The Audit found that, in 2011, Queensland had an installed electricity generation capacity of 12,644 MW. Transmission peak demand was 8,109 MW and distribution peak demand was 6,993 MW. The utilisation of electricity in Queensland in 2011 was 59,603 GWh for generation, 47,341 GWh for transmission and 38,540 GWh for distribution.
The DEC from electricity infrastructure in 2011 was $3.3 billion. This was made up of $0.6 billion from generation, $0.7 billion from transmission and $2 billion from distribution.
The Audit forecasts a 39 per cent increase in the use of electricity from 2011 to 2031. This equates to 90,401 GWh for generation, 78,861 GWh for transmission and 53,520 GWh for distribution by 2031. Based on these forecasts, the Audit projects an increase of $1.9 billion (57 per cent) in the DEC of electricity infrastructure to $5.1 billion. This is made up of $0.3 billion from generation, $0.6 billion from transmission and $1 billion from distribution.
Unlike the other eastern states, the Australian Energy Market Operator376 (AEMO) forecasts a rise in electricity consumption in Queensland, from 47,621 GWh in 2011 to 55,830 GWh in 2031.
There are several reasons for caution in directly comparing AEMO's forecasts and the Audit projections for the DEC of electricity infrastructure. The Audit assumes an energy efficiency improvement rate of 1.5 per cent per year (compared to a historic rate of 0.5-1.0 per cent), whereas AEMO assumes much faster rates, exceeding 20 per cent in some years. Consequently, electricity use underlying the Audit's DEC measure is considerably higher than that for AEMO's forecast.
Additionally, AEMO reports and forecasts unit electricity consumption in gigawatt-hours, whereas DEC is a measure of the value-add provided by electricity infrastructure, expressed in dollar terms. The two are not necessarily perfectly correlated.
Queensland is part of the National Electricity Market (NEM) which also includes NSW, SA, Victoria and Tasmania. Electricity demand has fallen in the NEM in recent years. Annual energy sent out across the NEM fell seven per cent from 194.9 TWh in 2009-10, to 181.2 TWh in 2013-14. The decline in demand in Queensland has been less than the NEM average.
Based on existing and projected levels of supply and demand conditions, coupled with the ongoing increase in renewable sources, there is likely to be little need for additional investment in capacity in Queensland over the next 15 years. Following commissioning of the LNG projects at Gladstone, the availability of low cost gas for generation will likely reduce.
The Large-scale Renewable Energy Target (and the previous Renewable Energy Target) have led to a substantial increase in the penetration of wind farms across the NEM. However, wind farms are not currently a significant component of generation in Queensland. At the same time, the Small-scale Renewable Energy Scheme, feed-in tariffs, and other photovoltaic (PV) subsidies have led to a significant increase in the penetration of solar PV systems in the last five years. In the National Electricity Forecasting Report Update, AEMO forecast an increase in solar PV output from 207 GWh in 2011, and 1,562 GWh in 2014, to 6,982 GWh by 2031 in Queensland.
The combination of an unanticipated decline in demand and rising penetration of renewables has led to an ongoing structural change in the wholesale sector, although for Queensland high levels of low-cost gas generation also had an impact.
At the same time, there have been considerable rises in network charges across the NEM, due to a range of factors. The rising network charges have in turn influenced retail prices, creating an impetus for regulators to investigate options that may diminish, or delay, further expansion of the network. Consequently, the Australian Energy Market Commission (AEMC), on 27 November 2014,377 made a new rule that establishes a new pricing objective and new pricing principles for electricity distribution businesses that will require that network prices reflect the efficient costs of providing network services. Distribution network prices will reflect the costs of providing the electricity to consumers with different patterns of consumption which has the potential to reduce demand during peak periods, and consequently also reduce future network infrastructure investment.
The implications of surplus capacity differ by sector. For the generation sector, surplus capacity and renewable policy settings are likely to result in the withdrawal of thermal generation assets. Indeed, since 2005, a significant amount of capacity has been 'mothballed' or retired in the NEM. In 2014 Queensland saw the shutdown of the Swanbank power station for three years as well as units at the Tarong and Calllide power stations put into reserve shut down during the non-peak (winter) season.
For the network sector, the decline in demand has diminished the need for augmentation investment. AEMO has pointed out that several transmission network service providers have delayed or cancelled a number of major network upgrades. Lower levels of demand growth may reduce the need for expenditure to replace existing assets.
Following the 2015 change of government in Queensland, there are likely to be policy changes affecting the electricity market. The incoming Government has pledged not to privatise state-owned electricity assets. The three network businesses (Ergon, Energex and Powerlink) will be consolidated into one, as will the two generation businesses (CS Energy and Stanwell).378
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376. Australian Energy Market Operator (2014a)
377. Australian Energy Market Commission (2014)
378. Queensland Labor (2014)