Declining electricity consumption in Australia

I missed this when it came out a few weeks ago, but the Australian Energy Market Operation (AEMO) has released new forecasts of electricity demand to 2020. The forecasts represent a further reduction on the big cuts in estimated demand made between 2011 and 2012. In 2011, the medium forecast was for nearly 250 000 GWH by 2020, up from 200 000 in 2010. The latest medium forecast is 211 000 GWh for 2020, and the low forecast stays below 200 000 out to 2022-23. These forecasts would be even lower if it were not for three large export LNG projects in Queensland.

Even more striking is the forecast for residential and commercial consumption per persom. In much of the debate around energy issues, it is assumed that increases in living standards must go hand in hand with higher consumption of all forms of energy. But AEMO, assuming moderate rates of economic growth, is predicting that consumption per person will drop to 6000 KwH per year by 2020. In 2005, it was around 7200 KwH, so that’s a drop of more than 15 per cent. Over that time, income per person is likely to rise by around 30 per cent.

The AEMO measures don’t include rooftop solar, but they do include large-scale renewable energy (wind and grid-connected PV). Current policy calls for an additional 20 000 GWh of large-scale renewables by 2020, which would imply a significant reduction in energy-related CO2 emissions over the next decade.

Of course, a lot of this is the fortuitous result of high electricity prices, driven mainly by distribution costs. But it’s certainly an impressive demonstration that lower energy consumption does not mean lower living standards.

68 thoughts on “Declining electricity consumption in Australia

  1. Australia’s decline in electricity consumption also indicates how easily other nations could cut their electricity use without reducing living standards. And this is something that is not a good omen for Australia’s LPG export projects.

  2. To be ‘efficient’ energy cuts should be GDP preserving and socially just. The workers laid off from Kurri Kurri smelter may not be so pleased about the reduction in electricity demand. An odd finding was that people who might have PV cut their air conditioner use after dark even though temperatures remain elevated. Thus 35C at 9 pm is somehow more tolerable than 35C at 5 pm. However I personally know frail elderly people without PV who will not use their air conditioner in heat waves for fear of bill shock.

    If due to carbon pricing and other factors we are sending domestic industries offshore like smelting it may be an own goal. We send to Asia the mix of ingredients such as iron ore and coking coal or alumina and thermal coal. When/if we lose our domestic metal industries we’ll have to buy back steel and aluminum made from our own ingredients.

    I think the bigger issue is not stationary emissions but replacing dwindling oil supplies for transport. There is some overlap if electric or direct gas fuelled transport grows. However I haven’t seen a satisfactory solution. When petrol is $3/L we’ll all be too broke to need much stuff made with the help of power stations.

  3. An elderly neighbour gave us an electric heater. It was quite new so I asked my wife why he gave it to us. Apparently he had told her it was too expensive for him to have a heater. Even though he basically lives in a tiny one bedroom alcove in a complex at the end of our street. She said I shouldn’t mention it to him because he would just be embarrassed.

    I long for a world of cheap and plentiful electricity.

  4. @TerjeP

    Maybe he just needs more income, and/or a more thermally efficient “alcove”.

    I agree that cheap and plentiful electricity would be a great thing, assuming the electriity was sustainably produced.

  5. Hi
    My dissertation below relates to the costs borne by consumers of electricity in Qld
    It is an insiders view as I worked in the industry from 1981 to 2001

    This opinion basically just refers to the facts in the electricity industry surrounding and arising from events during the 1990s and does not infer any ideology or political bias.

    In the mid to late 1990s, the State Govt restructured the electricity industry from a mostly single entity to several organisations. From the Qld Electricity Commission (QEC) to several Govt Owned Corporations (GOCs). The QEC generally covered much of the Qld population except for lower level distribution for which responsibility resided in local regional boards.

    At that time; we evolved to a state of affairs where only a fraction of the overall costs incurred was in the actual generation and distribution of electricity. That is the actual work and the systems required to supply power.

