For the first time since last June, Cedex Update has not reported an increase in annualised emissions from electricity generation in the NEM. Why? Annualised generation is falling sharply.
Pitt&sherry principal consultant energy strategies Dr Hugh Saddler said the main reason for the halt in absolute emissions growth is annualised generation fell more sharply than it has in most of the seven months leading up to February 2015.
While generation dropped, emissions remained flat, with the result made possible by various changes in the mix of generation – which is not out of the ordinary.
“The steady rise in annualised brown coal generation continued, but black coal generation, which has also been rising steadily since July 2014, fell slightly,” Dr Saddler said of the Cedex Update, a report that provides an indication of Australian greenhouse gas emission trends.
The fall in hydro generation slowed, whereas annualised wind generation rose slightly, while still remaining below the peak annualised level recorded in the year ending July 2014.
“Finally, annualised gas generation fell, as small increases in Queensland and New South Wales were insufficient to offset falls in Victoria and South Australia. It remains likely the peak in gas-fired generation, which we have been anticipating in recent issues of Cedex Update, was reached in the year to December 2014,” Dr Saddler said.
The overall effect of these changes was the annual share of coal-fired generation rose again to reach 74.7 per cent in the year to January 2015.
Total emissions in the year to January 2015 were 2.6 per cent higher than in the year to June 2014, and the emissions intensity of NEM electricity rose by 3.3 per cent. According to Dr Saddler, state-by-state changes in demand for electricity in the year to January 2015 show contrasting stories.
“Demand fell quite sharply in both VIC and SA, as the effect of the Point Henry aluminium smelter closure in VIC was augmented by the absence of any heatwave events comparable to the event of January 13-18, 2014,” he said.
“These falls were offset by a large increase in QLD demand, almost entirely caused by the apparent new, but mysterious, major industrial load, as described in last month’s [the CEDEX Electricity Update January 2015] edition.”
Coal’s changing fortunes
The February edition of Cedex Update revealed the changing fortunes of coal-fired generation in NSW, QLD and VIC, where most of Australia’s coal-fired power stations are located.
The dramatic decline in NSW is particularly obvious, according to Dr Saddler, with coal generation in the year to January 2015 no less than 25 per cent lower than the peak reached in the year to June 2008, and 10 per cent lower than at the start of the NEM in 1999.
In that period, three power stations have closed: Munmorah (soon to be demolished), Wallerawang C and, most recently, Redbank, a small plant commissioned as recently as 2001.
“NSW generation has continued to fall since last June, whereas coal-fired generation in VIC and QLD has taken advantage of the removal of the carbon price by increasing output,” Dr Saddler said.
“When NSW demand was at its maximum, in the year to March 2009, local coal generators supplied 88 per cent of total state requirements. In the year to January they supplied 76 per cent of demand, which had itself fallen by 10 per cent. Supply through interconnectors from VIC and QLD accounted for 14.5 per cent of total NSW demand in the year to January 2015, with the balance shared by gas, hydro and wind.”
Carbon price impact
Since the removal of the carbon price, VIC brown coal generation has been steadily climbing back to the relatively stable level of total output it achieved until the introduction of the carbon price.
In doing so, it is supplying in net terms a significant share of demand in not only NSW, but also SA and Tasmania. Dr Saddler said several interesting conclusions can be “tentatively drawn” from these changes in the pattern of generation and supply.
“Firstly, in the absence of a price on greenhouse gas emissions, the very low marginal cost of brown coal generation gives it a distinct competitive advantage, which was eroded to a significant degree when the carbon price was in place,” he said.
“Secondly, the recent changes in ownership of NSW power stations, from the NSW Government to companies holding generation capacity across state borders, may have encouraged this shift to VIC supply.”
NSW has five large coal-fired power stations. Bayswater and Liddell, respectively the largest and the third largest, are now owned by AGL, which also owns Loy Yang A, the largest brown coal power station in Victoria.
Mount Piper, the fourth largest NSW station is owned by Energy Australia, which also owns Yallourn W, the third largest of the four large Victorian stations. Energy Australia also owns Wallerawang, which it recently closed. AGL’s purchase of Bayswater and Liddell was completed recently, and has seemingly had little effect on the operation of its three major plants.
“However, Energy Australia appears to have steadily increased output from Yallourn W over the past year, with annual capacity factor rising from 61 per cent in the year to June 2014 to more than 76 per cent in the year to January 2015,” Dr Saddler said.
“By contrast, the capacity factor of Mount Piper has fallen in the same period from 78 per cent to 68 per cent, while Wallerawang has been completely closed down.”
Elsewhere, only one of the five NSW coal-fired power stations, the 1320MW Vales Point B, remains under government ownership. Eraring is owned by Origin Energy, which owns several large gas fired power stations in Queensland and Victoria, but no other coal-fired power stations.