BANKWEST CURTIN ECONOMICS CENTRE POWER TO THE PEOPLE WA's Energy Future
Focus on Industry Series, No. 2 August 2017 About the Centre
The Bankwest Curtin Economics Centre is an independent economic and social research organisation located within the Curtin Business School at Curtin University. The centre was established in 2012 through the generous support from Bankwest (a division of the Commonwealth Bank of Australia), with a core mission to examine the key economic and social policy issues that contribute to the sustainability of Western Australia and the wellbeing of WA households.
The Bankwest Curtin Economics Centre is the first research organisation of its kind in Western Australia, and draws great strength and credibility from its partnership with Bankwest, Curtin University and the Western Australian government.
The centre brings a unique philosophy to research on the major economic issues facing the state. By bringing together experts from the research, policy and business communities at all stages of the process – from framing and conceptualising research questions, through the conduct of research, to the communication and implementation of research findings – we ensure that our research is relevant, fit for purpose, and makes a genuine difference to the lives of Australians, both in WA and nationally.
The centre is able to capitalise on Curtin University’s reputation for excellence in economic modelling, forecasting, public policy research, trade and industrial economics and spatial sciences. Centre researchers have specific expertise in economic forecasting, quantitative modelling, micro-data analysis and economic and social policy evaluation. The centre also derives great value from its close association with experts from the corporate, business, public and not-for-profit sectors. POWER TO THE PEOPLE WA’s Energy Future
Contents
List of figures ii List of tables iii Foreword iv Executive summary v Key findings vi Introduction x The energy sector in the WA economy 1 The evolution of the energy sector in WA 2 Contributions to the WA economy 4 Employment in energy 8 Electricity in WA 17 Sources of electricity 19 Generation and load 24 Innovation 26 Future sources: 100% renewables? 31 Renewables as an energy source 33 Investment in renewables 38 Is 100% renewables realistic? 42 Consumption and costs 45 Consumption of energy 47 Energy costs in WA 51 Household utilities expenditure 54 Power to all people 59 Household energy costs and energy poverty 61 Households’ access to solar technologies 65 WA's Energy Future: Summary and Discussion 67 Evolution of the WA energy sector 69 The future energy landscape 70 Energy affordability 71 What does the Finkel Review mean for WA? 72 Regulation 73 A roadmap to our energy future 74 Glossary and Technical Notes 75 References 79
i List of figures
Figure 1 WA consumption by fuel type 2 Figure 2 WA’s agricultural industry at a glance 3 Figure 3 Value of electricity and gas utilities to the Australian economy 4 Figure 4 Gross value added of electricity, gas, water and waste services to 5 WA economy Figure 5 Contributions of electricity, gas, water and waste services to WA and 6 Australian economy Figure 6 Agriculture employment as a share of total employment: by state/territory, 7 2005-2016 Figure 7 Employment shares by WA energy sub-sector: broad employment definitions 8 Figure 8 Patterns of employment across WA energy sub-sectors: 2011 to 2016 9 Figure 9 Total employment in energy sector (alternative definition), by state: 10 2007 to 2017 Figure 10 WA’s share of national energy employment, 2007 and 2017 11 Figure 11 Energy employment as a share of total employment: by state/territory, 11 2007 to 2017 Figure 12 WA utility’s employment as a share of total employment: by region, 2001 to 2017 12 Figure 13 WA’s total employment by energy sub-components, 2001 to 2017 13 Figure 14 Employment by type in the energy sector: WA, 1986 to 2017 14 Figure 15 Full-time and part-time employment, WA utilities sector: 14 by occupation, 1987 to 2017 Figure 16 WA electricity generation capacity by source 21 Figure 17 Summer and winter electricity load in WA: 2016, by time of day 24 Figure 18 Comparison of summer and winter electricity loads in WA: 2007 to 2016 25 Figure 19 Share of innovation-active businesses by sector: 2014-15 and 26 change from 2012-13 Figure 20 Incidence and novelty of product innovation by industry sector: 2014-15 27 Figure 21 Incidence and novelty of operational process innovation by industry sector: 28 2014-15 Figure 22 Drivers of innovation in utilities sector: 2014-15 29 Figure 23 Drivers of innovation in utilities sector compared with all businesses: 29 2008-09 to 2014-15 Figure 24 Self-reported barriers to innovation, utilities sector and all businesses: 30 2014-15 Figure 25 Self-reported barriers to innovation, utilities sector and all businesses: 30 2008-09 to 2014-15 Figure 26 Proportion of electricity generation sourced by renewables, states and 34 territories: 2008-09 to 2014-15 Figure 27 Proportion of electricity generation sourced by renewables, states and 35 territories (excluding SA and Tas): 2008-09 to 2014-15 Figure 28 Composition of renewable energy fuels used for electricity generation: 36 WA and Australia, 2014-15 Figure 29 Composition of renewable energy fuels used for electricity generation - WA, 37 2008-09 to 2014-15
ii POWER TO THE PEOPLE WA’s Energy Future iii
Figure 30 Renewable projects under construction end of 2016 and to start construction 40 in 2017 Figure 31 Generating capacity from WA rooftop solar, 2016 to 2022 41 Figure 32 Levelised cost of electricity, new builds, Australia, 2017 43 Figure 33 Annual energy consumption per million population, states and territories: 47 by fuel type, 1960-61 to 2014-15 Figure 34 Annual electricity consumption by states and territories: 48 per million population, 1960-61 to 2014-15 Figure 35 Annual electricity consumption by states and territories: per million 49 population, 1960-61 to 2014-15 Figure 36 Annual energy consumption per million population, states and territories: 50 by fuel type, 1960-61 to 2014-15 Figure 37 Annual energy consumption per million population, states and territories: 52 by fuel type, March 2000 to June 2017 Figure 38 Regulated residential electricity tariff charges for WA: July 2009 to 54 July 2017 Figure 39 WA annual electricity costs: illustrative WA residential household, July 2009 55 to July 2017 Figure 40 WA household energy spending shares, by income: 2007-08, 2011-12 and 56 2014-15 Figure 41 Variation in household energy expenditure shares in WA, by family type: 62 2014/15 Figure 42 Shares of WA households with more than 10 per cent of expenditure on 63 utilities: by family type: 2006-07 to 2014-15 Figure 43 Share of spending on energy, health and groceries by WA single parents, by 64 income percentile: 2007-08, 2011-12 and 2014-15 Figure 44 Share of suitable WA dwellings with rooftop Solar PV installed: to June 2017, 65 by level of socioeconomic disadvantage List of tables
Table 1 Composition of the WA economy – gross value added by sector 5 Table 2 Electricity generation in WA, by source: 2008-09 to 2014-15 20 Table 3 Proportion of total net energy consumption sourced from 33 renewables, states and territories: 2008-09 to 2014-15 Table 4 Direct FTE Employment in Renewable Energy - Western Australia, 37 2009-10 to 2015-16 Table 5 Proportion of total energy consumption sourced from renewables, states 55 and territories: 2008-09 to 2014-15 Table 6 Average household energy spending, by state/territory & family type, 61 uprated to June 2017 Table 7 Average household spending on utilities in WA: by family type, 2006-07 to 62 2014-15 Table 8 Shares of suitable WA dwellings with rooftop Solar PV installed: to June 66 2017, by state/territory and level of socioeconomic disadvantage
iii Foreword
While there are many societal issues facing the world today, one could argue climate change and renewable energy technologies are universal in their need for action. Without a world to live in, what is the point of a solid education and good health?
Given our isolation and abundance of sunshine, Western Australia is in a unique position to foster innovation, so it’s surprising that we are not at the forefront of new energy technology creation and uptake in Australia.
This second report in our Focus on Industry series closely examines WA’s energy sector, and asks whether our State is positioned to take advantage of the multitude of energy technologies on the horizon.
We look at the historical relationship WA has with energy, and the State’s slow uptake of renewables. The report also reviews the sector as a whole, the employment and economic value it contributes to WA and the impact of rising energy costs on households in Western Australia.
In a State which enjoys an average of 300 days of full sunshine per year, it is reassuring to find the power generated from household rooftop solar is the second largest source of energy in the State. However, what is it that limits industry from moving toward renewable energy technology and what policies are other states and territories implementing that could be a game changer for WA?
This report aims to explore the current distribution and costs, and asks whether everyone in the State has access to affordable, reliable sources of energy to power their homes.
What becomes apparent is the need for a collaborative approach and clear leadership in developing solutions to improve access and affordability of energy. This is coupled with the need to understand the importance of all forms of energy technology, within a less adversarial conversation.
I’d like to thank the many stakeholders from the government, policy and energy sectors who gave us such valuable insights that helped shape the ideas behind our research. We hope the findings delivered in this report will shed some light on the WA energy industry and help bring more power to the people.
Professor Alan Duncan Director, Bankwest Curtin Economics Centre Curtin Business School, Curtin University
iv POWER TO THE PEOPLE WA’s Energy Future v
Executive summary
Energy is a vital part of our everyday lives. It keeps us warm and cool; allows us to produce and transport ourselves and the goods and services we buy and sell; it provides the power required to run hospitals, schools and businesses; and the means through which we are able to communicate, socialise and learn.
For Western Australia, the energy sector has played a vital role in building the economy through the provision of essential infrastructure and to a lesser extent, as a sector in and of itself, contributing around $6.2 billion to the states output and employing more than 20,000 people.
In recent times, population expansion and resource-led economic growth along with extensive deregulation and regional development as well as major industrial incidents have transformed the state’s electricity sector, from a single supplier to a structured monitored market with a number of industry players.
Challenges lie ahead for the energy sector with affordability a key concern for many West Australians. Our findings show that high energy costs impose a significant burden for many households, especially those on low incomes, with single parents, and older age single men and women more likely to be in energy poverty than other households. And there is evidence that some families are compromising on other essentials to meet rising energy costs, including food and healthcare.
Accessible, secure and affordable energy is a necessary component of any well- functioning economy. And the imperative to move to a greener source is a position that many citizens, communities and governments are taking. Western Australia is lagging behind on this front, with no clear renewable energy plan or target, despite others states taking these steps.
Investment in large-scale renewable projects are meagre in comparison to other states and territories, with most of the direct action towards reducing WA’s carbon footprint stemming from household demand and the desire to minimise electricity costs. Collectively, households are soon to become the biggest electricity provider in the state, holding more than 2,000MW of combined capacity. But the intermittent nature of Solar PV and the socio-economic gradient around accessibility, means that it will not be a complete solution to affordability and action towards ‘greening’ the state.
What is clear from this report is that the energy sector is changing rapidly globally and nationally; and that Western Australia needs a plan to navigate its way through these changes and towards a sustainable and affordable energy future. The inevitable progress towards renewable energy sources must be incorporated in future planning, so that the state is not left behind and future economic growth compromised.
v Key findings
The energy sector in the WA More than 77% of WA’s energy sector employees are located in the greater economy Perth region. Evolution Total employment in the utility sector Total energy consumption in WA has has increased substantially in the last almost doubled in the last 25 years. decade, primarily in the Perth metro area. Gas is the main source of energy in WA, accounting for more than 50% of WA’s WA Outback accounts for around 15% net energy consumption in 2014-15. of total utility sector employment in WA, followed by Bunbury (4.3%) and WA Oil is the second most popular source Wheatbelt (3.4%). of energy for WA accounting for around 40% of total consumption. Gas supply has become one of the major employers in the energy sector. Coal and oil dominate energy consumption in the more populous Most employment remains full-time, Eastern States. but there has been a noticeable increase in part-time employment in the last 2 Economic contributions years. As energy has cemented itself as a Technicians and trade workers make up day-to-day necessity, so too has the the majority of full-time employees in Australian energy industry grown in the utility sector. significance to the country’s economy. Between 1980 and 2016 the contribution Electricity in WA of Australia’s electricity and gas sector WA’s electricity network has changed has more than doubled in real terms significantly over the last twenty years from $10 to $25bn. and has shifted from a single to multi- WA’s utility sector has grown to $6.2 supplier regulated system. billion in Gross Value Added, up from In 2006, the state monopoly supplier was $2.5 billion in 1990. split into four state-owned corporations In 2016, utilities were accountable for – Western Power, Horizon Power, Synergy around 2.5% of total gross production in and Verve Energy (later merging to a both Australia and WA. single entity). Significant institutional reforms to Employment energy market planning and regulation Taking a broad definition of the energy have taken place in WA over the last sector by including oil and gas extraction, two years, including moving market pipeline transport and coal mining, total regulation to the Australian Energy employment is currently around 20,000 Market Operation in November 2015. people. Sources of electricity Oil and gas extraction remains the major employer in the energy sector, employing Since 2008-09, WA has generated more around 10,200 people. electricity every year, growing to annual generation of 38,000 Gigawatt hours. NSW, WA and NT have seen a consistent increase in the share of total Electricity generation from non- employment stemming from the energy renewables has fallen from 97% to 93% sector. in the last six years.
vi POWER TO THE PEOPLE WA’s Energy Future vii
Electricity generation capacity in Innovation in energy WA Innovation is an important element WA’s electricity generation capacity is of the energy sector, contributing to made up of state and privately owned more efficient, affordable and greener assets delivering power to urban and generation. regional areas. 47.3% of Australian businesses in the Western Australia’s energy network utility sector reported they were active is served by a range of facilities innovators in 2014-15, an increase of that generate electricity through a around 10% from 2012-13 figures. combination of technologies. Around 20% of businesses in the The largest coal-fired power stations in utilities sector reported the reduction of WA make a major contribution to the environmental impacts as one of the key state’s base load requirements. drivers of innovation. This compares to less than 5% from all other Australian The three state-owned coal-fired facilities businesses. at Muja, Kwinana and Collie together capable of producing 2,000MW of Businesses in the utilities sector cite electricity. government regulations as a major barrier to innovation. WA is home to over fifty combustion, gas steam turbine or gas reciprocating power generation plants. 100% renewables: A number of these facilities contribute to not if…when the state’s base load generation, and can rapidly dispatch power to meet peak load Global outlook demands. The world is moving towards renewables The largest renewable electricity in preference of high carbon-emission generation facilities in Western Australia fuels such as coal and gas, with are powered by wind turbines or hydro continued price reductions in renewable technology, with contributions from solar sources, technological advancement and and biomass plants. renewable energy policies driving these patterns. Generation and load For many jurisdictions renewable targets In summer, early morning energy load continue to be revised up rather than increases at a much slower speed than in down as they quickly meet or exceed winter. these. Winter energy use is characterised by a The cost of new-build renewable load decrease around midday, before a technology is falling rapidly, with the sharp increase toward the end of the day. levelised cost of new-build Solar PV is Over time, summer consumption now a quarter of its value in 2009. patterns throughout the day have flattened, which is likely to be linked to Investment in solar and wind is predicted the increased prevalence of roof-top to constitute three-quarters of the $10.2 Solar PV. trillion of expected global investment in new power generation technology out to 2040.