    This is supported by the fact that at the time the QEC was replaced by about 10 GOCs. Such as TEC, CS Energy, Stanwell Corp, Enertrade, Ergon, Group Energy Trader, Powerlink, Austa Energy (there were others)

    Upon formation, each one of these GOCs needed to have the following examples of departments. Administration, I.T., H.R., Purchasing, Legal, Finance, Planning (there are others). As a rough estimate I suppose we could look at about 10 of these existed previously within QEC. It then follows that we have gone from that number of 10 to say a quantity of almost 100 ? I am not claiming that the QEC was particularly efficient but as shown above it would have been quite lean compared to the situation today.

    The main issue is the burgeoning management resulting from these changes. Due to the multiplicity of GOCs, we not only have large replications in the number of similar functions repeated over these GOCs but also the creation of new roles. New roles such as; Boards of Directors, CEO, CFO, CIO, Trading, Risk Management, Business Development, Marketing, Sales and so forth. Salaries within upper management and to some degree within middle management are extremely high, not really supportable and a very high burden on users (the customers). Also what tends to occur is a sense of entitlement filters down through the ranks of these organisations resulting in upward pressure on wages meaning further burdens upon the consumer.

    Adding to these expenses were the costs of various infrastructures required to support the new GOCs. Such as the initial setting up and ongoing accommodation leasing of separate multiple office buildings for the staff. These offices did not exist before, were all of fairly large footprints and many within the CBD of Brisbane.

    An example in a different industry relates to AllConnex (water) which was disbanded due to the efforts of people power. At the time this was being formed it would have had all the management functions and issues similar to those I mentioned above (Boards, CEO Etc). If it had gone ahead there would have been all the costs involved in building a new Head Office edifice (I think it was on the Gold Coast). I seem to recall that certain dedicated local people caused the reversal of this decision thereby dodging an unnecessary and expensive ‘bullet’ for the residents of Redlands, Logan and the Gold Coast. I believe there was mention of; how many homes water bills would it take just to pay for the CEO salary and related expenses (I think there was mention of over a thousand homes).

    If one took yet another industry to compare; it would be Australian Telecommunications. When this industry was initially restructured in the 1980s; the “Rest of the World” was invited to enter and offer to compete. That is; compete against the single entity named Telecom Australia (as it was known as then). The result was the emergence of such Optus, AAPT, Vodafone etc. I think the overall population of Australia is about 5 times that of Queensland. It would have been a ludicrous situation to first break up Telecom Australia into multiple organisations. If similar had been done as in the Queensland Electricity Industry break up there could have been almost 50 Telecom Australia Corps.

    One other issue to add relates to reduced leverage and loss of economies of scale for expense inputs from service providers and suppliers. An example is the supply of Telecommunications Voice and Data Services. The QEC had a much higher capability in this regard than several small corporations. During the 1990s these kinds of expenses were being driven down through negotiations and leverage available only to a larger entity. These sorts of savings also filter through to end users. Telecommunications providers took advantage of the electricity industry break up to target the new entities individually thus increasing their overall revenues .

    In relation to all the Electricity Retailers. One would also consider the above issues to be problematic also. That is

    – burgeoning management due to multiplicity similar functions

    – creation of new roles such as; Boards of Directors, CEO, CFO, CIO, Trading, Risk Management, Business Development, Marketing, Sales and so forth.

    – Salaries within upper management and middle management

    – sense of entitlement down through the ranks

    – costs of various infrastructures required to support and ongoing accommodation of separate multiple office buildings


  6. Plenty of pensioners are in the same position as the gentleman mentioned by TerjeP. They can’t afford electricity for uses like heating. Soon they won’t be able to afford electricity at all.

    The current business model of corporations seems to be to price the poorer half of consumers out of the market altogether and only sell to the well off. Perhaps it makes good business sense to service the richer half of the market and igonore the poorer half as there is no profit in it.

    Privatised power companies will have no interest in supplying the poorer suburbs. I wonder how long till the poorer halves of Brisbane, Sydney and Melbourne look like Detriot? I give it 10 to 15 years without a serious change in direction. That’s the way we are headed.

    Question for TerjeP. If privatised economics suggest there is no profit in supplying some suburbs with power, water and telecommunications should we let these areas go off grid and become third world style slums?

  7. I am deeply not shocked. I have struggled many a time to understand how households could consume as much as they do, three to four times as much as my household does, and we’re not energy poor. Finally, some price signals are filtering through, people are turning off that third fridge, the energy labels are starting to change behaviours. And people are installing subsidised PV too.

