109.3 Mt brown coal (1414 TJ) produced 136.2 TWh. For natural gas, 434.5 TJ produced 41.8 TWh.
About 65% of Australia's electricity is produced from 48% of the capacity, reflecting the predominance of base-load demand and the fact that coal provides the main base-load capacity in Australia. See also chart below. Note that electrically, Western Australia is isolated.
National Electricity Market (NEM)
NEM infrastructure comprises both state and privately owned assets and is managed by a variety of entities under the overall direction of the Australian Energy Market Operator (AEMO).
In 2012-13 the NEM capacity was 48.4 GWe producing 204.5 TWh, 53% of this from black coal, 29% from brown coal, 7% from gas CCGT, 10% from hydro and 4% from wind. There were about 50 large dispatchable generators (100-750 MWe each), and they provided about 95% of the capacity. NEM capacity is 22.5 GWe coal, 9.5 GWe gas, 2.8 GWe wind, 7.9 GWe hydro, 2.0 GWe other.
The system load factor was about 55% and the reserve margin about 28%. In the competitive market the wholesale price averaged about $55/MWh. This comprised about 20% of final retail bills (51% being network, 20% being retail customer service and energy efficiency programs, and 9% being carbon price).
Unlike some overseas electricity markets where the transmission system operators activate dispatchable capacity 45 minutes ahead of perceived need, in Australia the NEM has real time balancing with the obligation on renewables up to five minutes before delivery. Prices are therefore capped very much higher, at $13,500/MWh. This has provided incentive for investment in new balancing plant, with 4 GWe of flexible capacity being added in recent years. In 2013 spikes went to $7000/MWh, with a lot above $1500/MWh. (In Germany the cap is €3000/MWh and the highest spike in 2013 was about €130/MWh, giving rise to little investment.) In Australia a gas-fired plant may only run for 900 hours per year (load factor 10%), on 1050 occasions, with 400 of the starts being for five minutes only, but it can be economic.
AEMO produced a National Transmission Network Development Plan (NTNDP) for 2030 which showed 251 TWh produced then in NEM – 62% black coal (27 TWh more than 2012), 17% brown coal (232 TWh less than 2012), 9% gas CCGT, 8% hydro and 17% wind.
Australian Energy Technology Assessment (AETA)
The AETA was undertaken by the Bureau of Resources and Energy Economics (BREE) in 2012. It evaluated 40 utility-scale generation technologies, projecting out to 2050, and focusing on estimating the levelised cost of electricity (LCOE), using AEMO’s NTNDP parameters and those from Treasury. The capital costs of various options excluded financing and system costs. AETA assessed two nuclear technologies: large light water reactors and small modular light-water reactors (SMR). Capital costs used were $4210/kW and $7908/kW respectively for first of a kind units, and $3470/kW and $4778/kW for Nth of a kind (while noting that overnight costs in Asia are much lower). These gave almost the lowest cost ranges of any of the 40 technologies over 2020 to 2050, with GW-scale nuclear about $100-110/MWh and $115-125/MWh for SMR over 2020-2050.
This study complemented a CSIRO eFuture model, which shows that incorporating nuclear into the generation mix from 2025 so that it contributed about 55% of supply from 2040 would save $130 billion in greenhouse gas abatement and $18 billion in health cost savings to 2050 compared with the Government’s 2012 Energy White Paper projections, and reduce LCOE from $158 to $125/MWh over 2040-50. The retail price saving is $86/MWh. Looking at capital costs to 2050, the White Paper projects $195-225 billion, the eFuture with nuclear $175-235 billion, including $85-100 billion for nuclear build.
Australian coal is mostly very clean by world standards, so electricity is produced without very much sulfur dioxide being emitted (or requiring expensive equipment to avoid its emission).
However, power generation contributes 33% of the country's net carbon dioxide-equivalent emissions (179 out of 543 Mt in 2013-14). The 2008-09 figure calculated from thermal plants in an ESAA benchmarking study is 204 Mt, about 37% of total. In this, black coal plants in NSW emit 920,000 tonnes CO2 per TWh, Victorian brown coal plants emit 1.29 million tonnes CO2 per TWh.
The Cost of Electricity
Much electricity in Australia is now traded so that distribution companies buy at the best price available from hour to hour from competing generators.
The difficulties matching supply with demand can be judged from the fact that Victorian demand ranges from 3900 MWe to 10,000 MWe, and that in NSW from 5800 to 15,000 MWe.
Australian electricity prices were almost the lowest in the world to about 2007, but have risen significantly since then, and international comparisons are exacerbated by the exchange rate. Hence 2011-12 average Australian household prices are above Japan and EU average and much higher than USA. By state, WA, Vic, NSW and SA 2011 prices rank behind only Denmark and Germany.
The earlier low prices created a major problem in attracting investment in new generating plant to cater for retiring old plant and meeting new demand – a 25% increase by 2020 was projected, and in fact a 40% rise occurred by 2011, with another 30% projected to 2013.
Eastern Australia's National Electricity Market (NEM) operates the world’s largest interconnected power system that runs for more than 5,000 kilometres from North Queensland to central South Australia, and supplies some $10 billion electricity annually to meet the demand of more than 10 million end users. The NEM volume-weighted average price in 2008-09 ranged from $36/MWh in Queensland to $49/MWh in Victoria and $69/MWh in SA. NEM infrastructure comprises both state and privately owned assets, and is managed under the overall direction of the Australian Energy Market Operator (AEMO), which was established by the state and federal governments.
Australia has 27,640 km of transmission lines and cable (220 kV and above – 10,300 km 330 kV and above), mostly state-owned and operated, transporting 209 TWh of electricity per year (2008-09). There is no connection between the east of SA and WA.
Because most of Australia's electricity is produced near the main load centres there is less high voltage (500, 330, 275, 220 kV) transmission needed than in some countries. There is nearly as much at 132 kV as at those four higher levels combined. (At 500 kV, transmission losses over 500-1000 km are halved.)
OECD IEA 2014, Electricity Information (2012-13 data).
ABARE, Australian Energy report 05.9
ESAA, Electricity Gas Australia 2010
AER Aug 2008, Network Report 2006-07
AGO 2004, Stationary Sector GHG Emission Projections
Vicpool Information Bulletin 3, 43.
CME report to Energy Users Association, March 2012, Electricity Prices in Australia: An International Comparison