vii Key findings (continued)
Australia Countries, states, cities worldwide have met or are looking to meet a 100% $7.3 billion in renewable projects are renewable energy or electricity target. underway or set to go to construction in 2017. Feasibility studies show that 100% renewables for the National Electricity NSW will add over $2bn, 1,170 jobs and Market and South West Interconnect over 1,000MW from renewable projects System are possible and cost currently underway. competitive. Queensland will add an extra 784MW of Levelised cost of new-build Solar PV and renewable capacity, with forward project wind is now cheaper than new-build coal investment valued at $1.76 billion over and on-par, or in some instances cheaper the next 12 mths. than new-build combined-cycle gas. Western Australia Arguably, it is no longer a question of 2.1% of WA’s total energy consumption whether a 100% renewable future is a is sourced from renewables. possibility, but more a question of how and when we get there. WA has seen electricity generation sourced from renewables increase from Households are driving growth in 2.9 to 7.1% in the six years to 2014-15. renewable energy in WA, with roof-top solar PV capacity expected to reach more Two-thirds of WA’s renewable electricity than 2,000MW by 2022. generation is sourced from wind compared with one-third nationally. Household solar PV penetration cannot solely be relied upon to move WA 1 in 4 suitable WA dwellings have roof- towards a renewable, clean energy future top solar. alone. Mandurah is the top solar postcode in Large-scale renewable technology WA with over 10,000 installations. together with adequate storage options Employment in renewable energy in and balancing efficiencies must be Western Australia currently stands included in any future renewable energy at around 1,060 full-time equivalent plan for the state. employees. Western Australia lags behind other Consumption and costs states and territories when it comes WA's energy consumption per capita has to investment in large-scale renewable been among the highest among all states projects. and territories. The state currently has only one large- On a per captia basis, WA's energy scale project in play – a 20MW solar farm consumption is 1.8 times the national at Emu Downs with a total project value average. of $50m. NSW has the highest energy 100% renewables "productivity". The ACT has set a target of 100% Tasmania's electricity consumption renewable electricity by2020, Qld 50% per capita is highest across states and by 2030 and Vic 40% by 2025. SA territories. continues to surpass targets, currently at 57% renewables for electricity. WA's consumption of solar and gas produced energy was fairly constant for many years but spiked in recent years.
viii POWER TO THE PEOPLE WA’s Energy Future ix
Energy costs in WA Around a quarter of single parents commit at least 10.2% of their income Perth utility prices have remained towards energy costs, and one in ten consistently below those in all other spend at least 15.1%. states and territories since the start of the millennium. Western Australian households rank fifth overall in energy spending at an overall The utility price gap between Perth and weekly average of $40.64. other capital cities has widened since the start of 2017. Couples with children spend more per week on energy than other family types, Electricity prices in Perth almost doubled at an average of $49.31 per week. Single between 2008 and 2014. parent families spend $37.23 on energy Household expenditure costs, the second highest in value terms and higher still in income share terms WA’s fixed supply charge tariff nearly given the lower typical incomes for this doubled in July 2017, from 48.60c to equity group. 94.91c per day, up 95% on 2016’s supply tariff. Increases in energy expenditure for single parent households in WA has been Household electricity costs have substantial – up 39% in real terms over increased annually by more than 10% ten years, and 10% over the last two in four years, with the recent increase years alone. of 10.4% in 2017 caused by the near doubling of the fixed supply charge. Around a quarter of single parents commit at least 10.2% of their income Energy costs can have a significant towards energy costs, and one in ten impost on the family budget, especially spend at least 15.1%. for those on low incomes. Household’s access to solar Household expenditure on energy rises technologies beyond 10% of total spending for those familities in the lowest 10% of the Installations of roof-top solar PV has income distribution. been increasing over time as energy costs rise and technology becomes This compares with 3% of household cheaper. spending for typical families on middle incomes and below 2% for those families Smart-metering can be used to modify with incomes in the top quarter of energy consumption behaviours and income distribution. avoid peak electricity prices. Energy cost shares have been increasing Many households are unable to take up over time, especially for single parent these cost-saving options due to issues families around affordability, dwelling suitability or tenure (e.g. renting). Power to all people A very clear socio-economic gradient in For many families on low incomes, household solar installations in Western the cost of energy is significant and Australia, with rooftop Solar PV installed forces them to compromise on other in only 7.4% of suitable dwellings in expenditure items. areas in the lowest socio-economic decile, and 16% of suitable houses in the Energy poverty second lowest decile. Western Australian households rank fifth nationally in energy spending at an overall weekly average of $40.64.
ix Introduction
The wide variety of strong views on energy in Australia, and the appearance of an agenda behind many of those views, have led to confusion about what the future really holds for both energy consumers and suppliers. There are many emerging technologies from renewables and ‘smart’ meters to ‘smart’ homes, grids and cities yet the lack of clear policy direction means no one can really say where the energy industry will go in Australia or how we will get there. Australians have an appetite to grasp new technologies with solar panels now installed in 1.5 million homes. Yet our network was designed for large scale generation and transmission, and in its current form could be limiting the willingness of consumers to adopt other new technologies.
Western Australia is often left out of the national conversation about the future of energy because our system has developed in isolation from the eastern states. The South West Interconnected System of Western Australia (SWIS) is independent of the eastern states’ so called National Electricity Market (NEM) yet WA is increasingly looking to adopt practices similar to the east coast. But is this the right choice for WA given our circumstances and will this enable Western Australians to benefit from new emerging technologies?
What do recent developments in energy technology mean for the future? And what is holding households and businesses back from taking up these opportunities to improve how we use and generate energy? Are the rules set correctly or are vested interests getting in the way? Or is it simply that the industry is waiting for leadership, for certainty, or shifts in policy?
This is the second Focus on Industry report by the Bankwest Curtin Economics Centre. Following the initial report on agribusiness, our researchers believe that the energy industry in WA is on the cusp of a tipping point that could revolutionise how energy is consumed and generated, requiring an in-depth look to see if WA is ready for this potential transformation.
This report asks if WA is positioned to take advantage of advances in energy technology that are yet to be incorporated into energy markets. In doing so, we discuss the state of play in energy and where WA sits in comparison with the eastern states. We consider how our natural endowments affect our energy choices, and how well the State is positioned to move to a renewable energy supply. The report highlights the key challenges, risks and policy issues requiring attention to ensure that WA’s energy system gets power to the people at the right time and right place, at a price that is no more than necessary and using technologies that will power us well into the future.
x The energy sector in the WA economy The evolution of the energy sector in WA
An inseparable element of the industrial revolution, and the economic development that ensued, was the capability of producing and controlling energy as an input of production. Without a doubt, the energy sources we use have changed quite significantly since, but economies still rely on energy as a primary input. In the centuries following the industrial revolution, energy has moved from being primarily a production input to an economic necessity; to the extent that changes in its prices can determine a country’s production and development levels.
An evolution of production processes has changed our definition of energy. In today’s world, energy is perceived to be a system of several methods of energy production, distribution and consumption, rather than one input.
Australia in general, and WA specifically, is blessed with ample energy endowments. The combination of these sources creates a portfolio of energy resources for the West Australian economy to consume. What becomes apparent, is that over the years the patterns of energy consumption have changed considerably in WA. As shown in Figure 1, total energy consumption in WA has almost doubled in last 25 years, with the combination of its sources transforming even more dramatically. In 1990-91, the share of consumption of natural gas and petroleum products were almost equal, but by 2014-15 natural gas was WA’s highest source of energy, with more than 50 per cent of the State’s energy coming from natural gas.
Figure 1 WA consumption by fuel type
1,400
1,200
1,000
800
600
400 Total annual energy consumption (PJ) Total 200
0 1990-91 1991-92 1992-93 1993-94 1994-95 1995-96 1996-97 1997-98 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15
Coal Electricity Petroleum products Natural gas Solar energy Liquid/gas biofuels Wood/ wood waste
Source: Bankwest Curtin Economics Centre | Department of Industry, Innovation and Science, Table D5.
2 POWER TO THE PEOPLE WA’s Energy Future 3
Comparing WA with other states and territories provides another perspective of the changing energy make-up within Australia. As shown in Figure 2, Australia’s use of coal has shrunk in all states and territories since 2008-09, with some indicating larger reduction than others. NSW, for example, produced almost half of its energy by coal in 2008-09, however by 2014-15 that number had dropped to 39.8 per cent, a reduction of almost 10 percentage points. Reductions in the share of coal in net energy consumption has given place to an increase in the use of renewables.
Only the Northern Territory has a lower uptake of renewable energy that Western Australia. Between 2008-09 and 2014-15, WA, NT and Victoria's share of renewables is shown to be fairly constant. While renewables only accounted for less than 5 per cent of net energy consumption in WA by 2014-15, Tasmania was leading the charge with around 40 per cent of its energy coming from renewables.
Oil as a source of net energy consumption has been volatile across all states and territories, but the Northern Territory remains the highest consumer of the black gold, with around 60 per cent of the Territory’s energy coming from oil in 2008-09 and 2011-12. This dropped to just below 50 per cent in 2014-15.
Oil is the second most popular source of energy for WA, comprising 35 per cent to 40 per cent of the State’s energy consumption. Gas is also popular in the NT, but Gas is the captures a relatively small share in NSW and Tasmania. However the similarities between NSW and Tasmania stop there, with coal being the main source of energy in main source of NSW, whereas renewables and oil share the highest proportions in Tasmania. energy in WA, accounting Figure 2 Net energy consumption by fuel type: states and territories for more than 100 50 per cent of 90 WA’s net energy 80
70 consumption in 60 2014-15. 50
40
30
20
10
Share of net energy consuption, by type (%) 0 2008-09 2011-12 2014-15 2008-09 2011-12 2014-15 2008-09 2011-12 2014-15 2008-09 2011-12 2014-15 2008-09 2011-12 2014-15 2008-09 2011-12 2014-15 2008-09 2011-12 2014-15 2008-09 2011-12 2014-15
NSW Vic QLD WA SA Tas NT AUS
Coal Oil Gas Renewables
Source: Bankwest Curtin Economics Centre | Department of Industry, Innovation and Science, Table C1.
The composition of net energy consumption has been relatively constant in WA in recent times, something unique in comparison to the other states and territories. In fact, in all other jurisdictions, the share of renewables has increased, with South Australia and Tasmania making the most progress.
3 Contributions to the WA economy
As energy has cemented itself as a day-to-day necessity, so too has the Australian energy industry grown in significance to the country’s economy. As illustrated in Figure 3, electricity and gas contributed less than $10 billion to the Australian economy before 1980. Over the next 40 years, the contribution of electricity and gas had more than doubled, measuring at more than $25 billion in 2016.
Despite the general upward trend in the contribution of electricity and gas to the Australian economy, the yearly rate of growth has been quite different. From 1976 to the start of the 1990s there was rapid growth, which started to slow in the 1990s and early 2000s. After another jump in 2008, the contribution to the Australian economy has remained relatively steady with some minor variations from 2013 to 2015.
Figure 3 Value of electricity and gas utilities to the Australian economy
30,000
25,000
20,000
15,000 $ million
10,000
5,000
0 1976 1980 1984 1988 1992 1996 2000 2004 2008 2012 2016
Electricty Gas
Source: Bankwest Curtin Economics Centre | ABS Cat no.5204.0.
Looking at the disaggregation of electricity and gas’ contribution to the economy also reveals an interesting pattern. Electricity overwhelmingly dominates the contribution value, however the small contribution of gas has been increasing since 1976, with rapid growth from 1980s to the turn of the 21st century. The contribution of gas to the economy has been steady in the past decade and currently sits at 7 per cent of the industry’s economic contribution. Overall, electricity plays a significant role in the Australian economy and its contribution has changed drastically over the past few decades.
4 POWER TO THE PEOPLE WA’s Energy Future 5
Figure 4 Gross value added of electricity, gas, water and waste services to WA economy
7,000
6,000
5,000
4,000
$ million 3,000
2,000
1,000
0 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Gross Value Added
Source: BANKWEST CURTIN ECONOMICS CENTRE | ABS Cat no.5220.0
Focusing on WA, Figure 4 shows the gross value added of the entire utility sector (electricity, gas, water and waste services) to WA’s economy. In 2016, the WA utility WA's utility sector sector was worth $6.2 billion to the economy, continuously exceeding $5 billion is currently since 2011. valued at $6.2bn. Table 1 Composition of the WA economy – gross value added by sector Industry Jun 1996 Jun 2006 Jun 2016 $m % $m % $m % Agriculture, forestry and fishing 3,244 12 3.7 5,277 10 3.9 5,261 14 2.3 Mining 22,710 1 25.9 29,324 1 21.7 69,009 1 30.6 Manufacturing 5,792 4 6.6 9,322 4 6.9 12,569 4 5.6 Electricity, gas, water and waste services 3,275 11 3.7 4,077 14 3.0 6,259 13 2.8 Construction 6,715 2 7.7 16,237 2 12.0 30,524 2 13.5 Wholesale trade 2,202 15 2.5 4,900 13 3.6 6,489 12 2.9 Retail trade 3,732 10 4.3 6,042 9 4.5 8,175 9 3.6 Accommodation and food services 1,732 16 2.0 2,814 16 2.1 3,754 16 1.7 Transport, postal and warehousing 6,370 3 7.3 9,518 3 7.0 12,319 5 5.5 Information media and 1,272 17 1.5 2,258 18 1.7 3,616 17 1.6 telecommunications Financial and insurance services 4,356 8 5.0 6,140 8 4.5 9,982 7 4.4 Rental, hiring and real estate services 2,691 13 3.1 2,955 15 2.2 4,960 15 2.2 Professional, scientific and technical 4,548 7 5.2 8,164 6 6.0 11,934 6 5.3 services Administrative and support services 2,632 14 3.0 5,059 12 3.7 7,086 11 3.1 Public administration and safety 4,020 9 4.6 5,181 11 3.8 7,875 10 3.5 Education and training 5,184 6 5.9 6,425 7 4.8 8,296 8 3.7 Health care and social assistance 5,356 5 6.1 8,246 5 6.1 13,268 3 5.9 Arts and recreation services 535 19 0.6 795 19 0.6 1,151 19 0.5 Other services 1,206 18 1.4 2,311 17 1.7 3,245 18 1.4 Ownership of dwellings 10,566 14,769 19,428 Taxes less subsidies on products 7,196 8,862 10,249 Gross state product: Chain volume 102,301 100 156,375 100 255,214 100 measures
Note: For Gross value added chain volume measures are used. Statistical discrepancy omitted from table. Source: Bankwest Curtin Economics Centre | BCEC analysis using ABS Cat no 5220.0
5 Table 1 shows the economic value, typically measured as gross value added, of the WA’s utility sector sectors that make up the WA economy. Unsurprisingly, Mining constitutes almost a has grown by $3.5 quarter of to the value of WA’s economy, with Construction coming in second. At the other end of the spectrum, Arts and recreation services and Other services contribute billion in Gross the least gross value added to the WA economy. We can also see that the utility Value Added sector (Electricity, Gas, Water and Waste services) is not far from the bottom of the (GVA), up from ranking in terms of economic contribution, and comes in as the 13th largest sector as $2.5 billion in at June 2016. 1990. Figure 5 Contributions of electricity, gas, water and waste services to WA and Australian economy
4.5
4.0
3.5
3.0
2.5
2.0
1.5
Share of Total Gross Production (%) Share of Total 1.0
0.5
0 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016
Western Australia Australia
Source: Bankwest Curtin Economics Centre | ABS Cat no.5220.0
In 2016, utilities In Figure 5, a comparison is made between the contributions that the utility sector makes to WA and Australia’s gross production. In 1990, the utility sector accounted were accountable for 3.3 per cent of WA’s economy, compared to 3.9 per cent of Australia’s economy. for around 2.5 These ratios have since decreased in both jurisdictions, but at different rates, and per cent of total the sector’s State contribution is now more representative of the national sector’s gross production contribution. in both Australia and WA.
