BMI View: Despite being a mature market Australian power sector is still growing , driven by strong demand. Although BMI believes renewables will be the fastest growing power source in Australia, policy changes have led BMI t o downgrade its renewable forecast. Meanwhile, coal will remain the dominant power source throughout out forecast.
Australia's power sector is facing unprecedented changes and challenges. Demand for electricity remains strong, but is considerably less than what was anticipated at the end of the last decade due to de-industrialisation and greater energy efficiency. Moreover, consumers are responding to the incentives created by the government's commitment to renewable energy, by generating their own electricity from off-grid solar energy rather than consuming electricity from the grid derived from traditional sources of energy such as coal and gas.
Repealing the carbon tax in 2014 will have a positive impact on the growth of thermal technologies such as coal and gas. Coal, in particular will show strong growth over the forecast period, while the increase in gas-fired generation will be less pronounced. High gas prices coupled with abundant peaking capacity will curb the need for new gas-fired generation in the short-term despite increasing domestic natural gas production.
Meanwhile, renewable generation will be the fastest growing power fuel source in Australia, driven by abundance of sunshine and wind as well as government subsidies. Nonetheless, BMI has downgraded its outlook for renewable growth as the government is gradually curbing the support schemes available to renewable energy.
Since assuming office in September 2013, Prime Minister Tony Abbott and the Liberal-National coalition have taken several divisive steps to scale back or repeal emissions reduction and green energy policies. This has hit investor confidence hard, evidenced by the announcement by Bloomberg New Energy Finance (BNEF) that total investment into large-scale renewable energy in Australia dropped 88% in 2014 from the previous year, to USD240mn.
Power generation will increase 2.0% y-o-y in 2015 to 252.4TWh, and by 20.7% over the ten-year timeframe, reaching 304.8TWh in 2024. The greatest growth will be in the generation of energy from renewables, coal and gas.
Power consumption will increase by 2.0% y-o-y in 2015 to 236.42TWh, rising to 285.8TWh by 2024. Much of the increase in household consumption will be from 'rooftop' solar generation rather than from the grid.
Transmission and distribution losses in 2015 will be fairly low at 6.3% of output and will decline in percentage terms over the 10-year forecast period due to heavy investment in the transmission network and the trend towards rooftop generation.
In July 2015, Australian wind energy development company Windlab proposed building a 1.2GW wind and solar power project near Hughenden, at northern Queensland, Australia, instead of a coal-fired power plant at the same site. The renewable energy facility, called Kennedy Energy Park, will comprise a 600MW wind farm and a 600MW solar photovoltaic farm.
On December 18 2014, the state government of New South Wales (NSW) in Australia announced plans to raise AUD20bn (USD16.4bn) by selling about half of its electricity transmission assets in order to fund major transport infrastructure upgrades. State Treasurer Andrew Constance said the government was looking to sell electricity transmitter Transgrid and half stakes in power retailers Ausgrid and Endeavour Energy, should the government win an election scheduled for March 2015.
The Australian Capital Territory government has awarded power purchase agreements (PPAs) in February 2015 to about 200MW of projects after a large-scale reverse wind energy auction. The agreements will be signed for 20 years and are planned to fulfil about 33% of the territory's power demand in 2020. The projects include RES Australia's 80.5MW Ararat wind farm and the 100MW Hornsdale wind farm planned by French power producer Neoen. The projects also include the 19.4MW Coonooer Bridge project launched by local firm Windlab.
Renewable energy backers are ready to inject up to AUD13bn (USD9.5bn) into new projects in the Australian state of New South Wales, helping the state deal with declines in coal and other mining industries it was reported in July. While coal remains New South Wales' main source of power, wind, solar and other clean energy projects are growing their presence as technology becomes more sophisticated.
Hydro Tasmania abandoned plans to build a 600MW wind plant on King Island, Australia in October 2014. The decision has been based on the results of feasibility studies conducted to date and growing costs, according to the CEO, Steve Davy.
