electricity generation emissions projections 2014–15 · web viewsource: acil allen 2015,...

Electricity Generation emissions projections 2014–15

August 2015

Published by the Department of the Environment.

www.environment.gov.au

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© Commonwealth of Australia (Department of the Environment) 2015.

Disclaimer:While reasonable efforts have been made to ensure that the contents of this publication are factually correct, the Commonwealth does not accept responsibility for the accuracy or completeness of the contents, and shall not be liable for any loss or damage that may be occasioned directly or indirectly through the use of, or reliance on, the contents of this publication.

Executive summary

Key points• Emissions from electricity generation are the result of fuel combustion for the production of electricity on-grid and

off-grid.

• In the 2014–15 Projections, over the period 2013–14 to 2019–20, total emissions from electricity generation are projected to be 1,369 Mt CO2-e.

• This is lower than the 2013 Projections by 42 Mt CO2-e due to lower projected economic growth, the closure of several large industrial facilities, and projections of stronger growth in rooftop solar photovoltaic and energy efficiency.

• Without taking account of abatement from the Emissions Reduction Fund, emissions from electricity generation are projected to be:

– 201 Mt CO2-e in 2019–20, a 15 per cent increase on 1999–2000 levels.



• Emissions from electricity generation were 33 per cent of Australia’s preliminary national greenhouse gas inventory 2013–14.

• Economic growth, population growth, and major resource development projects are expected to lead to a reversal of the recent trend of declining electricity use.

• The majority of the projected increase in electricity generation is expected to come from increased output from existing coal fired power stations, followed by solar generation and wind generation.

• Overall, the emissions intensity of electricity generation is expected to fall by 3 per cent over the period to 2034–35.

Throughout this report:

1. Totals may not sum due to rounding.

2. Percentages have been calculated prior to rounding.

3. Years in charts and tables are financial years ending in the stated year.

Electricity Generation emissions projections 2014–15 2

Baseline projections• The projections of electricity emissions have been prepared from a base year of 2013-14.

• Before taking account of the Emissions Reduction Fund, emissions from electricity generation are projected to increase by 12 per cent from 2013–14 to 2019–20 to reach 201 million tonnes of carbon dioxide equivalent (Mt CO2-e). Over the period 2013–14 to 2034–35, the emissions from electricity generation are projected to increase by 32 per cent to reach 236 Mt CO2-e. The emissions intensity of electricity generation is expected to fall slightly.

• Over the period to 2034–35, general business electricity use is expected to increase by around 50 per cent and account for half of total electricity use. However, general business is expected to use significantly less energy per unit of output. Residential electricity use is expected to gradually increase from 2017–18 because incomes are expected to grow faster than electricity prices, due to population growth, and this sees a reversal of the recent trend of declining residential electricity use.

• Coal fired generation is expected to account for 67 per cent of the projected increase in electricity generation over the period 2013–14 to 2034–35 as existing coal-fired power stations increase output and retired power stations come out of retirement.

• Solar and wind generation are expected to account for 22 per cent and 15 per cent of the projected increase in generation respectively. New investment is behind this increase and returns on investment in renewable electricity are expected to improve, in part due to the Renewable Energy Target.

• Over the period to 2017–18, electricity emissions from the liquefied natural gas (LNG) industry are expected to increase as three LNG projects located in Queensland commence production utilising electricity from the National Electricity Market (NEM).

• The emissions factors for fuel combustion for electricity generation are the same as in Australia’s National Greenhouse Accounts and are assumed to be constant.

Figure 1 Electricity generation emissions 1989–90 to 2034–35

Source: ACIL Allen 2015, pitt&sherry 2015, DoE 2015, DoE analysis.


Table 1 Baseline electricity emissions, key years

2000 2014 2020 2030

Mt CO2-e Mt CO2-e Mt CO2-e Increase on 2000 Mt CO2-e

Increase on 2000

Total 175 180 201 15% 224 28%


Impact of measures• The baseline projection is based on a ‘real 20 per cent’ Large-scale Renewable Energy Target equal to

27,000 gigawatt hours (GWh) of renewable electricity as this was the policy position at the time of the finalisation of the projections results. Abatement from a ‘real 20 per cent’ Large-scale Renewable Energy Target is estimated to be 27 Mt CO2-e over the period 2014–15 to 2019–20.