6 POWER TO THE PEOPLE WA’s Energy Future 7
Figure 6 Share of Gross Value Added from selected industries
60
50
40
30
20 Per cent of total gross value added 10
0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Electricity, gas, water and waste services Mining Manufacturing Construction All other Services
Source: Bankwest Curtin Economics Centre | ABS Cat no.5220.0
In Figure 6, we hone in on a few industries, to draw clearer comparisons of the contribution the utility sector makes to WA’s economy. The total gross value added contribution these industries make to WA’s economy has been almost constant over the past 25 years. Mining and Construction have increased moderately in the last few years, resulting in a reduction in the contribution share of all other services. The contribution share of WA’s utility sector has been steady since 1990, accounting for less than 5 per cent of total gross value added.
7 Employment in energy
To discuss employment in energy sector, we follow the Australian Bureau of Statistics (ABS 2009) to broaden the definition of energy to include Oil and gas extraction, Pipeline transport and Coal mining. Figure 7 shows the employment share of these sub-sectors in WA’s economy. According to latest data, around half of the employment generated by the energy industry stems from Oil and gas extraction (48.5%), followed by Gas and Electricity supply each with 18 per cent of the share. With an equal share of 5.7 per cent of total employment, Electricity generation and Electricity distribution round out the top five employment sub-sectors. Electricity transmission (0.01%) and Coal mining (1.1%) contributed the smallest share in May 2017.
Figure 7 Employment shares by WA energy sub-sector: broad employment definitions
Employment, May 2017 1% 1% 0% 1%
6%
6%
Oil and Gas Extraction Gas Supply Electricity Supply nfd Electricity Generation 18% 49% Electricity Distribution Electricity Market Operation Pipeline and Other Transport Coal Mining
18%
Source: Bankwest Curtin Economics Centre | BCEC analysis using ABS cat no 6291.0
In Figure 8, the trend of total employment in WA energy sector can be seen. From Oil and gas a starting point of 15,700 people in November 2011, the total number of persons employed in the sector peaked in November 2013 at around 24,000 people. This was extraction followed by a slight reduction in late 2014, and total employment since has remained remains the major above 20,000 people. employer in the energy sector, The Gas supply sub-sector has seen growth in recent years, and now employs 3,900 people. On the other hand, Coal mining has seen a significant drop in employment, employing 10,200 from around 1,500 people in 2011 to just 200 people in May 2017. people.
8 POWER TO THE PEOPLE WA’s Energy Future 9
Figure 8 Patterns of employment across WA energy sub-sectors: 2011 to 2016
30
25
20
15
Thousand, People 10
5
0 Jul 2016 Jul 2011 Apr 2015 Oct 2012 Jan 2014 Feb 2016 Feb 2011 Jun 2014 Sep 2015 Dec 2016 Dec 2011 Mar 2013 Nov 2014 Aug 2013 May 2017 May 2012
Electricity Generation Electricity Transmission Electricity Distribution Electricity Market Operation Gas Supply Coal Mining Electricity Supply nfd Oil and Gas Extraction Pipeline and Other Transport
Note: The values before 2011 are not presented as there was re-catrogorixzation of indusries in 2009. Nfd stands for Not Further Defined. Source: Bankwest Curtin Economics Centre | BCEC analysis using ABS Cat no 6291.0
But how does WA compare with other states and territories. Figure 9 shows this comparison, with Queensland recording the highest employment in the sector in 2012, equivalent to 53,000 people. This shows a considerable increase from a base of 23,200 people in 2007. ACT reports the smallest employment contribution with around 1,000 people employed in the energy sector for the last five years. In Victoria and WA, the number of people employed in the sector has grown steadily in the decade from 2007 to 2017. Tasmania shows a constant number of employed people in the sector, hovering around 2,500 people, however NSW and Qld report very different trends. NSW’s sector grew substantially in employment from 2007 to 2012, but has remained constant since. In Qld, after a large increase to 53,000 people in 2012, the number employed in the sector has shrunk to 42,000 in 2017. The Northern Territory follows a different trend again, with the number employed increasing slightly from 800 people in 2007 to 2,000 people in 2017.
9 Figure 9 Total employment in energy sector (alternative definition), by state: 2007 to 2017
60
50 52.87
40 43.16 43.25 42.09
30 Thousand persons 20 26.94 23.20 21.01 21.12 17.45 10 17.25 13.68 12.22 2.81 2.87 2.33 0.76 1.29 2.05 0.67 1.03 0.80 7.44 6.11 0 5.38 NSW Vic QLD WA SA Tas NT ACT
May 2007 May 2012 May 2017
Source: Bankwest Curtin Economics Centre | ABS Cat no 6291.0
As mentioned above, there are currently about 21,000 people working in the energy sector in WA. To compare the share of WA’s energy sector employment with other states and territories, Figure 10 presents each state’s share of national energy sector employment in 2007 and 2017. With about one third of the country’s energy sector employment, NSW has the biggest share across states and territories at around 31 per cent. Qld comes in second with just above 30 per cent of national sector employment in 2017, increasing its share from 27 per cent in 2007. Over the past 10 years, WA’s share of national energy employment has also increased from 14.3 per cent to 15.2 per cent. In 2017, Vic, SA, Tas and ACT recorded a smaller share of national energy employment in comparison to their 2007 figures, with Tas and SA dropping the most, around 2 per cent each.
10 POWER TO THE PEOPLE WA’s Energy Future 11
Figure 10 WA’s share of national energy employment, 2007 and 2017
May 2007 May 2017 NSW, WA and
0.9% 0.8% 1.5% 0.6% NT have seen 3.3% 1.7% a consistent increase in the 14.3% 15.2% 31.4% 31.2% share of total NSW Vic employment QLD 4.4% 6.3% SA coming from the WA Tas energy sector. NT ACT
16% 15.1% 27.1% 30.3%
Source: Bankwest Curtin Economics Centre | BCEC analysis using ABS cat no 6291.0
In Figure 10, we compared state and territory shares of national energy sector employment, but Figure 11 compares the sector’s contribution to each state and territory’s total employment. In Vic, Qld, SA and ACT, the share of total employment from the energy sector increased between 2007 and 2012, but shrunk in the 5 year period leading to 2017.
In 2017, the ACT had the lowest share of total employment from the energy sector, in comparison to other states. NSW and SA come in second with a 0.7 per cent share and Qld currently has the largest share with around 2 per cent of its local labour market coming from energy. WA’s share of energy associated employment has grown steadily from 1.1 per cent in 2007, to 1.4 per cent in 2012 and now makes up 1.6 per cent of total employment.
Figure 11 Energy employment as a share of total employment: by state/territory, 2007 to 2017
2.5 2.3 2.0
1.5 1.8 1.6 1.5 1.4 1.3
1.0 1.2 1.2 1.1 1.1 1.1 1.1 1.0 0.9 0.8 0.7
0.5 0.7 0.7 0.7 0.6 0.5 0.5 Share of state/territiry's total employment (%) 0.4 0.3 0 NSW Vic QLD WA SA Tas NT ACT
May 2007 May 2012 May 2017
Source: Bankwest Curtin Economics Centre | ABS Cat no 6291.0
11 To illustrate the decomposition of the utility sector’s labour market across WA's More than 77 regions, Figure 12 panel (a), looks at the total utility sector employment in each WA region and in panel (b) we compare the share of each region from the State’s total per cent of WA’s employment. These labour market regions are derived using the ABS Statistical Areas energy sector Level 4 (SA4) classification. This divides WA into Greater Perth (equivalent to Perth employees are and Peel), Bunbury (covering the South West), WA Wheatbelt (covering the Wheatbelt located in the and Great Southern regions) and WA Outback (covering all other WA regions). greater Perth WA Outback accounts for around 15 per cent of total sector related employment in region. WA, followed by Bunbury (4.3%) and WA Wheatbelt (3.4%).
The total number of people employed in the utility sector in WA spiked in the period between 2014 and 2015. However, latest figures suggest that in 2017 the total number employed in WA’s utility sector is equal to its relevant figures in 2012, around 16,000 people.
When we look at the regional trends shown in panel (b), we see that despite a slight Total employment fluctuation in recent years, the metro region (i.e. Greater Perth) has remained the in the utility highest employment region in WA’s utility sector, around 70 per cent. However, another interesting pattern is observable; in the recent years, the share of Bunbury’s sector has employment has decreased, while there has been a slight increase in WA Outback’s increased greatly employment share figures. in last decade, primarily in the Figure 12 WA utility’s employment as a share of total employment: by region, 2001 to 2017 Perth metro area. (a) Total employment (b) Share of employed working in energy (%) 25 90 80 20 70 60 15 50 40 10 30 20 Total Employment, (000) Total 5 gas, water and waste services 10
0 Share of Employed working in Electricity, 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Greater Perth Bunbury Greater Perth Bunbury Western Australia - Outback Western Australia - Wheat Belt Western Australia - Outback Western Australia - Wheat Belt
Note: Series are calculated using five quarters average. Source: Bankwest Curtin Economics Centre | ABS Cat no 6291.0.
12 POWER TO THE PEOPLE WA’s Energy Future 13
To examine the size of WA energy sector employment compared to national trends, in Figure 13, panel (a) we plot WA and national levels of energy related employment in contrast with the WA share of energy employment from total. In Figure 13, the bar chart shows WA's share from the national workforce and lines represent the number of persons employed. Employment in the energy sector has grown both in WA and nationally, however the trend for WA has been much more volatile, especially in the period from 2012 to 2014. Since 2015, the trend of total employment in WA has been steady, with only some minor variations.
Figure 13 WA’s total employment by energy sub-components, 2001 to 2017
(a) Total employment and national share (%) (b) Components of WA energy employment 30 50 30 45 25 25 40 35 20 20 30 15 25 15 20 WA Persons WA 10 10 Thousand, (000)
AUS x 10 Persons AUS 15 10 5 5 5 Share of natioanl Workforce WA 0 0 0 2000 2002 2004 2006 2008 2010 2012 2014 2016 2000 2002 2004 2006 2008 2010 2012 2014 2016
WA Share of National Workforce Western Australia Electricity Supply nfd Electricity Generation Australia Electricity Transmission Electricity Distribution Electricity Market Operation Gas Supply Oil and Gas Extraction Coal Mining Pipeline and Other Transport
Note: Series are calculated using five quarters average. Source: Bankwest Curtin Economics Centre | ABS Cat no 6291.0.
In panel (b) of Figure 13, we show the different sub-sectors of the WA energy sector. Oil and gas extraction has had the highest share of employment constantly, Most employment followed by Gas supply. Employment in both Electricity transmission and Electricity remains full-time, generation have diminished over the past 16 years. In past decades, Gas supply has recorded an increase in total employment in WA, and has become one of the but there has major employers in the energy sector. Another sub-sector with a dramatic change been a noticeable is Electricity distribution. Electricity distribution was among the sub-sectors with increase in part- the most significant employment contribution in WA in the years before 2006, but time employment employment in this sub-sector has dropped since. in last 2 years. Turning to Figure 14, we plot the number of people employed in the sector by their employment status to explore WA’s pattern of employment in the energy sector in more detail. Prior to 2003, the total number employed in WA’s energy sector was fairly constant, with the majority of people employed full-time. However, from 2003 employment in WA’s energy sector increased drastically from around 5,000 in 2002 to around 25,000 in 2012 and 2013.
13 Figure 14 Employment by type in the energy sector: WA, 1986 to 2017
30 6
25 5
20 4
15 3
Thousands Persons 10 2 Thousands Persons, Part-time
5 1
0 0 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015
Employment Part-time (RHS) Employment total Employment Full-time
Notes: Series are calculated using five quarters average. Source: Bankwest Curtin Economics Centre | ABS cat no 6291.0.
Figure 15 Full-time and part-time employment, WA utility sector: by occupation, 1987 to 2017
(a) Full-time employed (‘000s) (b) Part-time employed (‘000s)
60 7
50 6
5 40 4 30 3 20 2
Employment full-time (‘000) 10 Employment part-time (‘000) 1
0 0 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2000 2000
Managers Professionals Managers Professionals Technicians and Trade Workers Community and Personal Service Workers Technicians and Trade Workers Clerical and Administrative Workers Clerical and Administrative Workers Machinery Operators and Drivers Machinery Operators and Drivers Labourers Labourers
(c) Share of part-time employment (%) (d) Total monthly hours worked, all jobs (‘000s)
25 2,000 1,800 20 1,600 1,400 15 1,200 1,000 10 800 600
5 400 200 Share of part-time employment, (%) 0 Number of hours worked all jobs, (000) 0 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2000 2000
Managers Professionals Managers Professionals Technicians and Trade Workers Clerical and Administrative Workers Technicians and Trade Workers Clerical and Administrative Workers Machinery Operators and Drivers Labourers Machinery Operators and Drivers Labourers
Notes: Series are calculated using five quarters average. Source: Bankwest Curtin Economics Centre | ABS cat no 6291.0.
14 POWER TO THE PEOPLE WA’s Energy Future 15
To clarify the decomposition of WA’s energy sector labour market, Figure 15 displays some of the main indicators of labour market performance, by occupation. In panel Technicians and (a) we show total full-time employment in WA. trade workers However, from a starting point of more than 50,000 full-time technicians in 1987, the make up the category recorded a downward trend until 2000, before starting a slow increase again majority of full- to 2017. According to the latest data, total full-time employment sits around 30,000 time employees in Technicians and trade workers in WA’s utility sector, much less than the peak in the 1980s. the utility sector.
Clerical and administrative workers have also had a marginal increase in past 30 years, reaching just above 20,000 full-time employees in 2017. The number of full-time Managers also almost doubled in this period. The only occupation that has decreased in full-time employment in the utility sector is Labourers, with currently represent just under 10,000 of WA’s full-time energy sector employees.
In panel (b), the same analysis is shown for part-time employment. While the majority of occupations have had significant changes since 2008, part-time employment in clerical jobs has been growing steadily since the 1980s and there are now around 4,000 part-time Clerk and administrative staff in WA utility sector. This is followed by Professionals with just under 2,000 part-time employees.