  8. Australia falls behind Poland on Internet speed!

    Australians have an average Internet download speed of 6.28 megabits per second (Mbps), behind the global average of 7.67Mbps. This average speed is also slower than Poland’s internet.

    We are currently 47 th (and falling) out of 184 countries measured by Ookla.

    I currently get half the Australian average just outside the boundary of Brisbane (NW). Where I live there is no broadband, dodgy ADSL and the supplier of the copper network cannot even keep all landlines working to standard nor supply all houses with landlines.

    When Abbott gets elected (as seems likely) the NBN will halt. His proposed replacement will never work because the current copper network is overburdened and crumbling now. Prepare to see Australia fall further behind. Our power network will go the same way.

    Australia! The clever country? I don’t think so.

  9. @TerjeP “Cheap electricity”

    That’s what was promised when the old government monopolies were dismantled by Kennett and Keating, and look what we got.

  10. @wilful

    Two words; air conditioning.

    I use a bit in one room for about 60 days in summer (maybe 12 hours a day). By my calculations my solar panels can pretty much run it in the sunny daylight hours. Now that I can see income foregone (solar rebate) I begrudge running my aircon and will seek to use less in future. I never use heating (other than my solar hot water heating).

    However, I think poor people are being priced out of power use.

  11. @Ikonoclast New reverse cycle AC units are very efficient and relatively cheap – those old 3 phase ducted systems were real clunkers.

    For the elderly as part of their pension I would support free AC units and a subsidised power bill, if that’s ok with the free marketeers.

  12. Pensioners and those on payments less than that need an adequate income – so they can work out their priorities for expenditure – and that the full environmental costs are included in electricity prices.

  13. Pensioner discount thermal comfort would make a good episode of SBS ‘Housos’.

  14. @rog

    I run reverse cycle AC in one room well hidden and insulated from all direct sunlight for maybe 60 half-days a year at most. I still regard that as an excessive indulgence. I’ll be seeking to cut that down in future. If I could lose the 7 to 10 excess kilos which I am still struggling to lose then my body would self-cool a lot more efficiently (rueful laugh).

  15. Perhaps it is time to look at a pricing model which guarantees a “liveable” electricity allocation and much more for excess use? Electricity, like water, is necessary for survival.

  16. @John Phillips
    What you are saying has been echoed in other states. For example the Adelaide Advertiser (registration required) on July 9th has a story from former ETSA boss Bruce Dinham that says ‘we’re all being ripped off on electricity prices’. Somehow the micro-economic reformers thought that the more middlemen the better with every layer entitled to good profits. This contrasts sharply with vertically integrated generator/networker/retailers like EdF in France.

  17. Question for TerjeP. If privatised economics suggest there is no profit in supplying some suburbs with power, water and telecommunications should we let these areas go off grid and become third world style slums?

    Instead of “privatised economics suggest” I assume you mean “privatised power companies find”. On that basis I would answer as follows.

    The first policy response ought to be to look to the supply side of the equation and ask what obstacles obstruct the profitable supply of electricity. Is the sector unnecessarily taxed? Are there mandates that create unnecessary cost burdens? Are there labour market regulations that are unreasonable? Are there structural problems? Are there sovereign style investment risks that chill the market?

    If having exhausted those supply side options the problem is going to persisted then you might consider social policy measures.

    However I think it is a bit of a loaded lifeboat style question. There are times and places where government run electricity utilities decided not to, or failed to, serve certain customers. Would you advocate privatisation in those instances or would you condemn the customers to third world conditions?

  18. Rog,

    The carbon tax in BC was quite different to ours in Australia. Revenue neutrality was a focus of the policy design. No such focus in Australia. I have long said I would support a revenue neutral carbon tax but the ALP insisted on a tax and spend approach. The key paragraph from your article is the following one:-

    The key to the B.C. carbon tax shift’s success, Elgie said, is that it while taxes went up on fossil fuel use, income taxes were reduced, so it discourages pollution while encouraging employment and investment.