• Abatement from a 33,000 GWh Large-scale Renewable Energy Target, as is now legislated by the Australian Government, is estimated to be 37 Mt CO2-e.

• Estimates of energy savings and abatement from energy efficiency programs have not been explicitly identified due to data limitations.

• Projections of abatement from the Emissions Reduction Fund are not included to avoid disclosing potentially market sensitive information, and because the safeguard element of the Fund has yet to be decided.

• The Government will consider including estimates of abatement in future projections if it is possible to do so without reducing the effectiveness of the Emissions Reduction Fund auctions.

Changes from the 2013 Projections• In the 2014–15 Projections, emissions from electricity generation over the period 2013–14 to 2019–20 are

41 Mt CO2-e lower than in the 2013 Projections. In 2019–20, emissions from electricity generation in the 2014–15 Projections are 1 Mt CO2-e lower than in the 2013 Projections. The differences are a result of a range of factors:

– Economic growth is projected to be lower than in the 2013 Projections, in Australia and overseas.

– Projected electricity use in Australia is lower than in the 2013 Projections due to the closure of several electricity-intensive facilities and expectations of stronger growth in rooftop solar photovoltaic and energy efficiency.


Table of ContentsElectricity Generation emissions projections 2014–15.............................................................1

Key points................................................................................................................................................................ 2Baseline projections............................................................................................................................................ 3Impact of measures.............................................................................................................................................. 4Changes from the 2013 Projections................................................................................................................4

1.0 Introduction................................................................................................................................ 81.1 Sources of emissions from electricity generation..........................................................................81.2 Recent trends—national greenhouse gas inventory.....................................................................81.3 Projections scenarios.............................................................................................................................. 91.4 Outline of methodology........................................................................................................................ 10

2.0 Projections results.................................................................................................................. 122.1 Trends in the electricity generation projections.........................................................................132.2 Electricity demand................................................................................................................................. 142.3 Electricity generation and emissions..............................................................................................15

3.0 Sensitivity analysis................................................................................................................. 183.1 Electricity demand................................................................................................................................. 18

Appendix A Measures............................................................................................................................ 20

Appendix B 33,000 GWh Renewable Energy Target scenario.................................................22

Appendix C Changes from the 2013 Projections..........................................................................23

Appendix D Key assumptions........................................................................................................ 25

Appendix E References......................................................................................................................... 27

FiguresFigure 1 Electricity generation emissions 1989–90 to 2034–35.........................................3

Figure 2 Electricity generation trends 1989–90 to 2013–14................................................9

Figure 3 Projected electricity generation by fuel 2009–10 to 2034–35.........................13

Figure 5 Electricity generation emissions 2009–10 to 2034–35.......................................15

Figure 6 Projected annual average change in electricity generation..............................16

Figure 7 Projected emissions intensity 2009–10 to 2034–35............................................17

Figure 8 Electricity demand sensitivity analysis...................................................................19

Figure 9 Electricity generation emissions under a 33,000 GWh Renewable Energy Target.................................................................................................................................. 22

Figure 10 Comparison between the 2013 and 2014–15 Projections.................................24


TablesTable 1 Baseline electricity emissions, key years..........................................................................4

Table 2 Projections scenarios............................................................................................................... 9

Table 3 Projected electricity generation levels and fuel types, key years...........................12

Table 4 Electricity generation sensitivity analysis, key years.................................................18

Table 5 Changes between the 2013 and 2014–15 Projections................................................23


1.0 Introduction

The 2014–15 electricity generation projections are a full update of the 2013 electricity generation projections. They are based on research commissioned by the Department of the Environment from ACIL Allen (ACIL Allen 2015) and pitt&sherry (pitt&sherry 2015).

