Appendix d progress towards Australia’s emissions reduction goals

Figure D.12: Contributors to electricity emissions, selected years, 1990–2050, and to change in emissions relative to 2000 levels

 

Source: Climate Change Authority calculations using results from Treasury and DIICCSRTE 2013

D3.1.1 Overview of changes in electricity generation emissions intensity

Emissions intensity of electricity generation declined by about 7 per cent between 2000 and 2012 with further improvement expected in all modelled scenarios. The Treasury and DIICCSRTE projects that, in a no price scenario, the improvement is relatively modest; emissions intensity is about 16 per cent lower than 2000 levels in 2020—primarily as a result of renewables and driven by the RET—but is likely to change little after that.

With incentives in place to reduce emissions, changes in the electricity supply mix could reduce the emissions intensity of supply by up to a third in 2020 and by almost 90 per cent by 2050, compared to 2000 levels (Table D.1).

Table D.1: Emissions intensity of Australia’s electricity supply, 2000–2050

	Historical emissions intensity (t CO2-e/MWh)			Projected emissions intensity (t CO2-e/MWh)
Scenario	2000	2008	2012	2020	2030	2040	2050
No price	0.84	0.84	0.78	0.70	0.69	0.69	0.67
Low				0.70	0.66	0.48	0.28
Medium				0.69	0.62	0.47	0.26
High				0.56	0.25	0.10	0.09

Note: Calculation based on electricity generation ‘as generated’.
Source: Historical: BREE 2013b, Table O; DCCEE 2012 Projections: Climate Change Authority based on Treasury and DIICCSRTE 2013 data and ACIL Allen Consulting 2013

Figure D.12 shows several contributors to a lower emissions intensity electricity supply, particularly:

• 
  Declining conventional coal-fired generation, which could reduce emissions by between 2 and 56 Mt CO₂-e in 2020, relative to 2000 levels. Emissions from coal-fired generation are projected to be higher in 2030 than in 2000, except under the high scenario where they could be almost 130 Mt CO₂-e lower.
  
• 
  Increasing wind and solar generation share, which could contribute to an emissions reduction of about 30 Mt CO₂-e in 2020, relative to 2000. Projections suggest that in 2030 increasing wind and solar generation could reduce emissions by between 39 and 51 Mt CO₂-e (in no price and high scenarios, respectively), relative to 2000.
  

CCS and geothermal generation could also contribute significantly in later decades, with an incentive in place, though timing of their deployment remains uncertain. Table D.3 provides further detail of the potential fuel mixes that could lower the emissions intensity of electricity.

The deployment and diffusion of electricity generation technologies will depend on a range of drivers. Exchange rates, technological advances, climate change mitigation policy and electricity prices will affect the relative cost of technologies and the point at which each option becomes economically viable. Until 2020, the mandatory RET is likely to drive steady deployment of renewables, such as wind. Sections D3.3 and D3.4 discuss the opportunities and barriers to realising the potential changes in emissions intensity.

D3.1.2 Overview of changes in electricity demand

Since 2008, growth in electricity generation has slowed (Table D.2). Macroeconomic drivers, weaker global financial conditions and a rising Australian dollar have underpinned softening demand in the industrial sector, with the closure of the Kurri Kurri aluminium smelter in 2012 being one example (AEMO 2013a). Future industrial sector demand for electricity is likely to rise with strong projected growth in activity, but continuation of current energy efficiency improvements could offset growth to some extent (ClimateWorks 2013c). The considerable uncertainty in electricity demand forecasts is discussed further in Section D3.5.2.

Changes in electricity demand are driven, in part, by rising incomes and population, which have historically resulted in increased use of electrical appliances. Over the last two decades, the increased emissions that might be expected from the uptake of new appliances, such as IT and entertainment equipment, have been counteracted by improved efficiency in buildings and appliances.

Efficiency improvements have been driven primarily by policy intervention at various levels of government, particularly minimum energy performance standards for appliances implemented from 1999 and changes to the Building Code of Australia for residential buildings. Uptake of small-scale solar PV has also reduced demand for grid-connected electricity (AEMO 2013a).

Recently, substantial rises in electricity prices—growth of almost 60 per cent in residential prices from 2008 to 2012—have contributed to reduced growth in demand (Saddler 2013). This driver, however, could moderate within a few years (AEMC 2013).