Australia's Energy Transition Stalled by Stubbornly High Demand

Summary:

A more than 200% increase in installed solar power generation capacity since 2018 helped Australia rank sixth globally in terms of solar capacity last year and emerge as one of the world's fastest-growing major renewable energy producers.

However, to realise its goal of becoming a net-zero carbon emitter by 2050, Australia must reverse the trajectory of its energy use, which remains on a rising path in contrast with several peers that have curbed energy use in recent years.

Australia's total electricity consumption has grown nearly 8% over the past decade, compared with contractions over the same period of more than 7% in France, Germany and Japan, and a 14% drop in the United Kingdom, data from Ember shows.

Sustained growth in Australia's electricity demand has in turn meant that power producers must continue to heavily rely on coal for electricity generation on top of recent additions in supply of renewable energy sources. Australia's Energy Transition Stalled by Stubbornly High Demand_1

Australia's Energy Transition Stalled by Stubbornly High Demand_1

To accomplish emissions reduction targets on time, Australia's energy use must decline while clean energy supplies climb further, as that would give power producers the scope to shut high-polluting fossil-powered energy generation systems ahead of the 2050 deadline.

DEMAND DRIVERS

Reducing overall electricity and energy use is a major challenge in all countries, but will be especially tough in Australia which is a relative laggard in terms of the electrification of transport systems and is prone to sustained heat waves that trigger heavy use of air conditioners.

The transport sector uses more energy than any other part of the Australian economy, including industry, and accounted for roughly 40% of total final energy use as of 2020, according to the International Energy Agency (IEA.)

Transport energy demand has also expanded more quickly than other sectors, growing by over 5% from 2010 to 2020 compared to industry's 1.3% growth over the same period.

Australia's Energy Transition Stalled by Stubbornly High Demand_2

To reduce energy use, and cut the country's fuel import bill which topped AUD $65 billion in 2022 alone, according to the Australian Bureau of Statistics, the Australian government is keen to electrify car fleets and is offering large incentives for electric vehicle purchases.

Even so, electric vehicles accounted for only 5.1% of total Australian car sales in 2022, according to the International Energy Agency (IEA).

That compares to 13% in New Zealand, 21% in the European Union, and a global average of 14%.

More incentives for EV purchases are expected, but any rapid adoption of EVs would only serve to increase overall electricity demand and place further pressure on power producers to increase electricity supplies.

Heating and cooling for homes and businesses is another major energy demand driver in Australia, and accounts for roughly 40% of total electricity use in the country.

Australia is exposed to harsh weather conditions, especially heat waves which are expected to increase in frequency, intensity and duration over the coming decades due to climate change, according to the New South Wales government.

To cope, Australians are expected to resort to increased use of air conditioners during the hottest times of the year, adding yet more strain to electricity systems.

RENEWABLES RESCUE?

To alleviate any potential power shortages Australian utilities are expected to continue rolling out more renewable energy supply capacity, likely at an accelerating pace.

Risk assessment firm DNV projects that electricity generation from solar and wind sources across the Oceania and Pacific region will grow from a 12% share currently to more than 60% by 2050. Australia's Energy Transition Stalled by Stubbornly High Demand_3

Australia's Energy Transition Stalled by Stubbornly High Demand_3

Planned expansions to battery systems that can store surplus renewable energy produced during the day and distribute it to consumers overnight will provide additional power system support.

However, Australian power producers look set to remain substantially reliant on coal for baseload electricity generation for years, if not decades, more.

That coal generation will in turn keep pushing the country's emissions totals higher, unless overall electricity use can be sustainably lowered and give power producers the scope to close coal plants ahead of the mid-century target.

Source: ET

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