    Of course the ALP government swapped LITO for a higher tax free threshold to engineer the illusion of a significant income tax cuts. But it was almost all an illusion. The carbon tax in Australia was a tax and spend, not a tax and tax cut approach.

    However even if BC had introduced a less ideal carbon tax (eg tax and spend) it would be hard to notice on the power bill given that 90% of their electricity comes from hydro.

    And at the end of all this the real question is what difference does it make to the temperature. Switching away from income tax is a good thing but if the goal is to stop warming then success ought to be measured in that way.

  19. @TerjeP

    I would advocate better governing, more social programs, more dirigist action and both more deficits (while there is unemployment) and more taxes on the under-taxed rich and rich corporations. But I don’t expect you to agree.

    However TerjP, look at Detroit. That is where the US’s low tax policies got it. Cities going bankrupt and collapsing. The US is now a laboratory for the policies you advocate; low taxes, low wages, low regulation leading to high unemployment, high poverty, high illiteracy and so on. The US is going to hell in a handbasket with the neoliberal economic policies you advocate. The evidence is in and its irrefutable.

  20. @Ikonoclast

    Whilst the split between local, state and federal taxes is different in the USA compared to in Australia the overall level of tax is about on par. As such the major difference is that the US is more keen on government spending than Australia.

    So if you want to blame US outcomes on a key difference in fiscal policy it would be high spending not low taxation that you would have to blame.

  21. A heating allowance for pensioners does exist in Tasmania. It’s incredibly meagre though—two payments of $28 over the year—and tightly means tested. I don’t think the payment is actually tied to heating expenditure, so any distortionary effect the like of which Doug referred to would have to come from mental accounting.

  22. @Hermit
    Re your claim about people turning off their air conditioners at night – I would assume that if the house has been cooled all day it will not heat up much at night (particularly as temperatures at least here in southern Australia and in most inland areas tend to decline at night). You could even cool it to a low comfort range (below 20) when the day is hottest and you are getting the most from solar PV to ensure it doesn’t heat up too much at night I suppose. I don’t have solar PV yet but am planning to get it.
    I am doing research around equity, environmental sustainability and health and am starting to think that subsidised PV for low income households could be a really beneficial measure.

  23. @rog
    The AMA has called for subsidised AC for elderly people and those with chronic diseases and other conditions that put them at raised risks from heat waves. However it would be much better if this was accompanied by subsidised PV as much as possible – it would reduce the person’s bills directly, reduce the need for subsidy and reduce the harm to the environment/ climate change.

  24. @Val
    You could be right but thermal comfort is also a matter of perception. We feel we’ll cope better if the sun is not blazing. A major source of energy savings is shrinking the comfort zone so it is less than a whole room. For example we could watch our LCD TV while it is frosty outside using a 50 watt electric blanket or throw rug. I’ve done this and it’s slightly weird when your breath condenses. Quite comfy but we think we’re entitled to heat or cool half the house. At one time there was a circulating water blanket to keep cool but they are not yet widely on sale. Think astronaut suit without the limbs. Therefore we strictly don’t need 2500w reverse cycle in extreme temps but society tells us it is our right.

    I’m not sure where phase change panels are at. A simple version would be to make ice cubes in a solar powered fridge and use as needed. This problem has to be solved since Sydney hit 45.8C in January and 50C must be on the way. There are millions of ageing people living in fibro and corrugated iron hot boxes and many won’t survive extremes.

  25. ” it is assumed that increases in living standards must go hand in hand with higher consumption of all forms of energy”

    The energy demand process is, historically, driven by a series of step change in technologies that create demand. Steam engine – cars – electricity – air travel – internet and communications etc. At a minor level, you see smaller smoothing each way due to uptake, and then, energy efficiencies. These aren’t important. Just like focussing on energy efficiency has never changed energy consumption trend, and never will. Waving away large changes (like CSG in Queensland), ignores these more important step changes, btw.

  26. The way I see it we’re headed for blatant or disguised electricity rationing or we’ll make excuses to keep burning coal at only modestly reduced levels. Here Indonesia have a few dollars to save some orangutan habitat now we’re good to keep those coal stations going. Nonprice rationing can include remote switching of appliances. In King Island hot water services will turned off for short periods to cut peak demand. The same has been proposed for aircon in the hot zones not sure if any schemes are still current. Price rationing can be via basic minimum rate allowances for room heating and cooling, cooking, hot water, screen devices, lighting etc. Ways exist to monitor this without separate wiring loops. Above say 5 kwh per day for thermal comfort then penalty rates apply.