1.1 Sources of emissions from electricity generationEmissions from electricity generation are the result of fuel combustion for the production of electricity on-grid and off-grid. Greenhouse gases produced by electricity generation are carbon dioxide, methane and nitrous oxide.

Emissions from the construction of electricity generation facilities are counted in the 2014–15 direct combustion projections of construction emissions. Solar, wind, biothermal and hydroelectricity generation are assumed to be zero emissions technologies.

The 2014–15 electricity generation projections have been updated to take account of the 2006 IPCC Guidelines for National Greenhouse Gas Inventories and now include emissions from industrial electricity generation that were previously counted for under direct combustion.

1.2 Recent trends—national greenhouse gas inventoryEmissions from electricity generation in 2013–14 are estimated to have been 180 Mt CO2-e; 33 per cent of Australia’s preliminary national greenhouse gas inventory (DoE 2015). Figure 2 shows that emissions from electricity generation increased by 63 per cent over the period 1989–90 to 2008–09, but declined by 12 per cent from 2008–09 to 2013–14. Overall, electricity emissions rose by 2.5 per cent from 1999–2000 to 2013–14.

The decline in electricity emissions from 2008–09 to 2013–14 was a result of lower electricity use, and a fall in the emissions intensity of electricity generation. Closures of electricity intensive industrial facilities, such as the Kurri Kurri and Point Henry aluminium smelters in October 2012 and July 2014, contributed to the fall in electricity use. Higher electricity prices as a result of investment in poles and wires led to reductions in electricity use as consumers and businesses found new ways to use less electricity, and invested in renewable electricity. Ongoing cost pressures and government energy efficiency programs also led to improvements in the energy efficiency of buildings and technology.

The emissions intensity of electricity generation fell over the period 2008–09 to 2013–14, as seen by the increasing gap between electricity generation and electricity emissions in Figure 2. The reduction in the emissions intensity of electricity generation was driven by several factors:

The Renewable Energy Target and state government feed in tariff incentives which led to increases in renewable energy generation. Large increases in renewable energy generation, particularly from wind and rooftop solar photovoltaic, were observed.

The carbon tax which increased the price of coal and gas fired generation, and provided a financial incentive for hydroelectricity generators to run down their water storages. Relatively low gas prices and the improved competitiveness of gas fired generation compared with coal under a carbon tax led to the use of gas in new generation capacity.

Figure 2 Electricity generation trends 1989–90 to 2013–14



1.3 Projections scenariosThe baseline scenario has been developed on the basis of current information regarding the outlook for electricity generation. It includes the effect of energy savings and abatement from all electricity demand and generation measures currently in place. The baseline scenario does not include projected abatement from the Emissions Reduction Fund for the reasons outlined above.

High and low emissions scenarios have been used to indicate the possible upper and lower bounds on the projections. Sensitivity analysis has been conducted to examine the effect of changing the assumptions which underpin the electricity generation projections, as per Table 2. The results of the sensitivity analysis are presented in Chapter 3.

Table 2 Projections scenarios

Scenario Description

Baseline Best estimate of emissions based on current information.

No supply side measures

A scenario to determine the effect of the Renewable Energy Target.

Sensitivity Description

High electricity demand The high demand sensitivity is based on higher Gross Domestic Product (GDP) growth and lower electricity prices.

Low electricity demand The low demand sensitivity is based on lower GDP growth and lower income


Scenario Description

elasticity of demand.

1.4 Outline of methodology The 2014–15 electricity generation projections have three components:

1. Projections of electricity demand by pitt&sherry.

2. Projections of electricity generation by ACIL Allen.

3. Projections of emissions from electricity generation.

Electricity demand and generation were projected for each of the major electricity grids, and for large energy users not connected to a grid.

Electricity demandPitt&sherry used separate Microsoft Excel based models of residential, business and large industrial electricity demand to project electricity consumption. Residential demand was projected mainly on the basis of population growth, while business demand was assumed to be more closely related to economic growth. Large users of electricity are assumed to make discrete, large, infrequent and long-lived investment and disinvestment decisions. Projections of electricity produced and generation transmission losses were prepared in order to estimate the amounts of electricity consumed.

