Electricity generation emissions rise as renewables take a hit

Emissions from electricity rose sharply between June and November 2014,
3.2 million tonnes (Mt) CO2-e higher than in the year to June 2014.

The a 2.2 per cent increase in five months has been attributed to a large increase in electricity generation emissions and a smaller increase in petroleum emissions.

Data from emissions from all fuels up to the end of September, including an update on emissions from generators in the National Electricity Market up to the end of November, was recorded by pitt&sherry, with Energy Strategies principal consultant Dr Hugh Saddler suggesting the decline in consumption of natural gas in eastern Australia appears to have stopped.

“In our estimation this will turn out to be only a temporary halt, as higher wholesale gas prices flow through more strongly to large industrial and small retail prices alike over the next year or so. However, emissions from electricity use have turned sharply upwards since June 2014,” he said, acknowledging the research does not include data from Western Australia and the Northern Territory because of a lack of reliable information.

“The overall outcome is an increase in annual emissions from fossil fuel consumption in Australia for the year to September 2014.”

Dr Saddler noted the most important conclusion to draw from the changes observed since June 2014 was addressing emissions from electricity generation is key to achieving significant and permanent reductions in Australia’s greenhouse gas emissions.

“Certainly eliminating growth in petroleum emissions is significant and as unparalleled as the fall in demand for electricity. The trend of falling consumption of, and emissions from, direct use of natural gas is also important. Yet the effect of these profound changes in petroleum and gas energy use on total emissions is swamped by a relatively small change in electricity supply mix, from renewables and gas to coal,” he said.

“In the June report we said ‘it now appears June 2014 may mark the low point of Australia’s greenhouse gas emissions for the foreseeable future’. This is what is now happening.”

If the current rate of annualised emissions increase – 2.2 per cent over five months – were to continue for a year, Dr Saddler said NEM electricity generation would increase Australia’s total emissions by 1.4 per cent.

“Since demand has continued to fall over the past five months, average emissions intensity has increased slightly more than total emissions at 2.4 per cent,” he said, acknowledging the same supply side factors were at work in November as in each of the previous four months.

Annualised hydro generation continued its precipitate fall and wind generation scarcely changed over the month, leaving space for increases in both gas and brown coal generation. Annual hydro generation for the year to November was at its lowest level since the year to August 2012, just after the carbon price came into effect.

Annualised gas generation was down in New South Wales and South Australia, slightly up in Victoria and strongly up in Queensland, which Dr Saddler attributes to the low short-term wholesale gas prices available in Queensland.

“The average spot price in the Brisbane gas market hub in early November, as reported by the Australian Energy Regulator, was just $0.48 per GJ, compared with an average of $4.55 per GJ for the 2013-14 financial year… and even higher levels in July and August this year,” Dr Saddler said.

Dr Saddler added the change in SA gas generation is, in some ways, more interesting as it indicates a structural shift in the state’s electricity market.

“Because of its very poor endowment with local coal, SA has been much more heavily dependent on gas generation than other NEM states for more than 40 years. However, the share of gas in the state’s generation mix has been falling steadily and in annual terms is now at its lowest absolute level for 14 years, displaced by wind, rooftop solar, and increased imports of brown coal electricity from Victoria,” he said.

“Heavy dependence on gas generation formerly meant that wholesale electricity prices were significantly higher than in other NEM states. This difference has been steadily eroded over the past few years, to the obvious benefit of electricity consumers in the state.”

The full report is available to download at the pitt&sherry website.