    I fear that if the ‘frail’ get a thermal comfort concession then suddenly everybody gets classified as frail. In parts of the US doctors could prescribe medical marijuana suddenly everyone got an eligible affliction e.g. glaucoma. In a real emergency like a 50C heatwave I think we can keep people alive with low power devices, not Arctic blast aircon for whole rooms.

  27. In King Island hot water services will turned off for short periods to cut peak demand.

    I’d call that load shifting rather than rationing. And it’s hardly new. It’s been done for decades. Although typically to move load from day to night given the installed capacity of base load power (eg coal). Obviously on King Island with a high wind component (no doubt it’s a windy place) it makes sense to shift load based from when the wind don’t blow to when it does.

  28. p.s. That said I do think there is scope for smart rationing. If the system approaches it’s power delivery capacity operators have little option but to switch off sections of the grid. Ideally consumers could be tiered into first class, second class etc and be cut off based on the level of reliability they pay for. So for instance if the network is out of juice you would turn off hospitals and data centres (first class) last rather than crudely turn off a whole geographic region.

  29. @TerjeP

    Overall tax is not on a par, according to Wikipedia and Heritage Foundation data.

    USA Fed Tax 10.1% of GDP (2011-2012)
    AUS Fed Tax 20.5% of GDP (2011-2012)

    USA all govts tax 26.9% (2011-2012)
    AUS all govts tax 30.8% (2011-2012)

    Deficits are different recently;

    USA deficit at 7% of GDP (2011-2012)
    AUS deficit $27.4 billion or 1.9% (2011-2012)

    Of course, we would have to look at the time series of the last 40 years or so. Most or all of the USA’s recent deficits has been wasted on Iraq/Afghanistan and making munitions and war materiel. Hence, it has not gone into domestic infratructure and social spending.

    Conclusions, the US taxes too little (from the rich) and wastes its deficit spending on pointless overseas wars.

  30. USA all govts tax 26.9% (2011-2012)
    AUS all govts tax 30.8% (2011-2012)

    As I said, tax is about on par.

    Most or all of the USA’s recent deficits has been wasted on Iraq/Afghanistan and making munitions and war materiel.

    As I said, they have a spending problem.

  31. @TerjeP

    It’s where the spending goes that is the issue. Or do you think improved national infrastructure would be as wasteful as war spending?

  32. TerjeP :
    The carbon tax in BC was quite different to ours in Australia. Revenue neutrality was a focus of the policy design. No such focus in Australia.

    Maybe I got it wrong, but Australia’s carbon tax was pretty much revenue neutral. The money from the carbon tax went mainly to compensation to households, with a bit for some other stuff. Certainly I don’t recall any of the tax going to general revenue.

  33. Ikonoclast :
    It’s where the spending goes that is the issue. Or do you think improved national infrastructure would be as wasteful as war spending?

    It definitely matters. However leaving it with taxpayers in the first place ought to rank pretty high on the list of priorities.

  34. @rog

    I note that “click to embiggen” is becoming more common on web page graphs.

    What’s wrong with “click to enlarge”? It’s actually one less keystroke.

  35. TerjeP :Would you advocate privatisation in those instances or would you condemn the customers to third world conditions?


    TerjeP :
    Ideally consumers could be tiered into first class, second class etc and be cut off based on the level of reliability they pay for.

    … so I’m not entirely sure what your objection is, here. It seems like it’s exactly what you’ve previously described as ideal.

  36. A reality check for those who think coal is going anywhere fast is the July 27 entry in the This Is Power website. Last time I mentioned that site someone said it was possessed by the devil or somesuch and your computer will meltdown but have a go anyway. The point being that it reflects the views of those in the industry not wishful thinkers.

  37. @John Brookes
    My recollection is that the carbon price and compensation package had a net cost (ie. the compensation was not completely covered by the payments for emissions). This was always the claim by some against Tony Abbott: it’s hard to call something a tax when it has a negative impact on consolidated revenue.