Pitt&sherry used the following data sets in its models:

1. The Australian Energy Market Operator (AEMO)’s 2014 National Electricity Forecasting Report (AEMO 2014).

2. Projections of Gross State Product, based on Gross Domestic Product (GDP) forecasts from the Treasury’s 2014–15 Mid-year Economic and Fiscal Outlook (MYEFO).

3. Australian Energy Regulator (AER)’s Network Performance Reports for each National Electricity Market network business (AER 2015).

4. Estimates of household solar photovoltaic electricity generation (ACIL Allen 2015).

5. Beyond the NEM and the SWIS 2011–12, regional and remote electricity in Australia (Bureau of Resources and Energy Economics (BREE) 2013).

6. SWIS Market Data (Independent Market Operator of Western Australia (IMOWA) 2015).

Further information is available from pitt&sherry’s report1.

Electricity generationACIL Allen used a forward looking cost optimisation model, as well as pitt&sherry’s projections of electricity consumption to model a number of features of Australia’s major electricity markets, including:

1. existing generator operation

2. new investments

1 http://www.environment.gov.au/climate-change/emissions-projections


3. retirement decisions.

This enabled modeling of the types of fuels that would be used for electricity generation and the resulting emissions.

Separate sub-models were used to project emissions from off-grid generation and on site generation by large, remote resource extraction and processing facilities.

The Large-scale Renewable Energy Target and Small-scale Renewable Energy Scheme are explicitly incorporated into the modeling approach.

Further information is available from ACIL Allen’s report2.

2 http://www.environment.gov.au/climate-change/emissions-projections


2.0 Projections results

The cumulative emissions from electricity generation over the period from 2013–14 to 2019–20 are projected to be 1,369 Mt CO2-e. One third of Australia’s emissions are projected to come from electricity generation over that period.

Table 3 shows the projected electricity generation and fuel types in key years. Electricity generation is expected to increase by 12 per cent to 276 terrawatt-hours in 2019–20. Electricity generation is projected to increase as a result of economic growth and population growth. Although electricity use and economic growth are expected to remain tightly linked, technology improvements are expected to lead to reductions in the amount of electricity required to generate a unit of economic output. The emissions intensity of electricity generation is projected to fall slightly over the period to 2034–35 (refer to figure 7) for two reasons: less electricity is required for a given level of output and the proportion of electricity generated from renewable sources is expected to increase.

Table 3 Projected electricity generation levels and fuel types, key years

2014 2020 Increase

on 20142030 Increase

on 20142035

TWh TWh % TWh % TWh

Black coal 107 133 24 144 35 159

Brown coal 47 50 7 56 21 53

Gas 43 33 -25 41 -6 49

Cogeneration 7 4 -48 3 -60 3

Liquid fuel 4 4 1 4 8 4

Hydro 19 16 -15 15 -17 14

Wind 10 23 119 23 125 23

Solar 5 11 128 20 327 24

Biothermal 3 3 1 3 1 3

Total 245 276 12 311 27 333

Note: Hydro, wind, solar and biothermal tecnologies are assumed to be zero emissions. Source: ACIL Allen 2015, pitt&sherry 2015, DoE 2015, DoE analysis.


2.1 Trends in the electricity generation projectionsWithout taking account of the Emissions Reduction Fund, emissions from electricity generation are projected to increase by 36 per cent over the period 2013–14 to 2034–35, due to expected increases in the demand for electricity. Improvements in market conditions are expected to lead to increases in generation from renewable sources, and the return to service of some mothballed coal-fired generators.

Electricity generation is expected to grow by an average of 2 per cent a year from 2013–14 to 2019–20, and an average of 1.2 per cent a year from 2019–20 to 2034–35. Faster growth is expected in the earlier period because coal seam gas projects which are expected to start liquefying gas for export from 2014–15 will use electricity to power their gas fields and processing plants. The choice of electricity enables the LNG producers to retain more gas for export. Continual improvements in energy efficiency by business and residential users are expected, resulting in gradual declines in the rate of growth of electricity generation.

