Key Trends in Australia’s Energy Industry
Energy is one of the most important industries in an economy. Like the telecommunications sector, energy underpins and supports all other industries as an enabling input. Australia is an energy exporter: it sells around 80% of the total energy it produces to other countries. This article reviews Australia’s energy industry and the local energy market, and identifies the key trends on production and consumption.
Declining energy consumption in the local market
Up until 2010, local electricity consumption increased steadily from year to year. However, since 2010, the amount of electricity consumption overall has experienced a slight decline.
According to energy expert Dr Hugh Saddler, the decline in electricity consumption has been significant in the National Electricity Market (the NEM includes all states and territories except for WA and the NT), as well as WA.
NEM demand in the 2013 financial year was 4.3% lower than in 2009, which is the peak year for electricity consumption in Australia. Saddler noted that the decline in electricity consumption has come at the expense of coal fired generators, which are now close to being unprofitable. To support this theory, Saddler uses NEM data to draw on electricity quantities supplied by large generators to the NEM, as data on supplies to final consumers is difficult to consolidate.
Saddler has suggested that there are three major factors explaining the steady decline in electricity demand since 2010. The first factor is the advent of regulatory and other energy efficiency programs, which have had a positive impact on consumption and efficiency. The second factor is a structural change away from electricity intensive industries, and thirdly there’s the response by electricity consumers to higher electricity prices.
Overall energy consumption
However, electricity is just one type of energy used in Australia. Oil remains the largest energy source in the country, accounting for38% of Australia’s total energy consumption.
According to the 2014 Australian Energy Update by the Bureau of Resource and Energy Economics (BREE), oil consumption grew by 1% in 2012/2013 period. Gas (24% of total energy consumption) consumption grew by 2% in the same period, and renewables consumption rose by 12%.
Coal, which accounts for 33% of Australia’s energy consumption, fell by 6% in the same period. Overall energy consumption in the two most populous states (Victoria and NSW) continued to decline, while it grew in WA and Queensland – largely due to the mining and manufacturing sectors.
Ultimately, the growth in energy consumption by these industries (and by the commercial and services sectors) were offset by a decline in the use of energy for the generation of electricity. There was a slight decline in the final energy consumption (excludes power used for conversion activities), which rose by 2%.
Australia’s energy production
Australia has almost half of the total uranium resources in the world. It is also rich in coal and natural gas, and is well placed for renewable sources such as solar, wind, hydro, and geothermal. Production rose by 9% to 19,318 petajoules in the 2012/13 period. This was due to growth in black coal, uranium oxide, and natural gas production.
According to the BREE, black coal production grew by 9%, while uranium oxide rose by 18%. Oil production fell by 12%, and total electricity generation also dropped, by 0.3%.
The decline in electricity generation can be explained by the fall in demand on the NEM, but also by increasing off-grid electricity generation. Coal, at 64% (down from 77% in 2003/04), remains the large source for electricity generation, while natural gas grew by 5% to account for 20% of electricity generated.
Renewable sources of energy accounts for 13% of total electricity generation in Australia, and it grew by 26% in the 2012/13 period. The growth was based in expansion in hydro, wind, and solar.
According to research from Geoscience Australia, the country produces 2.4% of the world’s total energy. Australia is a major energy exporter, and exports around $80 billion or 80% of all the energy it produces. Australia is still the world’s largest coal exports, and black coal accounts for 61.5% of Australia’s total energy exports.
Uranium is the second largest energy export, at 25.4%, while gas, oil and LPG, and refined products make up for 8.4%, 4.2%, and 0.8% of the total export mix respectively.
Australia’s energy exports grew by 14% to 15,504 petajoules in the 2012/13 period. Growth in sectors such as black coal (up by 11.4%), uranium oxide (up by 21.3%), and liquefied natural gas (up by 26.9%) were key drivers of export growth in the energy sector.
Meanwhile, imports were also up. Australia’s energy imports rose by 5% in 2012/13, with crude oil and refined products making up most of Australia’s imports in the energy sector.