To illustrate the extent of change among occupations over the years, in panel (c) the share of part-time employment is presented. Clerical and administrative workers and Labourers currently record the highest share of part-time employment, at 15.3 per cent and 13.5 per cent respectively. The lowest share of part time employment belongs to Technicians and trade workers at 2.3 per cent. Latest figures suggest the share of part-time employment of Managers, Professionals and Machinery operators is equal, and around 5 per cent.
In WA’s utility sector, the share of full-time employment is significant across many occupations and therefore total monthly hours worked in this industry follow a similar pattern (panel (d)). Technicians and trade workers worked the most, and Labourers the least, with 1,200 and 400 hours of work per month respectively. According to latest data, total hours worked in other occupations are relatively even, around 800 hours per month.
15
Electricity in WA Introduction
WA’s electricity network has changed significantly over the last twenty years. Population expansion, resource-led economic growth, extensive deregulation and regional development – as well as major industrial incidents at home and abroad - have transformed the state’s electricity sector from a single supplier to a structured and monitored market with a number of industry players.
The current network has its origins in the State Energy Commission of Western Australia, a state monopoly which was split in 1995 into two state-owned corporations supplying gas (AlintaGas) and electricity (the Western Power Corporation, later Western Power). AlintaGas, later Alinta, was privatised in 2000, and as part of a series of reforms to WA’s electricity sector in 2006, Western Power was split into four state-owned corporations:
• Western Power - the network corporation responsible for the maintenance and operation of the physical electricity network infrastructure covering metropolitan Perth and the South West Interconnected System (SWIS);
• Horizon Power - the power corporation responsible for electricity generation, distribution and retail services in the north and regional areas of WA through the North West Interconnected System (NWIS), as well as maintenance of network infrastructure;
• Synergy - the WA energy retailer responsible for electricity account management, sales, marketing and customer billing to residential and business customers in Perth and the South West Interconnected System (SWIS); and
• Verve Energy - the state-owned corporation responsible for electricity generation serving Perth and the South West Interconnected System (SWIS)
Verve Energy and Synergy were merged into a single entity, also called Synergy, from 1 January 2014 as part of a broader review of the WA Energy Market (WEM) motivated by high state subsidies and a desire to control rising electricity prices.
Regulatory framework The last two years have seen significant institutional reforms to energy market planning and regulation in Western Australia. Previously, the state’s energy planning and regulation processes were overseen exclusively by WA regulatory and industry bodies including the Independent Market Operator (IMO), the original WA market planning and regulation entity, and Western Power.
From November 2015, the market operation and rules change functions of IMO relating to the wholesale electricity market were progressively handed over to the national Australian Energy Market Operator (AEMO). Shortly thereafter, on 1 July 2016, AEMO was given additional responsibilities for the systems management function previously overseen by Western Power1. Compliance monitoring also moved from IMO to WA’s Economic Regulation Authority (ERA) on the same date.
1 With the move also serving, prospectively, to protect against perceptions of conflict of interest under any future scenario in which Western Power became privatised.
18 POWER TO THE PEOPLE WA’s Energy Future 19
Sources of electricity
The pattern of non-renewable electricity generation in WA has not been evenly distributed. From 2010-11, electricity generation from Black coal decreased from 32.4 per cent to 28.0 per cent, whereas Natural gas generated electricity increased from 52.5 per cent in 2008-09 to 53.6 per cent in 2014-15 (Table 2).
The pattern of change among renewables is also different. Among the several renewable sources, the share of Biogas in electricity generation in WA has been fixed at around 0.3 per cent for the past few years, however the share of Solar PV in electricity generation has had a steady growth, from 0.1 per cent in 2008-09 to 1.8 per cent in 2014-15. The share of WA electricity generation from wind power has almost doubled over the same period, from 2.5 per cent in 2008-09 to 4.4 per cent in 2014-15.
Non-renewables remain a major source of WA’s electricity, indeed more than 92 per cent of WA's electricity generated in 2014-15 was from non-renewables (Table 2). Nevertheless, we can see a noticeable increase in the share of renewables.
Table 2 shows the trends and sources of electricity generation in WA. Since 2008-09, WA has generated more electricity every year, growing to a staggering level of 38,000 Gigawatt hours. While this increase is not unexpected, the decomposition of its sources provides interesting insights.
Electricity generation from non-renewable sources has increased from 27,000 GWh in 2008-09 to 38,000 GWh in 2014-15. However, the share of non-renewables in Electricity total electricity generation has dropped from 97 per cent in 2008-09 to 93 per cent generation from in 2014-15. Over this same time, both the share and total electricity generation from renewables has grown, from just above 800 GWh in 2008-09, to 2,700 GWh in non-renewables 2014-15. has fallen from 97 per cent to 93 per cent in the last six years.
19 Table 2 Electricity generation in WA, by source: 2008-09 to 2014-15 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 GWh GWh GWh GWh GWh GWh GWh Non-renewable fuels Black coal 8,738 9,612 10,352 10,783 10,277 10,885 10,523 Natural gas 14,556 16,006 18,116 17,538 17,645 20,880 20,146 Oil products 1,464 1,373 1,414 1,171 2,045 2,486 4,224 Other a 2,153 1,018 1,029 1,072 1,856 0 0 Total non-renewable 26,912 28,010 30,911 30,565 31,823 34,252 34,893 Renewable fuels Biogas 120 121 112 126 108 124 127 Wind 675 664 719 1,279 1,300 1,579 1,643 Hydro na na na na 221 205 206 Solar PV 19 58 198 331.4 450 555 683 Total renewable 813 843 1,029 1735.8 2,079 2,464 2,660
Total 27,725 28,852 31,940 32,301 33,902 36,715 37,553 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 % % % % % % % Non-renewable fuels Black coal 31.5 33.3 32.4 33.4 30.3 29.6 28.0 Natural gas 52.5 55.5 56.7 54.3 52.0 56.9 53.6 Oil products 5.3 4.8 4.4 3.6 6.0 6.8 11.2 Other a 7.8 3.5 3.2 3.3 5.5 0.0 0.0 Total non-renewable 97.1 97.1 96.8 94.6 93.9 93.3 92.9 Renewable fuels Biogas 0.4 0.4 0.3 0.4 0.3 0.3 0.3 Wind 2.4 2.3 2.3 4.0 3.8 4.3 4.4 Hydro 0.7 0.6 0.5 Solar PV 0.1 0.2 0.6 1.0 1.3 1.5 1.8 Total renewable 2.9 2.9 3.2 5.4 6.1 6.7 7.1
Total 100 100 100 100 100 100 100
Source: Bankwest Curtin Economics Centre | Department of Industry, Innovation and Science, Table O.
20 POWER TO THE PEOPLE WA’s Energy Future 21
Figure 16 WA electricity generation capacity by source
Total MW capacity
1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 9,000 10,000 11,000 12,000 13,000 14,000
TOTAL MW - coal fired 2,557
Muja 1,094 Kwinana 640 Bluewaters 416 Collie 300 Worsley Alumina Power Station 107
0 100 200 300 400 500 600 700 800 900 1,000 1,100 1,200 1,300 1,400
Maximum capacity (MW)
Coal fired power stations Total MW - coal fired
Total MW capacity
1,000 2,000 3,000 4,000 5,000 6,000
TOTAL MW - gas fired 3,981
Pinjar 576 Cape Preston 450 Neerabup 330 Kwinana - NewGen[1] 320 Pinjarra Alumina Refinery, Alcoa Australia / AGL 280 Kemerton (Transfield) 260 Cockburn 240 Port Hedland 175 Newman 170 Paraburdoo (Pilbara Iron) 155 Worsley Alumina Power Station 120 Kwinana - BP Refining 120 Dampier 120 Mungarra 112 Parkeston 110 Cape Lambert (Pilbara Iron) 105 Murrin Murrin (Minara Resources) 76 Mount Keith 67 Leinster 42 Kalgoorlie 42 Kambalda 42 Kwinana - Tiwest 36 Esperance (Burns and Roe Worley) 33 Cawse 21
0 100 200 300 400 500 600
Maximum capacity (MW)
Gas turbine power stations Total MW - gas fired
Source: Bankwest Curtin Economics Centre | Various sources.
21 Figure 16 WA electricity generation capacity by source (continued)
Total MW capacity
0 50 100 150 200 250 300 350 400 450 500
TOTAL MW - steam turbine gas 409
Telfer Gold Mine, Newcrest Mining 135 Wagerup Alumina Refinery, Alcoa Australia 98 Pinjarra Alumina Refinery, Alcoa Australia 95 Kwinana Alumina Refinery, Alcoa Australia 75 Capel (Iluka Resources) 6.5
TOTAL MW - reciprocating gas 99
Plutonic (Billabong Gold) 16.0 Carnarvon 15.3 Jundee (Northern Star Ltd) 13.2 Windimurra 13.0 Wodgina Tantalum Mine 8.8 Tamala Park 4.7 Canning Vale 4.0 Red Hill 3.7 South Cardup 3.3 Leonora 3.2 Henderson (Wattleup) 2.1 Kelvin Road, Gosnells 2.0 Mount Magnet 1.9 Kalamunda 1.9 Woodman Point 1.8 Millar Road, Rockingham 1.6 Dongara 1.6 Atlas (Mirrabooka) 1.1
0 50 100 150 200 250
Maximum capacity (MW)
Other gas power stations Total MW - steam turbine gas
Total MW capacity
0 50 100 150 200 250 300 350 400 450 500
2,557 TOTAL MW - wind 402
Collgar Wind Farm 206 Walkaway Wind Farm 90 Emu Downs 79 22 Albany 107 3.6 Nine Mile Beach 2.0 Ten Mile Lagoon TOTAL MW - Solar/hydro/biogas 48
Ord River Hydro 30 Greenough River Solar Farm 10 Ord Sugar Mill, Kununurra 6.0 Wellington Dam 2.0
0 50 100 150 200 250
Maximum capacity (MW)
Renewable power stations Total MW - Renewable power
Source: Bankwest Curtin Economics Centre | Various sources.
22 POWER TO THE PEOPLE WA’s Energy Future 23
Electricity generation capacity in WA The state’s electricity generation capacity is made up of a combination of state- owned and privately-owned assets delivering power to urban and regional WA, serving residential households, business customers, as well as the state’s major industries.
Western Australia’s energy network is served by a range of facilities that generate electricity through a combination of technologies.
The breadth, scale and capacities of WA’s electricity generating assets are explored in Figure 16. Power stations are clustered according to principal fuel and generation method, from some of the state’s largest coal-fired power stations in the top panel of Figure 16, to the broad inventory of gas combustion, gas steam turbine and reciprocating gas power stations in the two middle panels. Finally, the lower panel itemises some of the state’s main renewable power station ventures driven either by wind, solar power or biogas.
• The largest coal-fired power stations in WA make a major contribution to the state’s base load requirements, with the three state-owned coal-fired facilities at Muja, Kwinana and Collie together capable of producing 2,000MW of electricity.
• The State is also home to over fifty combustion, gas steam turbine or gas reciprocating power generation plants. A number of these facilities contribute to the state’s base load generation, and can rapidly dispatch power to meet peak load demands.
• Some, including large gas combustion plants at Pinjar, Cockburn and Mungarra at a combined capacity of 928MW, are state-owned facilities, but many are privately- owned and generate power by contract to the SWIS and NWIS, or directly to large production facilities in the resources, mining and refining sectors.
• The largest renewable electricity generation facilities in Western Australia are powered by wind turbines or hydro technology, with contributions from solar and biomass plants.
Two of Western Australia’s three power stations with the largest electricity generating capacity are coal-fired (Muja, with a rating of 1096MW; and Kwinana, at 640MW). The third largest power station, Pinjar is a gas combustion turbine facility powered by natural gas and diesel, with a 576MW rating. All three are owned by Synergy, along with Collie (coal-fired, at 300MW), Cockburn and Mungarra (both gas combustion stations, at 240MW and 112MW respectively).
Many of the major power stations delivering electricity to regional Western Australia are gas-fired. The three largest of these - Pinjarra, Port Hedland and Newman at 280MW, 175MW and 170MW respectively - are run by Alinta, and serve regional areas through the North West Interconnected System (NWIS).
Wind generation facilities in the state have a combined electricity generating capacity of 400MW. Collgar, Walkaway and Emu Downs wind farms have the largest capacities, at 206MW, 90MW and 79MW respectively. The Ord River Hydro plant can deliver up to 30MW, while Greenough River is currently the state’s only significant solar farm, with a 10MW capacity from 150,000 solar panels.
23 Generation and load
Not only has WA’s combination of resources used for electricity generation changed, there has also been a considerable shift in the load and consumption pattern of electricity in WA. There are two aspects of this difference. The first regards the variation in electricity consumption across different days (or seasons) in a given period, and the second is the variation and changes in the pattern of consumption across time.
To show the variation of consumption in a given time, in Figure 17, we plotted the operational electricity load in WA on a typical winter and summer day. The horizontal axis represents a 24 hour period and the vertical axis shows the electricity load in Megawatts per hour (MWh). December to February are considered summer and June to August winter. Overlaying the duration of sunlight in summer and winter with electricity operation load helps us to understand the pattern.
The first observation from the graph is to identify the different patterns of load on a summer and winter day. On a typical summer day, the early morning operation load increases at a much slower speed than on a winter day. But in winter, the load decreases around midday and increases toward the end of the day. While the different patterns of operation load are associated with differences in the behaviours and actions of consumers during summer and winter, the changes in the rate of growth from the lowest load point to the highest is something worth noting.
Looking at the red coloured line (summer operational load) alongside the orange shaded area (summer sunlight), it is possible to relate solar panel generated electricity to a smoother trend (or slower growth) in operation load. On a summer day, the duration of sunlight is longer and therefore the load variation is much less volatile than on a winter day. Solar panels and other solar generated electricity can be associated with the smoother operational load trend during summer.
