The main fossil fuels used to generate electricity are coal and natural gas, reflecting the abundance of these fuel sources in Australia.
Coal-fired plants dominate electricity production, accounting for nearly three quarters of the electricity generated from fossil fuels in 2012-13. Black coal and brown coal are distinguished by differences in their energy and water content.
A given weight of black coal contains more energy and less water than the same weight of brown coal, and also emits less greenhouse gas. Black coal generates about 51.1% of Australia’s fossil fuel fired electricity and brown coal about 23.8%.
The share of both black coal and brown coal has declined over the five years through 2012-13, as more gas-fired plant has come on stream.
The importance of natural gas has increased strongly over the five years through 2012-13, reflecting growing availability of the fuel, as well as its greater flexibility compared with coal. Increasing production of coal seam gas has contributed to the growth of gas as a fuel for electricity generation.
In addition, although natural gas is a more expensive fuel than coal, it offers greater flexibility. Coal-fired power stations run continuously, providing base load power, as stopping and re-starting these plants is a lengthy process. In contrast, gas-fired power stations can be brought on line quickly, making them useful in meeting seasonal and peak demand.
Petroleum products (such as fuel oil and diesel) generate only small volumes of electricity and are mainly used in remote areas not serviced by gas pipelines. The share of this fuel source has held steady over the five years through 2012-13. Multi-fuel plants also generate a small volume of electricity.
Economic growth is expected to remain solid over the five years through 2017-18, as the benefits of the resource boom ripple through other sectors. While rising mine output will lead to increased demand for electricity used to power conveyor belts, crushers and various types of processing equipment, the overall growth in demand for electricity is also expected to return to growth.
Conservation measures trimmed electricity demand over the five years through 2012-13. Most of the readily achievable gains (the ‘low hanging fruit’) were made during that period, as households switched to more efficient lighting sources and businesses opted for more efficient electricity use. Conservation will remain a trend, particularly given rising electricity prices, but its impact is expected to be smaller.
As a result, the demand for electricity is expected to return to growth over the five years through 2017-18, reflecting ongoing economic growth and Australia’s increasing population. While the use of renewable power sources will continue to expand, most of the electricity generated over that period will come from burning fossil fuel.
Electricity generated from fossil fuel is expected to grow at an annualised 1.8% over the five years through 2017-18. Manufacturing industries, households and the commercial and service sector will remain the major users of electricity.
However, the importance of basic metal processing to electricity demand is expected to wane with the closure of some smelters and refineries (including aluminium smelters and a copper refinery). The combination of rising electricity prices and higher demand is expected to result in industry revenue growing at an annualised 6.9% over the five years through 2017-18 to reach $24 billion. In 2013-14, revenue is forecast to grow 7.8%
Karen Dobie is the general manager of IBISWorld.