  38. TerjeP :@John Brookes
    You got it wrong. Tax and spend is not revenue neutrality. At best they achieved budget neutrality which is not the same thing.

    semantics and slogans.
    the old american conservative we-are-so-fiscally-responsible”tax and spend” gets trotted out again.

    taxes are everyones contribution to the public purse.
    they are collected to be spent.
    how they are spent is the concern.
    here in the west we have wasted public monies spent by conservatives on clangers like the “bell tower”
    it was going to pay for itself (sound familiar?).

    how somebody who sounds off in open contempt at a system that provides the public amenities ,paid for from the public purse,and continues to take the personal benefit from those amenities can bear to subject themself to this is a mystery.
    why live here?
    it must hurt your delicate sensibilities,so why not live within a system where there are no public amenities and if you are so personally lacking as to have no means to tap into the moneypot then tough luck.
    after all there is no such thing as society.
    isolated and self reliant, never connecting to others in a co-operative way, there are quite a lot of places that fit the ideological criteria.
    you don’t even have to speak the language,you’d fit right in.

    apparently there are over 1,000,000 houses in OZ that have fitted solar panels.
    people have not stopped fitting them even though the “incentives have been scaled back.
    people are voting with their rooves.

  39. @Ken Fabian
    Re subsidised insulation in addition to subsidised solar PV to go with the AMA recommendation re subsidised AC for low income groups at particular risk from heat waves – yes that would also be good, as would subsidised external sun-blinds (very effective). Any such measures would be good rather than just relying on AC alone. There’s a number of programs eg run by some Councils to provide free or low cost retrofitting and advice to low income households, but these don’t generally include larger cost items such as insulation and sun blinds of course – more things like door and window weather stripping.
    However I was being a bit short hand in referring to subsidised solar PV – in practice such a ‘subsidy’ would have the advantage that it provides more direct financial return through the feed in tariff as well as savings, thus increasing the possibility that even people on low incomes could pay some of it back, so it could operate more like a loan scheme than direct subsidy.
    A colleague who like me is also doing a PhD around these issues is aiming to evaluate health benefits from improved housing sustainability – pretty difficult but interesting topic. However simply reducing power bills should be seen as a direct health benefit in itself, since power bills are contributors to problems like food insecurity and inability to purchase medication as well as general stress.
    Worth noting that in southern states cold weather is still more likely to cause increased mortality and morbidity according to Tony McMichael et al – I can’t remember where their cut off point was in terms of when heat related mortality will begin to exceed cold related mortality in southern states but I guess judging by the way temperatures are going here, we can’t be that far off it. All these measures – insulation, retrofitting, even solar PV to some extent – will also help protect vulnerable groups against cold as well, of course.

  40. It may be an effective public health measure to distribute devices that combine a thermometer and capacitive humidity sensor to the elderly. It could be made to have two alarms, one which goes off when the combined temperature and humidity put people at risk of developing hyperthermia, and another more annoying alarm which goes off when the area needs to be vacated or immediately cooled for safety. As these devices should be quite cheap to produce in mass I don’t see why they couldn’t become as common as smoke detectors in the homes of the elderly. As they overcome the anti-freedom tendencies of our physiologies to fail to both detect and handle heat stress as we age, provided the price is right, as a libertarian I would have no problem with the government paying for them out of general taxation as their effect would be liberty maximising as it is difficult to exercise free choice when one is dead.

  41. I wonder if the line ‘fail to both detect and handle heat stress as we age’ applies to society as a whole. Due to depletion and/or climate change I expect that coal, oil and gas will all be relatively unaffordable by 2050. Therefore we have failed detect early on the need to find adequate replacements, perhaps the mother of all market failures. As others have said h. saps appears to be hard wired for irrational optimism.

    Not only did Sydney nudge 46C in January but just this month Tasmania had its lowest recorded temp of -12.2C. The error bars on the temperature time series will swing both ways.

    On fuel prices I think it’s quite possible petrol will hit $2/L within the term of the next parliament. Talking heads on TV will say ‘nobody saw it coming’ or ‘it’s just a glitch’. Er, OK.

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