Figure 17 Summer and winter electricity load in WA: 2016, by time of day
1,600
1,400
1,200
1,000
800 MW\h of operational electricity load 600
400 0:00 1:00 2:00 3:00 4:00 5:00 6:00 7:00 8:00 9:00 10:00 11:00 12:00 13:00 14:00 15:00 16:00 17:00 18:00 19:00 20:00 21:00 22:00 23:00
Summer Sun Light Winter Sun Light 2016 Winter 2016 Summer
Source: Bankwest Curtin Economics Centre | AEMO Market Data
24 POWER TO THE PEOPLE WA’s Energy Future 25
Figure 18 Comparison of summer and winter electricity loads in WA: 2007 to 2016
(a) Summer
1,600 50
45 1,400 40
35 1,200 30
1,000 25 MW\h 20 800 15
10 600 5
400 0 0:00 1:00 2:00 3:00 4:00 5:00 6:00 7:00 8:00 9:00 10:00 11:00 12:00 13:00 14:00 15:00 16:00 17:00 18:00 19:00 20:00 21:00 22:00 23:00
Summer Sun Light 2003 2007 2010 2016
(b) Winter
1,600 50
45 1,400 40
35 1,200 30
1,000 25 MW\h 20 800 15
10 600 5
400 0 0:00 1:00 2:00 3:00 4:00 5:00 6:00 7:00 8:00 9:00 10:00 11:00 12:00 13:00 14:00 15:00 16:00 17:00 18:00 19:00 20:00 21:00 22:00 23:00
Winter Sun Light 2007 2010 2013 2016
Source: Bankwest Curtin Economics Centre | AEMO Market Data
The general pattern of electricity consumption or operation load in WA has traditionally been similar across winter and summer days. However, looking at the historical summer consumption pattern, panel (a) of Figure 18 suggests that while the daily total load is higher in recent years, the trend has been flattened across the day. In winter though, there is a hike in operation load once the sun sets, and extent of this hike has increased in recent years. This could also potentially be linked to the prevalence of solar panels - with the sun setting and a general absence of energy storage, households can not use their solar panel generated electricity and they quickly move to using conventional electricity grids. So even though operational load from these households has been lower during the day (i.e. while the sun is shining), there is a faster rate at which maximum operational load is reached in the evening.
25 Innovation
Considering the importance of the energy sector to Australia’s and WA’s economy, innovation in this industry would be extremely beneficial to both the nation’s economy and to households in general. Innovation also seems to be the key to bring about solutions to the challenges being faced by the sector.
While it is not possible to measure the impact of every innovation, it is possible to evaluate the innovation activity among firms in the industry. Figure 19 shows the share of innovation-active firms in each industry in Australia. The bars show the percentage of innovation-active firms in each specific sector and the diamond points, referring to the right hand side axis, show the percentage point change from 2012-13.
In Figure 19, the Australian utility sector is highlighted among other industries. Wholesale trade has the highest share of innovation-active firms (57.6%) and Transport, postal and warehousing services has the least (23.3%). The national average sits around 45 per cent, increasing slightly from 2012-13. The Australian utility sector is fairly average (47.3%), with a slightly higher share of innovation- active firms compared to national levels. The increase in innovation-active firms in this sector is significant, at around 10 percentage points from 2012-13.
Figure 19 Share of innovation-active businesses by sector: 2014-15 and change from 2012-13
60 30
50 25
40 20
30 15
20 10
10 5
0 0
-10
-5 Change: 2012-13 to 2014-15 (ppt)
Percentage of Innovation Active Businesses -20 -10 Total Mining Retail Trade Construction Other Services Manufacturing Wholesale Trade Arts and Recreation Services Financial and Insurance Services Agriculture, Forestry and Fishing Health Care and Social Assistance Transport, Postal and Warehousing Transport, Accommodation and Food Services Administrative and Support Services Rental, Hiring and Real Estate Services Electricity, Gas, Water and Waste Services and Waste Electricity, Gas, Water Information Media and Telecommunications Professional, Scientific and Technical Services Professional, Scientific and
2014-15 Change from 2012-13
Notes: Figures denote the proportion of businesses in each industry sector that report any innovative activity. Changes are expressed as percentage point differences between 2012-13 and 2014-15. Source: Bankwest Curtin Economics Centre | Authors' calculations from ABS Cat No 8158D001.
26 POWER TO THE PEOPLE WA’s Energy Future 27
Innovation can come in several forms - it could be the introduction of a new product or service, or a new or modified process.
Figure 20 looks at industry sectors according to the incidence and extent of product innovations, while Figure 21 concentrates on process innovations.
Figure 20 shows the instance of innovation in products and its novelty across different industries. Wholesale trade has the highest proportion of product related innovation with almost 32 per cent innovation-active firms. A large proportion of product innovations among Australian industries are new to the business only, rather than being new to the industry. The rental industry for example does not have any new product innovation activity that contributes to the industry or Australian market. In contrast, some industries such as mining are innovating with products that are unique to the world.
Hovering close to national figures, the utility sector has about 19 per cent of innovation-active firms working on product innovation. These innovations contribute to world and national product innovations at almost the same rate, 1.9 per cent and 2.3 per cent respectively.
Figure 20 Incidence and novelty of product innovation by industry sector: 2014-15
Wholesale Trade 31.7
Manufacturing 28.5
Accommodation and Food Services 28.1
Professional, Scientific and Technical Services 25.3
Information Media and Telecommunications 25.1
Arts and Recreation Services 24.2 Other Services 24.0 Health Care and Social Assistance 20.5 Retail Trade 19.4 Electricity, Gas, Water and Waste Services 18.7 Administrative and Support Services 16.9 Financial and Insurance Services 16.8 Rental, Hiring and Real Estate Services 15.1 Mining 12.6 Construction 9.7 Agriculture, Forestry and Fishing 8.6 Transport, Postal and Warehousing 8.3 Total 19.3
0 5 10 15 20 25 30 35
New to the world New to Australia New to the industry New to the business only
Notes: The overall length of each bar represent the shares of businesses in each industry sector that introduced a new or significant product innovation. Separate shades within each bar represent the degree of novelty of innovation. Source: Bankwest Curtin Economics Centre | Authors' calculations from ABS Cat No 8158D002.
27 Figure 21 shows the incidence of novelty in operational process innovations. The pattern of innovation in operational processes in the utility sector is quite interesting and is among top innovative industries in operational process. In terms of innovation in operational processes, the utility sector does not contribute to world innovations and is a follower of world scale operational in process innovations. The utility sector contributes to national innovations at 1.7 per cent.
Figure 21 Incidence and novelty of operational process innovation by industry sector: 2014-15
Manufacturing 27.6 Wholesale Trade 21.1 Electricity, Gas, Water and Waste Services 19.4 Health Care and Social Assistance 19.2 Professional, Scientific and Technical Services 19.2 Mining 18.1 Financial and Insurance Services 17.5 Information Media and Telecommunications 16.0 Rental, Hiring and Real Estate Services 15.7
Other Services 15.5 Transport, Postal and Warehousing 14.6 Retail Trade 13.9 Arts and Recreation Services 13.8 Accommodation and Food Services 13.8 Administrative and Support Services 12.9 Agriculture, Forestry and Fishing 11.1 Construction 9.6 Total 15.6
0 5 10 15 20 25 30
New to the world New to Australia New to the industry New to the business only
Notes: The overall width of each bar represent the shares of businesses in each industry sector that introduced a new or significant innovation in operational processes. Separate shades within each bar represent the degree of novelty of innovation. Source: Bankwest Curtin Economics Centre | Authors' calculations from ABS Cat No
To complement the overview of innovation in the utility sector, Figure 22 shows the drivers of innovation and compares the utility sector with all other Australian businesses. Competition, demand or market drivers play an important role in motivating innovation both in the utility sector and all other businesses. This same rule applies for the Production or delivery of services, with around 50 per cent of all Australian businesses (including utilities) considering production and delivery as one of the drivers of innovation.
The pattern between the utility sector and all other businesses diverges when we consider the reduction of environmental impacts and improving safety as the main drivers of innovation. Around 20 per cent of utility businesses reported the reduction of environmental impacts as one of the drivers of innovation, in comparison to less than 5 per cent or all other businesses. Responses to government regulation also motivates companies in the utility sector to innovate more than it does for all other business.
28 POWER TO THE PEOPLE WA’s Energy Future 29
Figure 22 Drivers of innovation in utilities sector: 2014-15
Competition, demand or market related drivers
100
Adherence 80 Production to standards 60 or delivery 40 20 All Businesses 0 Electricity, Gas, Water Response to Reduce and Waste Services government environmental regulations impacts
Improve safety or working conditions
Notes: Estimates have relative standard errors of 10% to 25% and the upper and lower band were not shown to improve visibility. Values for “Adherence to Standard” are missing for 2006-07. Source: Bankwest Curtin Economics Centre | ABS Cat No. 81580.
Historical trends in the drivers of innovation for the utility sector and all other businesses are also interesting. As shown in Figure 23 (b), the patterns of innovation drivers for all other businesses has been almost constant, with small changes in the areas of production and service delivery and market drivers. But the drivers of innovation for utilities have changed significantly. Recent figures, 2014-15 and 2012-13, show less firms reporting the reduction of environmental impacts as one of the drivers, whereas competition and market related drivers of innovation have been constant throughout the years.
Figure 23 Drivers of innovation in utilities sector compared with all businesses: 2008-09 to 2014-15
(a) Utilities sector businesses (b) All businesses
Competition, Competition, demand or market demand or market related drivers related drivers
100 100 80 80 60 60 Adherence 40 Production Adherence 40 Production to standards or delivery to standards or delivery 20 20 0 0
Response to Reduce Response to Reduce government environmental government environmental regulations impacts regulations impacts
Improve safety or Improve safety or working conditions working conditions
2014-15 2012-13 2010-11 2008-09
Notes: Estimates have relative standard errors of 10% to 25% and the upper and lower band were not shown to improve visibility. Values for “Adherence to Standard” are missing for 2006-07. Source: Bankwest Curtin Economics Centre | ABS Cat No. 81580.
29 Figure 24 shows the barriers to innovation for the utility sector, and shows a lack of Utilities cite access to funds as the highest barrier to innovation in the utility sector. Access to funds and skilled workers are also barriers to innovation for all other business, but government less so for the utility sector. regulations as a major barrier to Figure 24 Self-reported barriers to innovation, utilities sector and all businesses: 2014-15 innovation. Lack of access to additional funds
Other barriers to 35 Cost of innovation 30 development 25 20 Uncertain demand for 15 Lack of skilled new goods or... 10 persons: within the... 5 All Businesses 0 Electricity, Gas, Water and Waste Services Government Lack of skilled regulations or... persons: within the...
Lack of access to Lack of skilled knowledge or... persons
Notes: Estimates have relative standard errors of 10% to 25% and the upper and lower band were not shown to improve visibility. Values for “Adherence to Standard” are missing for 2006-07. Source: Bankwest Curtin Economics Centre | ABS Cat No. 81580.
Figure 25 Self-reported barriers to innovation, utilities sector and all businesses: 2008-09 to 2014-15
(a) Utilities sector businesses (b) All businesses
Lack of access to Lack of access to additional funds additional funds
Other barriers to 35 Cost of Other barriers to 35 Cost of innovation 30 development innovation 30 development 25 25 20 20 Uncertain 15 Lack of skilled Uncertain 15 Lack of skilled demand for 10 persons: demand for 10 persons: 5 new goods 5 within the... new goods within the... 0 0 or... or...
Government Lack of skilled Government Lack of skilled regulations persons: regulations persons: or... within the... or... within the...
Lack of access to Lack of skilled Lack of access to Lack of skilled knowledge or... persons knowledge or... persons
2008-09 2010-11 2012-13 2014-15
Notes: Estimates have relative standard errors of 10% to 25% and the upper and lower band were not shown to improve visibility. Values for “Adherence to Standard” are missing for 2006-07. Source: Bankwest Curtin Economics Centre | ABS Cat No. 81580.
Figure 25 compares the historical trend of innovation barriers for companies in the utility sector and all other businesses. For all industries, a lack of access to additional funds is most commonly cited as the largest barrier to innovation. However, utilities more commonly cite government regulation or compliance and the cost of development as barriers to innovations than other industries do.
Since 2008-09, the significance of all barriers has increased except for uncertainty about demand. Nonetheless, the reduction in utility businesses citing uncertain demand, government regulations or compliance and a lack of access to knowledge or technology that appeared in the 2012-13 survey all returned to previous levels in the 2014-15 survey.
30 Future sources 100% renewables? Future sources: 100% renewables?
In the year to March 2017, Australia will produce around 550 tonnes of greenhouse gases, 34 per cent of which will stem from electricity and 17 per cent from transport (Department of Environment, 2017). As the world moves towards a greener future, and with Australia renewing its commitment to reduce greenhouse gas emissions, energy providers and policy makers are expected to take action.
Australian governments, have in general not actively (or indeed collectively) set a clear policy direction when it comes to renewable energy, and changes in consumer choice and behaviour have largely been driving the changes to our energy mix - especially in WA.
Middle income households especially are voting with their feet (or wallets) and adopting roof-top Solar PV at a dramatic rate in response to rising energy costs and personal commitment to reducing greenhouse gases.
Governments are now at the cross-roads in deciding the direction of future energy sources for their constituents. Decisions and planning need to occur now so that energy security, efficiency, low-no carbon and cost effective energy sources are established to replace ageing coal and gas plants.
In this section, we examine the level of energy consumption and electricity generation sourced from renewable sources in WA and how this compares with other states and territories over time. We also assess the current level of investment in the renewable sector in WA and take stock of the question of a 100 per cent renewable energy future for the State.
32 POWER TO THE PEOPLE WA’s Energy Future 33
Renewables as an energy source
The world is moving towards renewables in preference of high carbon-emission fuels such as coal and gas, with continued price reductions in renewable sources, Globally, technological advancement and renewable energy policies driving these patterns (REN21 2017). Between 2015 and 2016, total electricity provided by renewable the world is sources grew by nearly 9 per cent globally, representing 24.5 per cent of the worlds' moving towards electricity production (REN21 2017a). renewables in preference of high For Australia, the proportion of total energy consumption sourced from renewables has increased marginally over the last decade, currently providing 5.8 per cent of all carbon-emission energy needs nationally – although this is a deterioration from the 1960s levels of fuels. around 13 per cent (Table 3).
In recent years, all states and territories have typically seen an increasing share of energy consumption sourced from renewables. Tasmania and South Australia are leading the group, with the weight of electricity generation source from renewables influencing these outcomes. Western Australia has seen a modest rise in recent 2.1 per cent of times, from 1.7 to 2.1 per cent of total energy consumption sourced from renewables WA’s total energy between 2008-09 and 2014-15, but the State remains in second last place among all consumption states and territories. is sourced from Table 3 Proportion of total net energy consumption sourced from renewables, states and territories: renewables. 2008-09 to 2014-15 New South Western South Northern Year Victoria Queensland Tasmania Australia Wales Australia Australia Territory 2008-09 3.8% 1.9% 5.7% 1.7% 32.1% 32.1% 0.4% 4.1% 2009-10 4.2% 2.2% 8.3% 1.6% 34.7% 34.7% 0.5% 4.8% 2010-11 4.7% 2.4% 7.7% 1.5% 37.4% 37.4% 0.5% 5.0% 2011-12 4.7% 2.5% 7.5% 1.7% 36.8% 36.8% 0.5% 4.9% 2012-13 5.0% 2.8% 8.5% 1.8% 42.7% 42.7% 0.5% 5.5% 2013-14 5.1% 3.1% 8.3% 2.0% 49.6% 49.6% 0.6% 5.8% 2014-15 5.2% 3.4% 8.5% 2.1% 38.6% 38.6% 0.7% 5.8%
Note: Total net energy consumption is the total quantity (in energy units) of primary and derived fuels consumed less the quantity of derived fuels produced. cccccccccComprehensive data comparing all states and territories is sourced from DIIS. More recent data for the NEM states is available from AEMO and AER. Source: Bankwest Curtin Economics Centre | Department of Industry, Innovation and Science, Table C.
