16 May 2014
The Australian electricity market analysis report to 2020 and 2030 report provides an overview of the Australian Energy Market along with projections for future electricity demand and wholesale electricity prices in Australia’s major electricity markets out to 2020 and to 2030, to provide context for considering the prospects for geothermal energy. It summarises the most relevant and recent information on Australia’s electricity industry, including regional markets, projected demand, generation costs and transmission infrastructure requirements.
With respect to electricity demand (consumption) the projected range of outlooks are shown in Figure 1. The annual growth rate is between 0 and 2.5 percent over the period with a declining rate of growth over time reflecting slowing population growth, efficiency improvements and structural change. There are two possible ways of characterising the demand growth rate projections. The first is to note there is significant uncertainty in projected demand. This reflects the fact that analysts are still seeking to understand the unprecedented decline in demand since 2009-10 and are therefore uncertain as to how to project future demand. The key uncertainties are
- the exchange rate and its impact on the competitiveness of Australian manufacturing,
- whether households adopt more energy conservation and efficiency measures in response to higher electricity prices and
- the relative balance of centralised, on-site and off-site electricity generation.
The second interpretation is that in general consumption growth will be below 2 per cent per annum (closer to and possibly even below 1 per cent) which is uncharacteristically below the projected rate of growth in the economy. As such, there is a general consensus view that electricity demand growth has shifted to a sustained lower rate.
A summary of the potential range of wholesale electricity market prices is shown in Figure 2. The projections indicate that there will be a continuing weakness in the wholesale electricity price owing to the current excess supply of generation capacity that is both a function of the recent decline in electricity consumption, and additional capacity to meet the Renewable Energy Target. Given the consensus of demand projections is for only a modest recovery in the rate of growth in demand, these market conditions are expected to continue into the 2020s. Under a no carbon price scenario, wholesale electricity prices could be in the range of $40-80/MWh. The Future Grid Forum (2013) projections are the most pessimistic during this period.