Figure 3 Projected electricity generation by fuel 2009–10 to 2034–35



2.2 Electricity demandElectricity demand is projected to increase by 11 per cent from 2014–15 to 2019–20, to 213 TWh. Over the period 2014–15 to 2034–35, electricity use is projected to increase by 35 per cent to 260 TWh. Much of the increase in electricity use is expected to come from growth in general business that is closely linked to economic growth.

Figure 4 Electricity demand 2014–15 to 2034–353

Source: pitt&sherry 2015, DoE analysis.

General business demand for electricity is closely linked to economic growth, which is projected to increase over the period 2014–15 to 2034–35. Residential energy demand is expected to grow in line with population growth, and as a result of small projected increases in appliance ownership (such as air conditioners).

The large industry category generally refers to large manufacturing and mining facilities. Use of electricity by large industry is expected to increase from 2014–15 to 2017–18. New coal seam gas projects in Queensland are expected to use grid electricity and account for the majority of this growth.

Energy efficiency is projected to improve as appliances and equipment are repaired and replaced with newer, more energy efficient models. Construction of new buildings and the refurbishment of old buildings are also expected to lead to improvements in energy efficiency. As the stock of energy efficient buildings, appliances and equipment increases, the amount of electricity needed to generate economic output is expected to reduce. The overall effect is that the rate of demand growth is significantly lower than the projected rate of economic growth.

3 The demand series presented in Figure 4 are taken from pitt&sherry’s demand analysis. In developing the electricity generation projection, ACIL Allen modelled additional sources of demand from large industrial, mini-grid, off-grid and grid-exempt sources. This was equivalent to roughly 24 TWh of additional demand, and these sources of demand are not included in the chart above. For this reason, the chart total does not match the numbers for overall demand in TWh quoted in this document.


2.3 Electricity generation and emissionsEmissions from electricity generation are projected to increase by 12 per cent between 2013–14 and 2019–20 to reach 201 Mt CO2-e. Over the period 2013–14 to 2034–35, emissions from electricity generation are projected to increase by 32 per cent, to reach 236 Mt CO2-e. As shown in Figure 5, the vast majority of emissions from electricity generation are expected to come from the combustion of black and brown coal. The projected increase in coal fired generation is met primarily through the return to service of mothballed coal fired power stations.

Figure 5 Electricity generation emissions 2009–10 to 2034–35

Source: ACIL Allen 2015, pitt&sherry 2015, DoE 2015a, DoE analysis.

Minor changes in the fuels used for electricity generation are expected, with larger changes expected between 2013–14 and 2019–20 than between 2019–20 and 2034–35, as seen in Figure 6. Coal fired generation is expected to be more competitive than gas fired generation following repeal of the carbon tax in 2013–14, and because of the expected gas price rise due to the commencement of LNG exports from the east coast. Hydroelectricity generation is expected to fall in the near term because the carbon tax provided the incentive for these entities to increase their generation above long-term levels which has led to the depletion of water storages.


Figure 6 Projected annual average change in electricity generation

Source: ACIL Allen 2015, pitt&sherry 2015, DoEa 2015, DoE analysis.

The Renewable Energy Target is expected to lead to increases in wind and solar generation between 2013–14 and 2019–20. From 2019–20, the Renewable Energy Target is not expected to increase further, however, projected improvements in the return on household photovoltaic installations are expected to lead to further increases in household solar.

Gas fired generation is projected to increase between 2019–20 and 2034–35 because it is projected to be the most competitive way to increase generation capacity, particularly off-grid in Western Australia.

Overall, the emissions intensity of electricity generation is expected to increase by 5 per cent between 2013–14 and 2015–16, return to 2013–14 levels in 2019–20, and fall by 3 per cent by 2034–35 as seen in Figure 7.


Figure 7 Projected emissions intensity 2009–10 to 2034–35

Source: ACIL Allen 2015, pitt&sherry 2015, DoEa 2015, DoE analysis.