Privatisation continues. In April 2014, the state of New South Wales announced plans to sell the state's electricity network for an expected AUD32bn, assuming it gains a mandate at the next state election in 2015. If the sale goes ahead, it will be triple the size of any other single sale of electricity or gas assets in Asia.
Regulators are upholding the operation of the free market. In March 2014, the antitrust regulator blocked a plan by the government of New South Wales to sell its power plants to the Australian Gas Light Company (AGL) Energy Ltd for AUD1.51bn. And in May 2014, the Australian Competition Tribunal blocked a plan by AGL to buy the generating company Macquarie Generation due to concerns the move could reduce market competition. The Big Three ( AGL, Origin Energy and the Hong Kong-based Energy Australia) already control an estimated 77% of the market for small electricity users and about 85% of the gas market.
The Australia Power Report features BMI Research's market assessment and independent forecasts covering electricity generation (coal, gas, oil, nuclear, hydro and non-hydro renewables), electricity consumption, trade, transmission and distribution losses and electricity generating capacity.
The Australia Power Report also analyses the impact of regulatory changes, recent developments and the background macroeconomic outlook and features competitive landscapes comparing national and multinational operators by sales, market share, investments, projects, partners and expansion strategies.
- Use BMI's independent industry forecasts for Australia to test other views - a key input for successful budgeting and strategic planning in the power market.
- Target business opportunities and risks Australia's power sector through our reviews of latest power industry trends, regulatory changes, and major deals, projects and investments in Australia.
- Assess the activities, strategy and market position of your competitors, partners and clients via our Competitive Landscape analysis.
BMI Industry View
Summary of BMI’s key industry forecasts, views and trend analysis, covering power markets, regulatory changes, major investments, projects and company developments.
Industry SWOT Analysis
Analysis of the major Strengths, Weaknesses, Opportunities and Threats within the power sector and within the broader political, economic and business environment.
BMI’s Power Forecast Scenario
Forecasts to end-2024 for all key indicators, supported by explicit assumptions, plus analysis of key downside risks to the main forecasts:
- Generation: Electricity generation total, thermal, coal, natural gas, oil, nuclear, hydropower, hydro-electric pumped storage and non-hydropower renewables.
- Transmission and Distribution Losses: Electric power transmission and distribution losses.
- Trade: Total imports and exports.
- Electricity Consumption: Net consumption.
- Electricity Capacity: Capacity net, conventional thermal, nuclear, hydropower and non-hydroelectric renewables.
BMI’s Power Risk Reward Index
BMI’s Risk Reward Indices provide investors (power companies, service companies and equity investors) looking for opportunities in the region with a clear country-comparative assessment of a market’s risks and potential rewards. Each of the country markets are scored using a sophisticated model that includes more than 40 industry, economic and demographic data points to provide indices of highest to lowest appeal to investors,
Structure, size and value of the industry sector; overview of the industry landscape and key players; an assessment of the business operating environment, sustainable energy policies, pricing and the latest regulatory developments.
Key Projects Database
Details and analysis of all current and planned developments (new ventures, capacity expansion and other investments) across the sector broken down by location, sector type, capacity, value, companies and operational status.
Illustration of the power industry that exploits our data-rich, in-depth analysis of the leading players in the sector and examination of operational results, strategic goals, market position and the potential for investment.
Power Outlook long-Term Forecasts
Regional long-term power forecasts covering electricity generation, consumption and capacity for thermal, hydroelectric and nuclear power. These are supported by a country specific overview, alongside an analysis of key downside risks to the main forecasts.
Providing BMI’s near-term economic outlook for the region as a whole, as well as taking a close look at countries of particular interest and the latest trends and developments.
The Power Market Reports draw on an extensive network of primary sources, such as multilateral organisations, government departments, industry associations, chambers and company reports, including Energy Information Administration (EIA), World Bank (WB) and United Nations (UN).