WHAT ARE WE DOING ON ENERGY, AND WHY?

THE PROBLEM

• Australians have the highest per capita greenhouse emissions among indistrialised countries — about 27 tonnes per year.
• Electricity generation is the single biggest source of emissions, contributing about 37 per cent of Australia's greenhouse gas emissions in 2009.
• This amounted to 261 billion kilowatt hours (TWh) of electricity in 2009, 68% more than the 1990 level and growing at up to 3% pa.
• Of this gross amount, about 19 TWh is used by the power stations themselves, leaving 242 TWh actually sent out (net production). Then about 17 TWh is lost or used in transmission and 11 more in energy sector consumption, leaving 214 TWh for final consumption (or 189 TWh apart from aluminium exports).
• 78% of the power is produced from coal, 14% from natural gas, 4.7% from hydro; the rest is new renewables (mostly wind).
• About 20 per cent of network capacity and investment is used to meet peak demand for about 2 per cent of the time — usually the hottest summer and coldest winter afternoons and evenings.
• Australia has some of the cheapest electricity prices in the world, mostly because coal is cheap to mine and burn. Of the total bill, roughly 40 per cent goes to the generator (power station); about 10 per cent to the transmisison line company; about 40 per cent to the distribution company; and the last 10 per cent to the retailer.
• Prices are now escalating: this is due mostly to higher charges to distribution and transmission companies.
• Reforming the way electricity is generated and consumed is critical for Australia to reduce the national and global severity of climate change.

THE CONTEXT

About 90 per cent of electricity generated in Australia is moved through the national grid, aka the National Electricity Market (NEM), which runs from Port Douglas in far north Queensland to Port Lincoln in South Australia.

The NEM is controlled by a complex national regulatory system (resulting from an agreement betwen the states and territories in 1995) overseen by the Standing Council on Energy and Resources (SCER) and implemented through the National Electricity Law and Rules.

The National Electricity Objective is "to promote efficient investment in, and efficient operation and use of, electricity services for the long term interests of consumers of electricity with respect to –

1. price, quality, safety, reliability, and security of supply of electricity; and
2. the reliability, safety and security of the national electricity system.

Unlike comparable countries such as the UK, there are no environmental or social objectives, and (in its former acronym of MCE) the SCER has resisted attempts to introduce them.

If energy demand is increasing, there are two possible responses: build more infrastructure to provide more power (either fossil fueled or renewables), or reduce demand, through a mix of better energy efficiency and demand management (smoothing out demand across the daily cycle). The former are called supply side, and the latter demand-side, solutions.

The National Electricity Rules make it more attractive for "poles and wires" companies to invest in new infrastrucutre than to invest in energy efficiency and demand management solutions.

THE SOLUTION

TEC has been working since 2004 to introduce an environmental Objective and to change the Rules to make investment in energy efficiency and demand management more attractive.

We also work to ensure that "poles and wires" companies seriously consider these alternatives before deciding to invest in expensive new infrastructure and applying for large increases in their regulated incomes.

We have also supported other efforts to ensure that the NEM contributes to a reduction in the greenhouse gas emissions generated by fossil fueled electricity, to complement the introduction of a carbon price and the expansion of renewable energy generation. This has included producing four annual Green Electricity Watch rankings, which make it easier for consumers to choose environmentally sound sources of electricity.