Australia faces unprecedented oversupply of energy, no new energy generation needed for 10 years: report

South-eastern Australia will not need to ramp up energy generation for the next 10 years, even under a worst-case scenario, a report says.

The Australian Energy Market Operator (AEMO) report says Australia is facing an energy glut never before seen in the history of the national electricity market.

It raises serious questions about the ongoing viability of existing coal-fired power stations, but might also result in more pressure on the Federal Government to reduce the Renewable Energy Target (RET).

A spokesman for AEMO, Joe Adamo, says there is no additional generation required to maintain the reliability.

"Now, that's under all three scenarios that we model. So what we're saying is that there's an oversupply of generation capacity at present. It doesn't affect the reliability," he said.

For the next year alone, Australia will produce up to 8,900 megawatts more than is needed. That is around four times the power produced in a year by Australia's largest coal-fired power station.

Electricity use in Australia has been falling now for about four years due to the take-up of rooftop solar systems, greater use of energy-efficient appliances and the downturn in some manufacturing industries that use lots of electricity.

Audio: Listen to David Mark's story (The World Today)

 

The principal consultant of energy strategies with Pitt and Sherry, Hugh Sadler, says the upshot is that if the coal-fired power stations want to stay running, they will be competing in a buyer's market.

"Many of them will have to trade unprofitably as many of them already have been doing for the last year or two," Mr Sadler said.

Just last week energy company HRL announced it would close a small coal-fired power station in Victoria's La Trobe Valley.

"It was one that was kind of earmarked for closure some three or four years ago but was propped up by some of the industry assistance measures of the previous Labor government," the Alternative Technology Association's Damien Moyse said.

"Those measures have now run out and so as soon as they have that power station has found that it's no longer economical to operate.

"That's really because there just isn't the need for so much base load power at the moment," he said.

Energy in oversupply, but prices still rising

Despite the oversupply, Australians have continued to pay more for their electricity.

"The prices have been rising because of the other parts of the cost of electricity, which is the cost of getting it from the boundary of the power station through the meters of all the individual consumers," Mr Sadler said.
"And that's considerably more than half of the total cost of the total electricity that's supplied to households or small businesses.

"That's the part that's been rising very rapidly over the last three or four years."

While all this has been going on, the Federal Government has been reviewing the Renewable Energy Target, which stipulates a certain amount of renewable electricity should be in use by 2020.

The big electricity companies have been lobbying the Government to axe or at least reduce the RET because renewables like wind and solar are hitting their bottom line.

"On a demand basis we don't need any additional investment for generations for some time, and that's what the AEMO report says," Mr Moyse said.

"But the mechanisms that leverage investment into renewable energy and into low-carbon technologies like the Renewable Energy Target are not about, ultimately, providing enough electricity supply to match demand.

"What they're about is industry development and restructure mechanisms. They're trying to, over time, restructure the industry so that more of our generation, irrespective of what the demand level is, comes from renewables or low-carbon technology and less from carbon-intensive generation, such as coal and gas."

At present there are millions of dollars in renewable projects sitting on the shelf while their developers wait to see what the Government does with the RET.

The bottom line, Mr Sadler says, is that there is no future for the large-scale renewable sector in Australia without the RET.

But he says that goes for other technologies too.

"In fact, some of the very new gas-fired power stations are going to be withdrawn from the market in a few months' time even though they are the newest power stations in Australia, apart from the renewable ones, because of the high price of gas means that they can't compete in the current market," he said.

In the meantime, Australians are increasingly voting with their wallets as electricity prices continue to rise.
There are around 1.5 million rooftop solar systems in the country and the number is increasing.

abc.net.au 9 Aug 2014