33 Turning to electricity generation, Tasmania sits at close to 100 per cent of all power generated sourced from renewables, a legacy of the State’s isolation and natural endowment with the first hydro-electric station built in the early 1900s (Figure 26). Hydro remains the primary renewable energy source for electricity generation, although wind has been playing a greater role in the State with the construction of the Musselroe Wind Farm in 2013 and the expansion of the Woolnorth Wind Farm in 2007. Energy security has been problematic for the State, with heavy reliance on water coupled with depleting storage levels and the 2015 Basslink outage leading to a Senate Inquiry and Tasmania Energy Security Taskforce being established.
South Australia has seen a sharp increase in electricity generated from renewable sources in a relatively short period, rising from 14.4 to 40.4 per cent in the space of six years, and recent data from the Australian Energy Regulator has placed South Australia’s energy derived from renewables at 57 per cent. But this rapid transition has not been without controversy or difficulties. In particular, intermittency has been problematic for the State, where morning and evening peaks are such that renewables cannot always be relied up on for adequate power supply. The Finkel Review has sought to deal with this by recommending that all renewable projects going forward be required to produce dispatchable power (Finkel 2017). South Australia’s recent announcements for two large-scale storage projects will likely resolve some of the intermittency issues the State has experienced, but may not be a complete solution.
Figure 26 Proportion of electricity generation sourced by renewables, states and territories: 2008-09 to 2014-15
100
90
80
70
60
50
40 renewables (%)
30
20
10 Proportion of electricity generation sourced from
0 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15
WA Australia NSW Vic QLD SA Tas NT
Notes: Comprehensive data comparing all states and territories is sourced from DIIS. More recent data for the NEM states is available from AEMO and AER. This figure captures all electricity generation and in addition to power plants, includes rooftop solar PV generation, generation by industrial facilities such as in mining and manufacturing, and off-grid generation. Source: Bankwest Curtin Economics Centre | Department of Industry, Innovation and Science, Table O5.
34 POWER TO THE PEOPLE WA’s Energy Future 35
Among the remainder of the states and territories, NSW and Victoria are almost equal third-placed in electricity generation sourced from renewables – 10.8 and 10.4 per A has seen cent respectively (Figure 27). Victoria has moved the farthest in the period between 2008-09 and 2014-15 from around 2 to 10 per cent. Western Australia has seen electricity electricity generation sourced from renewables increase from 2.9 to 7.1 per cent in generation the six years to 2014-15. This represents 2,659 of the total 37,552 GWh generated sourced from in 2014-15. Queensland has also seen a rise in electricity generated from renewable renewables sources, from 3.5 to 6.2 per cent. The NT has the lowest electricity generation sourced increase from 2.9 from renewables, with a rising trajectory in recent periods. to 7.1 per cent in The flattening or decrease in renewable electricity generation between 2013-14 the six years to and 2014-15 across most states and territories is likely to stem from the repeal of 2014-15. the carbon pricing scheme on 1 July 2014. When in operation, the carbon pricing scheme saw a decline in output from brown coal generators of 16 per cent, and black coal generators, 9 per cent (AER 2017). This represented a fall in total emissions from electricity generation of 10.3 per cent in the two years the carbon price was in operation (AER 2017).
Figure 27 Proportion of electricity generation sourced by renewables, states and territories (excluding SA and Tas): 2008-09 to 2014-15
20
18
16
14
12
10
8 renewables (%)
6
4
2 Proportion of electricity generation sourced from
0 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15
WA Australia NSW Vic QLD NT
Notes: Comprehensive data comparing all states and territories is sourced from DIIS. More recent data for the NEM states is available from AEMO and AER. This figure captures all electricity generation and in addition to power plants, includes rooftop solar PV generation, generation by industrial facilities such as in mining and manufacturing, and off-grid generation. Source: Bankwest Curtin Economics Centre | Department of Industry, Innovation and Science, Table O5.
The composition of renewable energy fuels for electricity generation in Western Australia varies considerably compared to national trends (Figure 28). The weight of Tasmania’s hydro-electric generation drives the composition that we see nationally, constituting 39 per cent of all renewable energy fuels. This compares with only 8 per cent of renewable electricity generation sourced from hydro for Western Australia.
35 For WA, Wind is the most common source of renewable electricity generation, Two-thirds of constituting two-thirds of WA’s renewable electricity. Nationally, Wind is responsible WA’s renewable for one-third of electricity generation sourced from renewables. Solar photovoltaic (PV) is the second largest source of renewable energy in WA (26%), followed by Hydro electricity (8%) and Biogas (5%). generation is sourced from Figure 28 Composition of renewable energy fuels used for electricity generation: Wind compared WA and Australia, 2014-15 with one-third Australia Western Australia nationally. 6% 5% 17% 4% 26%
Bagasse, wood Biogas Wind Hydro Solar PV 33%
8%
39% 62%
Notes: Comprehensive data comparing all states and territories is sourced from DIIS. More recent data for the NEM states is available from AEMO and AER. This figure captures all electricity generation and in addition to power plants, includes rooftop solar PV generation, generation by industrial facilities such as in mining and manufacturing, and off-grid generation. Source: Bankwest Curtin Economics Centre | Department of Industry, Innovation and Science, Table O5.
Recently, the composition of renewable energy fuels used for electricity generation 1 in 4 suitable WA in Western Australia has been changing, with Solar PV and Hydro playing a greater dwellings have role than in previous years (Figure 29). The increase in solar is largely driven by increased installations of small-scale Solar PV units, triggered by the West Australian roof-top solar. goverments, Feed-in-Tariff (FiT) scheme which began on 1 July 2010 under the renewable energy buy-back scheme. The scheme included a state government contribution of 40 cents per kWh and an additional 7 cents per kWh paid by the customer’s retailer.
Mandurah is Currently, around 1 in 4 West Australian dwellings that are deemed suitable for the top solar roof-top solar have units installed, taking it to third place among the states and territories behind Queensland (32%), and South Australia (31%) (ABS 2017a). As of postcode in WA 2016, Mandurah recorded just over 10,000 small-scale Solar PV installations, making with over 10,000 it the top postcode in WA for Solar PV. The opening of the 10MW Greenough River installations. solar farm in Walkaway near Geraldton in 2012 is also likely to be playing a smaller role in increased renewable electricity sourced from solar. And while Wind remains the primary renewable source of electricity, its domination has reduced from 83 to 62 per cent in a relatively short timeframe.
36 POWER TO THE PEOPLE WA’s Energy Future 37
Figure 29 Composition of renewable energy fuels used for electricity generation - WA, 2008-09 to 2014-15 Employment 100 2 7 19 in renewable 90 19 23 22 26 energy in 80 11 8 Western Australia 70 8 currently stands 60 83 at around 1,060 79 50 FTE employees. 70 74 40 64 63 62
electricity generation (%) 30
20 Composition of renewable fuels used for
10 15 14 11 7 5 5 5 0 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15
Solar PV Hydro Wind Biogas
Notes: Comprehensive data comparing all states and territories is sourced from DIIS. More recent data for the NEM states is available from AEMO and AER. This figure captures all electricity generation and in addition to power plants, includes rooftop solar PV generation, generation by industrial facilities such as in mining and manufacturing, and off-grid generation. Source: Bankwest Curtin Economics Centre | Department of Industry, Innovation and Science, Table O5.
Employment in renewable energy in Western Australia currently stands at around 1,060 full-time equivalent (FTE) employees (Table 4). This represents a decline in annual direct FTE employment of 1,170 from its peak of 2,230 in 2011-12. Employment in Solar PV has remained the dominant employment type in the renewable energy sector. This is largely driven by roof-top solar PV installations, which in 2011-12 employed almost 2,000 FTEs as a result of government incentives through the FiT scheme.
Employment in the renewable Wind sub-sector in WA peaked in 2010-11 at 360 FTE employees, coinciding with the construction of the Collgar Wind Farm located 25 kilometres south east of Merredin; but has since wound down to only 40 FTEs in the 2015-16 financial year.
Other states and territories have experienced similar declines in employment since peaking between 2010 and 2012. However, employment is expected to increase over the coming years as large-scale renewable projects get underway and demand for Solar PV continues to rise.
Table 4 Direct FTE Employment in Renewable Energy - Western Australia, 2009-10 to 2015-16 Renewable Engery 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 no. no. no. no. no. no. no. Solar 960 1,660 1,980 1,450 1,010 980 990 Wind 70 360 200 100 50 40 40 Biomass 20 20 20 20 20 10 10 Other* - 10 - 10 - - - Govt / NPI 20 30 30 20 20 20 20 Total 1,070 2,080 2,230 1,600 1,100 1,050 1,060
Note: *Hydro and geothermal. FTE = full-time equivalent. Source: Bankwest Curtin Economics Centre | Department of Industry, Innovation and Science, Table O5.
37 Investment in renewables
Globally, the renewable resource sector is thriving. On latest figures to come out of Investment in the 2017 Bloomberg New Energy Finance report, investment in solar and wind is solar and wind expected to constitute three-quarters of the $10.2 trillion of future global investment in new power generation technology out to 2040 (BNEF 2017). will constitute three-quarters of For Australia, the repeal of the carbon price in 2014, followed by a two-year review the $10.2 trillion of the Renewable Energy Target initiated by the Abbott government has brought uncertainty to the renewable energy market with little investment activity in large- of expected scale renewable projects in recent times (CEC 2016). This uncertainty was lessened global investment towards the end of 2016, when the Turnbull government renewed Australia’s in new power commitment to the 2015 Paris agreement, binding Australia to emissions reductions generation of 2 to 28 per cent on 2005 levels by 2030. technology out to To achieve these reductions, the Australian government has set a Renewable Energy 2040. Target (RET) to reduce greenhouse emissions stemming from the electricity sector through encouraging and supporting generation from sustainable and renewable sources. A large-scale renewable energy target and small-scale renewable energy scheme have been operationalised, both of which are administered by the Clean Energy Regulator. The large-scale renewable energy target is seeking to achieve 33,000 GWh2 of renewable electricity generation by 2020.
2 This represents a reduction from the previous 41,000 GWh, which was changed in June 2015 through the Renewable Energy (Electricity) Amendment Bill 2015.
38 POWER TO THE PEOPLE WA’s Energy Future 39
The sector is now moving full-speed ahead, with 2017 expected to be one of the biggest years for large-scale renewable infrastructure build (CEC 2016). The Clean $7.3 billion Energy Council has valued the 30 projects set to commence construction in 2017 at in renewable $7.3 billion (Figure 30). These projects are expected to add around 3,150MW of new generation capacity and provide an additional 3,725 jobs. projects are set to go to construction NSW is set to lead the states and territories when it comes to investment and jobs in 2017. in the renewable sector over the coming 12 months, with over $2 billion and 1,170 direct jobs created and an additional 1,018MW of capacity (Figure 30). Among these projects is the 270MW Sapphire Wind Farm located between Glen Innes and Inverell, which began construction in January 2017. The project is valued at $588 million and will generate enough clean energy to power 115,000 homes and offset over 700,000 tonnes of carbon emissions each year (Sapphire 2017).
Queensland will add an extra 784MW of renewable capacity, with forward project investment valued at $1.76 billion. Major projects include the $400 million Lilyvale Solar Farm 50 kilometres south-west of Emerald, which will add 100MW of capacity to the State, and the $380 million Mt Emerald Wind Farm, which will see 53 wind turbines with the capacity to generate up to 180MW. The Mt Emerald Wind Farm will supply around one-third of the power needs of Far North Queensland.
South Australia is continuing its strong investment trajectory in large-scale renewable energy projects. The State currently has projects valued at $1.74 billion Queensland either under construction or to start construction in 2017, adding 644MW of capacity. These figures exclude recent announcements by the South Australian government, will add an which includes the $50 million investment in the world’s largest (100MW) lithium- extra 784MW ion battery and $650 million 150MW solar thermal plant. Both projects are set to of renewable commence work within the next 12 months. capacity, with The Riverland Solar Farm to be built at Morgan in South Australia’s Riverland is one forward project of the largest projects to start construction, valued at $1 billion. The project will add investment 330MW of capacity and include 100MW in battery storage. Stages 2 and 3 of the valued at Hornsdale Wind Farm are also underway, with the overall project valued at $800 $1.76 billion. million, and capacity of 209MW.
39 Figure 30 Renewable Projects under construction end of 2016 and to start construction in 2017
Investment: $1,764M Jobs: 1,300 Investment: $50M Megawas:784 Jobs: 100 Megawas:20
Investment: $2,037M Jobs: 620 Megawas:644
Investment: $2,140M Jobs: 1,170 Megawas:1,018
Australia Investment Jobs MW Turbines $7,286M 3,725 3,153 523 Turbines 0 269
MW Investment: $1,295M 20 1,018 Jobs: 535 Megawas:687
Notes: *Projects at the commissioning phase at the end of 2016 are not included in the total new capacity figure. Investment in the South Australia Hornsdale Wind Farm includes stages 1, 2, & 3. Data for ACT and NT not available. ACT is expected to draw most of their renewable energy from other states and territories. Source: Bankwest Curtin Economics Centre | Clean Energy Council Australia, Various other sources.
Victoria will add 687MW of renewable capacity with investment valued at $1.3 billion Western Australia underway or set to commence this year. The biggest of these projects is the first large-scale solar project for the State led by Overland Sun Farming and comprising lags behind three sites at Yatpool, Iraak and Wemen in the state’s North. The combined projects other states are valued at $500 million and will add 320MW of renewable energy capacity. The and territories second largest project underway is the Ararat Wind Farm, adding 75 new turbines when it comes and 240MW of renewable capacity to the grid. The total value of the project is $450 to investment million and it will generate enough electricity to power around 120,000 Victorian homes. in large-scale renewable Western Australia lags behind other states and territories when it comes to projects. investment in the renewable sector. The State currently has only one large-scale project in play – a 20MW solar farm at Emu Downs, that will share the transmission connection and facilities with APA’s existing 80MW Emu Downs Wind Farm. The total value of the project is $50 million and primarily provides energy for Kwinana’s desalination plant.
40 POWER TO THE PEOPLE WA’s Energy Future 41
Household investment While large-scale renewable projects are flagging in WA relative to other states and Capacity from territories, household investment in Solar PV is flourishing and is set to become the roof-top Solar PV State’s largest growth area for renewable power. Currently, total capacity from roof- is predicted to top Solar PV in WA is around 730MW, the second largest combined power source in reach 2,000MW the State, second only to the Muja Power Station. by 2022. The capacity of roof-top Solar PV in Western Australia has grown by 37 per cent in the last 18 months alone, due to 19 per cent growth in the number of installations over the period, and an increase in the average MW capacity per installation – rising from 4.8MW to 5.6MW. If this trend continues, Solar PV capacity is predicted to reach more than 2,000MW by 2022, making it the largest quasi-power plant in WA (Figure 31).