3.0 Sensitivity analysis

It is not possible to predict future trends in emissions drivers with complete certainty. For electricity generation, key drivers affecting emissions include electricity demand and fuel prices. Sensitivity analysis has been conducted for these drivers to inform plausible upper and lower bounds for the projections. Results for key years are described in Table 4.

Table 4 Electricity generation sensitivity analysis, key years

Projection

2020 Change from

baseline

2035 Change from

baseline

Mt CO2-e Mt CO2-e Mt CO2-e Mt CO2-e

Baseline 201 - 236 -

High electricity demand 208 7 252 16

Low electricity demand 195 -6 214 -22

3.1 Electricity demandUnder the low demand sensitivity, projected cumulative electricity demand is lower by 5.9 per cent from 2014–15 to 2034–35 relative to the baseline. This is accompanied by corresponding lower projected cumulative emissions (5.5 per cent over the same period).

In the low demand sensitivity, coal and gas output is projected to be lower in comparison to the baseline scenario. As a result of lower coal-fired generation, the lower demand results in a corresponding 5.5 per cent reduction in emissions. Under this sensitivity, very little additional capacity is expected to be installed other than that required to meet the Renewable Energy Target.

Under the high demand sensitivity, expected electricity demand is 7.2 per cent higher cumulatively from 2014–15 to 2034–35 and expected emissions are 5 per cent higher. The anticipated increase in demand seen under the high demand sensitivity is met through a combination of expected higher coal output, and the projected installation of additional gas and solar PV capacity. The projected additional gas and solar capacity under the high demand sensitivity means that the higher cumulative demand under this scenario is met by lower emissions intensity energy supply on average and therefore emissions don’t rise to the same degree as electricity demand.


Figure 8 Electricity demand sensitivity analysis



Appendix AMeasures

The 2014–15 electricity generation projections include estimated abatement from generation measures including the Renewable Energy Target and GreenPower. The following scenarios assisted in determining these estimates:

1. A baseline scenario which includes the effect of generation measures currently in place.

2. A scenario where the Renewable Energy Target ends from 1 July 2014 to determine the effect of the Renewable Energy Target.

Impact of generation measures—Renewable Energy Target4

The Renewable Energy Target is comprised of the Large-scale Renewable Energy Target and the Small-scale Renewable Energy Scheme. It allows renewable energy power stations and owners of small-scale renewable energy systems to create certificates for every megawatt hour (MWh) of renewable electricity they produce.

Liable entities (generally electricity retailers) are obligated to purchase certificates and surrender them to the Clean Energy Regulator each year to demonstrate compliance with the scheme, providing financial incentives to both large-scale renewable power stations and owners of small-scale systems.

The 2014–15 electricity generation projections were finalised while the Renewable Energy Target negotiations were ongoing. Therefore, in assessing the impact of the Renewable Energy Target, a decision was taken to assess the Government’s then stated preference for a Large-scale Renewable Energy Target consistent with a ‘real 20 per cent’ share for renewables.

Compared to a ‘real 20 per cent’ Renewable Energy Target scenario, if the Renewable Energy Target ended from 1 July 2014, then no new wind, or utility-scale solar PV developments are projected to occur throughout the projections period. In this scenario, electricity demand is instead met by fossil-fuelled generation (primarily black and brown coal).

The comparison of the results of the two scenarios provides an estimate of the abatement achieved through the ‘real 20 per cent’ Renewable Energy Target of 13 Mt CO2-e in 2020, and by 27 Mt CO2-e cumulatively from 2015–16 to 2019–20.

GreenPower GreenPower is a voluntary government accredited program that enables electricity providers to purchase renewable energy on behalf of households or businesses.

This program is projected to reduce emissions by 0.9 Mt CO2-e in 2019–20 and by 6 Mt CO2-e between 2014–15 and 2019–20.

Abatement from this measure is considered additional to the abatement task (see the calculation of the abatement task in the 2013 Projections).