Figure 31 Generating capacity from WA rooftop solar, 2016 to 2022
2,500
2,000
1,500
1,000
500 Generating capacity from WA rooftop solar (MW) Generating capacity from WA
0 Jul 2016 Jul 2017 Jul 2018 Jul 2019 Jul 2020 Jul 2021 Jan 2016 Jan 2017 Jan 2018 Jan 2019 Jan 2020 Jan 2021 Jan 2022
MW from rooftop solar projected MW from rooftop solar ci (lower) ci (upper)
Notes: Projections are based on predictions from a log linear regression of total MW of rooftop solar PV capacity, and reflect the growth both in the number of installations and the average MW output per solar PV installation. Source: Bankwest Curtin Economics Centre | Authors’ calculations from Clean Energy Regulator data on solar PV by postcode.
Similar trends are predicted on a national level, with consumer-driven roof-top solar PV expected to account for around 24 per cent of electricity generation by 2040, and Australia forecast to become one of the most decentralised electric systems in the world, housing 45 per cent of total power generating capacity behind-the-metre (BNEF 2017).
41 Is 100% renewables realistic?
The world is moving full steam ahead towards a renewable future with policy, people For many and the market driving change. As of the end of 2016, 48 developing countries, 34 jurisdictions businesses and several cities and smaller jurisdictions had committed to targets of 100 per cent renewable energy, with this number growing each year (REN21 renewable targets 2017a). The ACT added itself to this list in 2016, committing to a target of 100 per continue to be cent renewable energy by 2020. Byron Bay Shire Council has also set a 100 per revised up rather cent renewable energy target by 2025, and Coffs Harbour 100 per cent renewable than down as electricity by 2030. they are quickly A number of countries, cities and communities have already achieved a status of met or exceeded. 100 per cent renewable energy or electricity across the globe. These include Albania, Iceland, Paraguay, Costa Rica and smaller areas such as Greensburg, Kansas and Burlington, Vermont (REN21 2017a). For many jurisdictions, renewable targets continue to be revised up rather than down, as they are quickly met or exceeded. South Australia is one such example, when in 2009 they set a renewable energy target of 33 per cent by 2020, yet achieved this by 2014 and have now set for themselves a target of 50 per cent by 2025, with recent reports suggesting that they have now exceeded this second target (AER 2017).
While the ACT has set a target of 100 per cent renewable electricity by 2020, whereas Queensland has opted for 50 per cent by 2030 and Victoria 40 per cent by 2025. Western Australia and New South Wales are yet to follow.
For Australia, a number of studies have been conducted that test the hypothesis of a 100 per cent or thereabouts renewable scenario, typically in relation to our National Electricity Market (see for example AEMO 2013; Elliston et al. 2013 & 2016, Blakers 2017) and recently for the South West Interconnect System (Lu et al. 2017). The studies seek to optimise the mix of renewable energy sources at the lowest cost option relative to the grid coverage and climate and show that 100 per cent renewables is more than possible, and typically at a competitive and often at lower cost than conventional sources.
The CSIRO, along with a number of other experts, also concur that there is no technical obstruction to reaching 100 per cent renewables (CSIRO 2017; REN21 2017b). A recent global study by REN21 collected global views about the feasibility of achieving a state of 100 per cent renewables, interviewing over 110 energy experts from around the world including Australia. The study found that there was universal agreement among Australian experts that globally we can achieve a 100 per cent renewable energy supply (REN21 2017b).
Close to 100 per Arguably, it is no longer a question of whether reaching close to 100 per cent renewables is a possibility, but more a question of how and when we get there. cent renewables is no longer a question of if... but how and when.
42 POWER TO THE PEOPLE WA’s Energy Future 43
Cost of renewables The cost of renewable technology is falling at a rapid pace, making renewables not The levelised only a sensible choice for the environment, but also a rational economic choice when it cost of new-build comes to replacing or decommissioning ageing fossil fuel powered plants. Solar PV is now a quarter of its. According to the latest Bloomberg New Energy Finance report, globally, the levelised cost of electricity (LCOE) from Solar PV is now a quarter of its 2009 value and is predicted to decrease by another 66 per cent by 2040 (BNEF 2017). The same report also predicts the cost of on and offshore wind to continue to fall, by 47 and 71 per cent respectively as competition increases and turbines become more efficient.
LCOE allows for a comparison of the cost of new-build technology incorporating differences in cost profiles and other parameters. The metric typically includes a number of key pieces of information such as the life of the asset, cost of capital, ongoing operating and maintenance costs, fuel costs, discount rate, and specific technology related costs such as CO2 storage.
The latest BNEF report estimates the LCOE of new-build Solar PV and Wind in Australia is now cheaper than new-build Coal and on-par, or in some instances cheaper than new- build combined-cycle Gas (Figure 32). New-build Wind is estimated to cost between $61-$118/MWh and Solar PV between $78-$140/MWh. On the other hand, new-build supercritical Coal is estimated to cost between $134-$203/MWh, and adding carbon capture and storage (effectively a carbon price) would see this increase to around $352/ MWh. Combined-cycle Gas generation remains relatively cheap in Australia, with new builds costing between $74-$90/MWh on average over their lifetime.
Figure 32 Levelised cost of electricity, new builds, Australia, 2017
250
200
150
100
50 Levelised Cost of Electricity ($/Mwh)
0 Wind Solar PV Gas Coal
Source: Bankwest Curtin Economics Centre | Bloomberg New Energy Finance.
For Western Australia, the cost of moving to a renewable future for the South West Interconnected System (SWIS) has recently been estimated using a scenario that compares like-for-like fossil-fuel replacement with 90-100 per cent renewables sourced from Solar PV, Wind and pumped-Hydro storage (Lu et al. 2017). The study finds that Wind and Solar PV are a competitive alternative to fossil fuels for the SWIS, with the difference between the two scenarios narrowing over time as the price of renewable technology continues to fall and when factoring in the previous 2014 carbon price.
43 Reliability of renewables Rapid transition to renewables without careful planning can accentuate intermittency problems that exist with renewable technology, which are often limited to generating power when the sun is shining and the wind blowing. The consequences of high dependence on renewable sources are such that morning and evening peak demand cannot always be met.
Over and above this are issues about general network stability, specifically in relation to frequency, voltage and system inertia, where fluctuations occur in supply as weather patterns vary throughout the day. This emphasises the need for cost- effective storage options for current and new renewable energy technologies to ensure adequate power supply. The Finkel review’s recommendation to require all renewable projects going forward to have the capacity to produce dispatchable power will increase the future reliability of renewable energy if mandated. Greater efficiency balancing energy demand over the course of the day and across large-scale grid systems that can draw from alternate weather systems is also likely to help overcome the intermittency problems associated with renewable sources.
Summary In 2015, Western Australia’s greenhouse gas emissions totalled 86.5 million tonnes of carbon dioxide equivalent – fourth ranked behind Qld, NSW and Vic. WA – contributed 16.1 per cent to Australia’s national emissions in 2015, which were 537.8 million tonnes of carbon dioxide equivalent. While other states and territories have set themselves proactive policies including renewable energy targets to reduce their carbon footprint and contribute to Australia’s emissions reduction target, Western Australia is still to take substantial action on this front.
Investment in large-scale renewable energy in WA is lagging when compared to other states and territories and overall energy and electricity generated from renewable sources is relatively low compared to other jurisdictions. Most of the direct action is coming from the household sector as they take their energy needs and energy affordability into their own hands, moving to behind the meter roof-top Solar PV. Collectively, households (and businesses) are soon to become the biggest electricity provider in the State, holding more than 2,000MW of combined capacity. However, this capacity is still limited by the intermittent nature of Solar PV.
The State is slowly moving towards a renewable energy future, but mainly through household driven demand rather than direct policy action and planning led by the state government. This has a number of negative implications for those households and businesses that are unable to take advantage of Solar PV, especially those that are renting. This is discussed further in the Power to all People section later in this report. Further, household Solar PV penetration cannot solely be relied upon to move WA towards a renewable, clean energy future alone. Large-scale renewable technology together with adequate storage options and balancing efficiencies must be included in any future renewable energy plan for the State.
44 Consumption and costs Consumption and costs
As energy becomes more integrated into our daily lives, it is more or less a common “commodity” for every household and individual. The increasing role of energy in daily tasks means cost increases are felt more acutely, and linked to this is a change in household energy consumption patterns. The interdependency of energy cost and consumption implies they should be looked at simultaneously. In this section we look at the consumption patterns of energy among states and territories.
46 POWER TO THE PEOPLE WA’s Energy Future 47
Consumption of energy
There are two main channels of energy consumption; households and industry. Energy is an important intermediary input for many industries and often On a per captia its consumption is used as an indication of economic activity. However, the basis, WA's energy decomposition of industries and production processes can alter consumption trends and patterns. consumption is 1.8 times the Figure 33 shows the yearly consumption of energy adjusted for population across national average. different states and territories. According to latest figures, Australian energy consumption per capita sits around 250 gigajoules, showing a moderate downward trend since 2008-09. Victoria's consumption sits very close to national figures. Energy consumption in NSW, Tasmania and South Australia have remained the lowest in the country since 1990-91, around 200 gigajoules per capita, per annum. Their consumption increased in the period of 2003-04 to 2008-09 to around 240 gigajoules, before leveling off again. Since the early 2000s, energy consumption trends in Queensland have diverged from Victoria and the national average, increasing to around 300 gigajoules per captia, per year.
Figure 33 Annual energy consumption per capita, states and territories: 1990-01 to 2014-15
500
450
400
350
300
250
200
(gigajoulles per person) 150
100 Annual energy consumption per capita
50
0 1990-91 1991-92 1992-93 1993-94 1994-95 1995-96 1996-97 1997-98 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15
NSW Vic QLD WA SA Tas NT AUS
Source: Bankwest Curtin Economics Centre | Department of Industry, Innovation and Science, Table B1.
On a per captia basis, WA's energy consumption is 1.8 times the national average, with the state typically the number one or second heaviest consumer in the nation. In the early 2000s WA was energy consumption was the highest in Australia on a per capita basis, with increased economic activity and the mining boom driving these patterns. The state has continued to remain the top energy consumer, with the NT energy consumption falling dramatically in recent times.
While most states and territories per capita energy consumption has been declining since the mid-2000s, WA's has continued to rise, although recently plateauing.
Over the 25 years shown, WA's energy consumption per capita has increased slightly from just below 350 to 400 gigajoules per year. The moderate increase in energy consumption in WA is quite interesting when compared to other states'. While energy consumption across the rest of the country recorded a modest decrease, energy consumption in WA has consistency grown at a moderate rate.
47 Figure 34 Annual energy ‘productivity’ by states and territories: 1990-01 to 2014-15
NSW has the 400 highest energy 350 "productivity". 300
250
200
150 Sm GSP per gigajoulles 100 Energy consumption 'productivity'
50
0 1990-91 1991-92 1992-93 1993-94 1994-95 1995-96 1996-97 1997-98 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15
NSW Vic QLD WA SA Tas NT AUS
Source: Bankwest Curtin Economics Centre | Department of Industry, Innovation and Science, Table B1.
To analyse the trend of contribution of the energy, Figure 34 displays the value of Gross State Product (GSP) for every Peta joule of energy, known as the `productivity' of energy. Lowest among the states and territories is NT, with NSW consistency reporting the highest productivity. All states and territories have a trended upwards, with some showing more rapid growth than others. Energy productivity in SA has had significant growth from 2009-10, now only behind NSW in energy productivity. With the exception of SA and NSW, all other states and territories are, and have been, below the national figures.
WA's energy productivity has increased from around 180 million per unit of energy (Peta joules) to around 260 million over the last 25 years. In the period between 2003-04 and 2008-09, WA's energy productivity aligns with national figures, however since then its productivity has dropped, keeping in line with Vic.
48 POWER TO THE PEOPLE WA’s Energy Future 49
Figure 35 Annual electricity consumption by states and territories: per million population, 1960-61 to 2014-15 Tasmania's 100 electricity 90 consumption per 80 capita is highest 70 across states and 60 territories. 50
(PJ/million) 40
30
20
10 Annual electricity consumption per million population 0 1960-61 1963-64 1966-67 1969-70 1972-73 1975-76 1978-79 1981-82 1984-85 1987-88 1990-91 1993-94 1996-97 1999-00 2002-03 2005-06 2008-09 2011-12 2014-15
NSW Vic QLD WA SA Tas NT
Source: Bankwest Curtin Economics Centre | Department of Industry, Innovation and Science, Table D1.
To clarify the consumption pattern across states and territories, we first look at electricity consumption, Figure 35, followed by energy consumption by fuel type, Figure 36. Figure 35 shows the units (Peta joules) of electricity consumption for every 1 million of population. Tasmania has the highest electricity consumption per capita among all other states and territories and SA has the lowest. Since the 1960s, all states and territories have shown growth in their per capita electricity consumption but the growth has smoothed out in recent years. Since 2008-09, some states have even recorded a reduction. What is clear from Figure 35, is NSW, Vic and Qld have shown a reduction in electricity consumption per capita since 2011-12. WA's electricity consumption per capita has steadily increased since the late 1970s, increasing by 2.5 times in last 40 years. WA consumed just under 20 units (Peta joules) of energy for every 1 million population in 1972-73, but according to 2014- 15 figures, the electricity consumption per capita in WA has increased to somewhere around 50 units (Peta joules).
In Figure 36, we look at the consumption trend by fuel type. Except for coal, WA is a top consumer of any fuel type among other states. In coal sourced energy consumption, WA is in the bottom half of the list among states and territories. In solar and gas sourced energy consumption, there is a substantial difference between WA and other states. WA's consumption of solar produced energy was fairly constant in the 25 years following 1978-9, but from 2005-06, consumption spiked and has increased since. A similar pattern is observable for Gas - constant in the period between 1969-70 and 1984-85, before starting an upward trend that carries through to 2014-15. The trend of WA's energy consumption generated by petroleum is interesting too. Petroleum recorded significant growth from 1690-61 to 1978-79, before dropping and staying almost constant until 2011-12, showing signs of an increase in last 5 years.