4 Appendix B has further discussion of impact of the finalised Renewable Energy Target agreement on projected emissions.


Energy savings and abatement from demand side measuresThe 2014–15 electricity generation projections do not explicitly identify abatement from demand side measures such as energy efficiency policies due to data limitations.


Appendix B33,000 GWh Renewable Energy Target scenario

Further analysis was conducted by ACIL Allen and the Department to enable the estimation of the abatement impact of a 33,000 GWh Renewable Energy Target5.

Over the period to 2019–20, a 33,000 GWh Renewable Energy Target is projected to deliver 37 Mt CO2-e of abatement cumulatively in comparison to a scenario where the Renewable Energy Target ended on 1 July 2014. This contrasts with the 27 Mt CO2-e projected to be supplied by a ‘real 20 per cent’ Large-scale Renewable Energy Target over the same period. Therefore the newly legislated Large-scale Renewable Energy Target is expected to deliver an additional 10 Mt CO2-e to 2019–20 compared with a Large-scale Renewable Energy Target designed to help deliver a ‘real 20 per cent’ outcome for renewable in 2020.

Figure 9 Electricity generation emissions under a 33,000 GWh Renewable Energy Target


5 As a result of the policy uncertainty surrounding the Renewable Energy Target, ACIL Allen was commissioned to model electricity sector emissions under a 34,000 GWh Large-scale Renewable Energy Target. The Department then used these results to estimate the effect of a 33,000 GWh Large-scale Renewable Energy Target on the projections.


Appendix CChanges from the 2013 Projections

Key changes include:

1. an amended Renewable Energy Target, based on the Government’s announced policy position at the time the projects were prepared of a ‘real 20 per cent’ Large-scale Renewable Energy Target (see Appendix A for further details of the changes);

2. revisions to the national greenhouse gas inventory, resulting in changes to the electricity emissions for 2013–14 . Those changes have been carried through to the 2014–15 Projections;

3. the inclusion of new sources of industrial electricity generation that were previously accounted for in other sectors, to be consistent with the national greenhouse gas inventory and international reporting rules;

4. updated forecasts for industrial electricity consumption, particularly growth in electricity use by LNG projects derived from coal seam gas; and

5. updated macroeconomic assumptions to take account of the depreciation in international commodity prices, Australia’s terms of trade and exchange rate.

Table 5 Changes between the 2013 and 2014–15 Projections

2020 Cumulative 2014 to 2020

2030 Cumulative 2014 to 2030

Mt CO2-e Mt CO2-e Mt CO2-e Mt CO2-e

2013 Projections 201 1,409 244 3,605

2014–15 Projections

201 1,367 224 3,489

Difference 0 -42 -20 -116

Source: ACIL Allen 2015, pitt&sherry 2015, DoE (2015a), DoE analysis.

In the 2014–15 Projections, electricity emissions are expected to grow faster from anticipated increases in black coal-fired generation, partially in response to the change in Renewable Energy Target policy settings, for the period to 2019–20. Electricity emissions in the 2014–15 Projections are comparatively lower than the 2013 Projections for the period 2019–20 to 2029–30 due to expected lower demand and weaker economic conditions.

Electricity demand is projected to be lower, particularly in the National Electricity Market, due to the closure of electricity-intensive facilities and stronger growth expectations in rooftop solar PV.


Figure 10 Comparison between the 2013 and 2014–15 Projections



Appendix DKey assumptions

The 2014–15 electricity generation projections were completed by the Department of the Environment in consultation with a range of agencies including the Treasury, the Department of Industry and Science and the AEMO.

The 2014–15 electricity generation projections are based on:

1. An electricity demand projection by consultants pitt&sherry.

2. Electricity generation and emissions projections by consultants ACIL Allen.

Macroeconomic parameters are based on Treasury’s 2014–15 Budget and the 2014–15 MYEFO. These parameters were extended to cover the projections period, based on advice from the Treasury and the Department of Industry and Science.

Electricity generation and emissions projectionsThe Department engaged ACIL Allen to produce electricity generation and emissions to 2034–35 for Australia’s electricity projections.

Key assumptions for this modelling included:

1. confidential historical emissions, electricity generation, electricity consumption and fuel use data (2011–12, 2012–13 and 2013–14) from the National Greenhouse and Energy Reporting Scheme (NGERS) and the national greenhouse gas inventory;

2. updated state and federal government policy settings for key generation measures including:

a. the removal of a carbon pricing mechanism from 1 July 2014

b. changes to the Renewable Energy Target including amending the Large-scale Renewable Energy Target to achieve a ‘real 20 per cent’ of projected electricity demand in 2020 for renewables, with amended annual targets commencing on 1 January 2016 and Emissions-intensive trade-exposed activities 100 per cent exempt;

3. commodity production assumptions were based on a range of sources including the Department of Industry and Science’s Resources and Energy Quarterly, IBIS World reports, Wood Mackenzie’s LNG tool and the AME Group and cross checked against company statements about the timing of new projects, expansions and facility closures;

4. international prices for oil and gas based on projections from the International Energy Agency’s 2013 World Energy Outlook (low oil price scenario); and

5. coal prices based on the Treasury’s medium-term projections, informed by stakeholders as well as domestic and international experts.

Further information about assumptions made is available in the report provided by ACIL Allen’s modeling report Electricity Sector Emissions: Modeling of the Australian Generation Sector.


Electricity demand projectionsThe Department engaged pitt&sherry to produce an electricity demand projection, which includes major grid, mini-grid and off-grid electricity consumption to 2034–35.

Key assumptions for this modelling included:

1. projections of Gross State Product (GSP) , based on Gross Domestic Product (GDP) forecasts from Treasury’s 2014–15 MYEFO;

2. Australia’s forecast population, consistent with Australian Bureau of Statistics (ABS) modelling to 2034–35 (ABS 2013);

3. forecast retail and wholesale electricity prices (ACIL Allen 2015);

4. updated state and federal government policy settings for key demand-side measures, including changes to energy efficiency programs and state government rooftop solar PV feed-in tariffs;

5. updated historical energy savings data for appliances and equipment provided by the Department of Industry and Science; and

6. updated forecasts for industrial electricity consumption, taking account of the new sources of growth in LNG projects derived from coal seam gas, based on advice from ACIL Allen and the AEMO.

Further information about assumptions made is available in the report provided by pitt&sherry’s modeling report Electricity Demand Projections to 2035 (pitt&sherry 2015).


Appendix EReferences

AEMO 2014, 2014 National Electricity Forecasting Report, http://www.aemo.com.au/Electricity/Planning/Forecasting/National-Electricity-Forecasting-Report

ACIL Allen Consulting 2015, Electricity Sector Emissions: Modelling of the Australian Electricity Generation Sector, ACIL Allen consulting, Brisbane, QLD.

Australian Bureau of Statistics (ABS) 2013, Population Projections [Series B], Australia, 2012 (base) to 2101 (cat. no. 3222.0), Commonwealth of Australia, Canberra, ACT.

AER 2015, Network performance reports 2014 and 2015, http://www.aer.gov.au/

Bureau of Resources and Energy Economics (BREE) 2013, Beyond the NEM and the SWIS 2011–12 regional and remote electricity in Australia, http://www.bree.gov.au/publications/beyond-nem-and-swis-2011%E2%80%9312-regional-and-remote-electricity-australia

Department of the Environment (DoE) 2015, Australian National Greenhouse Accounts: Quarterly Update of Australia’s National Greenhouse Gas Inventory September Quarter 2014, Commonwealth of Australia, Canberra, ACT.

Independent Market Operator of Western Australia (IMOWA) 2015, South West Interconnected System (SWIS) Market Data, http://www.imowa.com.au/

NGER 2015, Greenhouse and energy information in the National Greenhouse and Energy Reporting (NGER) data publication 2013–14, Clean Energy Regulator, Canberra, ACT

pitt&sherry 2015, Australia’s Emissions Projections 2014: Electricity Demand Projections to 2035. Report prepared for the Department of the Environment.


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