49 Figure 36 Annual energy consumption per million population, states and territories: by fuel type, 1960-61 to 2014-15 WA's consumption (a) Solar energy (b) Petroleum 1.6 200 of solar and 1.4 180 160 1.2 gas produced 140 1.0 120 energy was fairly 0.8 100 0.6 80 60 constant for many 0.4 40 million population (PJ/million) million population (PJ/million) 0.2 20 years but spiked Annual petroleum consumption per Annual solar energy consumption per 0 0 in recent years. 1960-61 1962-63 1964-65 1966-67 1968-69 1970-71 1972-73 1974-75 1976-77 1978-79 1980-81 1982-83 1984-85 1986-87 1988-89 1990-91 1992-93 1994-95 1996-97 1998-99 2000-01 2002-03 2004-05 2006-07 2008-09 2010-11 2012-13 2014-15 1960-61 1962-63 1964-65 1966-67 1968-69 1970-71 1972-73 1974-75 1976-77 1978-79 1980-81 1982-83 1984-85 1986-87 1988-89 1990-91 1992-93 1994-95 1996-97 1998-99 2000-01 2002-03 2004-05 2006-07 2008-09 2010-11 2012-13 2014-15
NSW Vic QLD WA SA Tas NSW Vic QLD WA SA Tas
(c) Coal (d) Gas
180 250 160 140 200 120 150 100 80 100 60 population (PJ/million) population (PJ/million) 40 50 20 Annual gas consumption per million Annual coal consumption per million 0 0 1960-61 1962-63 1964-65 1966-67 1968-69 1970-71 1972-73 1974-75 1976-77 1978-79 1980-81 1982-83 1984-85 1986-87 1988-89 1990-91 1992-93 1994-95 1996-97 1998-99 2000-01 2002-03 2004-05 2006-07 2008-09 2010-11 2012-13 2014-15 1960-61 1962-63 1964-65 1966-67 1968-69 1970-71 1972-73 1974-75 1976-77 1978-79 1980-81 1982-83 1984-85 1986-87 1988-89 1990-91 1992-93 1994-95 1996-97 1998-99 2000-01 2002-03 2004-05 2006-07 2008-09 2010-11 2012-13 2014-15
NSW Vic QLD WA SA Tas NSW Vic QLD WA SA Tas
Notes: Energy consumption for each state and territory expressed in Gigajoules (GJ) per million of state population. Population data figures drawn from ABS Cat.No 3101.0. Source: Bankwest Curtin Economics Centre | Authors’ calculations using Department of Industry, Innovation and Science Tables D1 to D8 (Australian and state/ territory energy consumption).
50 POWER TO THE PEOPLE WA’s Energy Future 51
Energy costs in WA
The costs of utilities - including electricity, gas and water - can be a significant imposition on households and businesses across the country. Rising energy costs Perth utility materially affect household financial wellbeing, and present challenges to business sustainability, a fact highlighted in the recent public concern expressed over the issue. prices have remained The energy market in Western Australia continues to be highly regulated, a feature consistently that the State shares with other jurisdictions in Australia. However, one point of below those in all difference to emerge in WA in the last two years relates to a change in responsibilities for planning and regulation. Although WA sits outside the National Energy Market other states and (NEM), the planning and regulatory functions for the State’s energy market are now territories since carried out by the national Australian Energy Market Operator (AEMO). the start of the
This section provides an overview of Consumer Price Index movements, both for WA millennium. utilities prices overall, and separately for electricity and gas prices. The analysis compares headline consumer energy prices in WA with other states and territories in Australia, as well as looking at real average household expenditures on energy and utilities.
Our findings serve to lay down a benchmark against which to judge the future evolution of energy costs in WA, and how affordability compares between households in the West and the rest of Australia. With planning and regulation ultimately impacting on residential and business energy prices, this analysis can also serve, at least, to provide context against which to judge the impact of the new regulatory framework for WA.
Utilities Overall, the composite utility price index for Perth has remained consistently below those for other state capital cities in every year since the start of the millennium, as The utility price shown in Panel (a) of Figure 37. Brisbane has faced the greatest overall utility price inflation since 2000, particularly in the period from June 2014 to date. Melbourne gap between ranks second in terms of growth in utility prices since 2000, followed by Adelaide and Perth and other Sydney. capital cities has widened since the Looking closer at utility price movements over time, Perth prices rose more rapidly in the two years from March 2009 to September 2011, by some 20 per cent annually. start of 2017. There was a short period of relative stability between 2013 and end 2015, but the most recent ABS data for June 2017 shows the price gap between Perth and Australia has again widened. This is due principally to recent sharp increases in utility prices in Adelaide, Brisbane, Melbourne and Sydney.
Panel (a) of Figure 37 also compares Perth utility prices to the national eight-capital average, and confirms the existence of a widening utility price gap between Perth and the rest of Australia, particularly between 2012 and mid-2014. After some narrowing in prices, the gap has again widened since the start of 2017.
51 Figure 37 Annual energy consumption per million population, states and territories: by fuel type, March 2000 to June 2017
(a) All utilities
States and territories Difference – Australia vs WA
400 350 350
350 300 300 300 250 250 250 200 200 200 150 150 150 100 100 100
50 50 50 utility CPI Index, March 2000=100 Utility CPI Index, March 2000=100 0 0 0 Jun 2002 Jun 2005 Jun 2008 Jun 2011 Jun 2014 Jun 2017 Jun 2002 Jun 2005 Jun 2008 Jun 2011 Jun 2014 Jun 2017 Sep 2001 Sep 2004 Sep 2007 Sep 2010 Sep 2013 Sep 2016 Sep 2001 Sep 2004 Sep 2007 Sep 2010 Sep 2013 Sep 2016 Dec 2000 Dec 2003 Dec 2006 Dec 2009 Dec 2012 Dec 2015 Dec 2000 Dec 2003 Dec 2006 Dec 2009 Dec 2012 Dec 2015 Mar 2000 Mar 2003 Mar 2006 Mar 2009 Mar 2012 Mar 2015 Mar 2000 Mar 2003 Mar 2006 Mar 2009 Mar 2012 Mar 2015
Sydney Melbourne Brisbane Gap: AUS-Perth (RHS) Perth Australia Adelaide Perth Canberra
(b) Electricity
States and territories Difference – Australia vs WA
400 350 350
350 300 300 300 250 250 250 200 200 200 150 150 150 100 100 100
50 50 50 utility CPI Index, March 2000=100 Utility CPI Index, March 2000=100 0 0 0 Jun 2002 Jun 2005 Jun 2008 Jun 2011 Jun 2014 Jun 2017 Jun 2002 Jun 2005 Jun 2008 Jun 2011 Jun 2014 Jun 2017 Sep 2001 Sep 2004 Sep 2007 Sep 2010 Sep 2013 Sep 2016 Sep 2001 Sep 2004 Sep 2007 Sep 2010 Sep 2013 Sep 2016 Dec 2000 Dec 2003 Dec 2006 Dec 2009 Dec 2012 Dec 2015 Dec 2000 Dec 2003 Dec 2006 Dec 2009 Dec 2012 Dec 2015 Mar 2000 Mar 2003 Mar 2006 Mar 2009 Mar 2012 Mar 2015 Mar 2000 Mar 2003 Mar 2006 Mar 2009 Mar 2012 Mar 2015
Sydney Melbourne Brisbane Gap: AUS-Perth (RHS) Perth Australia Adelaide Perth
(c) Gas
States and territories Difference – Australia vs WA
400 350 300
350 300 250 300 250 200 250 200 150 200 150 100 150 100 50 100
50 50 0 utility CPI Index, March 2000=100 Utility CPI Index, March 2000=100 0 0 -50 Jun 2002 Jun 2005 Jun 2008 Jun 2011 Jun 2014 Jun 2017 Jun 2002 Jun 2005 Jun 2008 Jun 2011 Jun 2014 Jun 2017 Sep 2001 Sep 2004 Sep 2007 Sep 2010 Sep 2013 Sep 2016 Sep 2001 Sep 2004 Sep 2007 Sep 2010 Sep 2013 Sep 2016 Dec 2000 Dec 2003 Dec 2006 Dec 2009 Dec 2012 Dec 2015 Dec 2000 Dec 2003 Dec 2006 Dec 2009 Dec 2012 Dec 2015 Mar 2000 Mar 2003 Mar 2006 Mar 2009 Mar 2012 Mar 2015 Mar 2000 Mar 2003 Mar 2006 Mar 2009 Mar 2012 Mar 2015
Sydney Melbourne Brisbane Gap: AUS-Perth (RHS) Perth Australia Adelaide Perth
Notes: CPI has been adjusted to an index reference period of March quarter 2000 = 100 – All Utilities include Electricity, Water and sewage, Gas and other household fuels. Source: Bankwest Curtin Economics Centre | Authors’ calculations from ABS Cat No. 6401.0 Consumer Price Index, Table 11.
And what has been driving these utility price changes? In particular, how do electricity and gas prices compare between Perth and other state and territory jurisdictions? Panels (b) and (c) of Figure 37 compare electricity and gas prices for Perth and the main state capitals since 2000, and against the national average over the same period.
Interestingly, while electricity prices have remained consistently lower in Perth than elsewhere, gas prices for Perth moved significantly higher compared to Australia, a feature of the relatively high demand for gas in Western Australia and with prices increasing at a faster rate since 2009-10.
52 POWER TO THE PEOPLE WA’s Energy Future 53
Electricity WA’s electricity market has remained in the public eye, and high on the WA Electricity prices government’s reform agenda, for a number of years. The state government’s supply in Perth almost company, Western Power, was separated in 2006 into four separate state-owned doubled between entities – Verve Energy, Western Power, Synergy and Horizon Power. 2008 and 2014. In April 2013, the WA Liberal Government announced that Verve and Synergy, respectively the State’s electricity generator and retailer, would be merged into a single entity, also called Synergy, from 1 January 2014. This move, part of a broader review of the WA Wholesale Energy Market (WEM), was prompted by high state subsidies of up to $500 million per year and a near doubling of electricity prices over the period from 2008 to 2014 (Figure 37 Panel b). As noted earlier, the State’s energy sector moved to a new national planning and regulation framework in 2015, overseen by the Australian Energy Market Operator (AEMO).
Electricity prices rose significantly in Western Australia over the period from 2009 to 2012, particularly in the South West of the State, after a period of price stability stretching for almost a decade before (Figure 37 Panel b). Electricity prices also increased in other states from 2009, and for some capital cities – notably Adelaide, Brisbane, Sydney and Melbourne - at a greater and for a longer period rate than Perth. Perth’s electricity prices stabilised from September 2013 to June 2017, with electricity price inflation remaining lower than a number of state capitals.
Gas The story of gas prices in Western Australia is a somewhat different to the electricity price narrative. WA’s gas price index leapt in June 2008, driven by a gas supply crisis precipitated by the Apache Energy plant explosion on 3 June 2008. The resultant loss of a third of the State’s gas supply drove Perth consumer gas prices to increase by 19 per cent between March and September 2008 (Panel c, Figure 37). Prices rose by up to 30 per cent from December 2009 to mid-2010, and sharply again in June 2011 and March 2012, the latter driven by the effects on gas prices of long-term gas contracts locked in by Japan after the Fukushima nuclear disaster. Gas prices stabilised from September 2013, with the gap between WA and national gas prices narrowing over the course of the last four years.
Rising prices place additional pressures on businesses that rely heavily on gas as an input to production. Gas prices and the balance between supply and demand have been a topic of policy attention both in WA and nationally. Indeed, the Economic Regulation Authority’s 2014 Microeconomic Reform inquiry focussed on gas supply as a key policy area for reform (ERA 2014).
In 2006, the WA state government introduced a reservation policy, later known as the Domestic Gas Reservation (DGR) policy. The DGR policy requires new gas company developments to provide a 15 per cent reserve of Liquid Natural Gas (LNG) exports for the domestic market. According to its proponents, the DGR policy is intended to give domestic gas users access to a greater share of the benefits of the State’s gas reserves, to stimulate the WA economy, and to ensure that gas supplies in Western Australia are secure, reliable, and affordable for the State’s households and businesses. The DGR policy remains in place, but also under scrutiny. Critics of the DGR policy challenge whether the intervention is justified either in maintaining a reliable, secure gas supply to WA, or in its original aim, on the grounds of industry market power, and argue that the benefits to WA domestic gas consumers from the initiative are more than outweighed by the costs to the State in foregone export earnings and economic activity.
53 Household utilities expenditure
Consumer price indices for public utilities such as electricity and gas are instructive WA’s fixed supply in providing a picture of aggregate utility price inflation over a specified period, but charge tariff they don’t easily translate either in to the dollar price of energy, or to real household energy expenditures. nearly doubled in July 2017, from WA’s Uniform Tariff Policy sets a common fixed supply charge (per day) and 48.60c to 94.91c a variable electricity charge (per kilowatt hour of electricity) for all small user residential households in metropolitan Perth and regional WA3. Figure 38 shows the per day, up 95 trajectory of charges for residential tariffs A1 and A2. The most noticeable feature per cent on 2016’s being the near doubling of the fixed supply charge in July 2017, from 48.60c to supply tariff. 94.91c per day, an increase of 95 per cent on 2016’s fixed supply tariff.
Figure 38 Regulated residential electricity tariff charges for WA: July 2009 to July 2017
100 94.9058
90
80
70
60 48.5989 45.1516 47.1834 50 43.2072 41.5455 38.2291 40.1405
Cents per day 4032.329 27.0016 25.7029 26.474 26.474 30 24.8866 23.5369 20.8251 21.8664 17.611 20
10
0 July 2009 July 2010 July 2011 July 2012 July 2013 July 2014 July 2015 July 2016 July 2017
Supply charge - cents per day Electricity charge - cents per unit (Kw/h)
Notes: Charges are for residential electricity Tariff A1 and A2. Supply charges are expressed in cents per day, and electricity charges presented in cents per Kilowatt/hour (kW/h). Source: Bankwest Curtin Economics Centre | Energy Operators (Powers) Act 1979 - Energy Operators By-laws 2006 (WA).
3 Subsidies from WA government, and Tariff Equalisation Contributions drawn from network charges in the South West Interconnected System, are used to support the Uniform Tariff Policy, given that supply costs to regional areas are higher relative to the more densely populated urban and inner regional areas of metropolitan Perth and the South West.
54 POWER TO THE PEOPLE WA’s Energy Future 55
Table 5 Proportion of total energy consumption sourced from renewables, states and territories: 2008-09 to 2014-15 July July July July July July July July July 2009 2010 2011 2012 2013 2014 2015 2016 2017 Weekly costs $ $ $ $ $ $ $ $ $ Supply Charge 2.26 2.68 2.81 2.91 3.02 3.16 3.30 3.40 6.64 Usage Charge 18.49 21.87 22.96 26.13 24.71 28.35 26.99 27.80 27.80 Total Charge 20.75 24.54 25.77 29.04 27.74 31.51 30.29 31.20 34.44 Annual costs $ $ $ $ $ $ $ $ $ Supply Charge 118 139 146 151 157 164 172 177 345 Usage Charge 962 1,137 1,194 1,359 1,285 1,474 1,403 1,445 1,445 Total Charge 1,079 1,276 1,340 1,510 1,442 1,639 1,575 1,622 1,791
Notes: Illustrative weekly residential household energy costs are calculated for households consuming 15kW/h on Tariff A1. Charges are those presented in Figure 38. Source: Bankwest Curtin Economics Centre | Authors’ calculations from WA Treasury (sources as for Figure 38).
The fixed supply and electricity charge tariffs translate to a household electricity cost according to the level of electricity consumed by a family in a given period. If a household consumed an illustrative average of 15kWh of electricity per day (Table 5), then their electricity bill in 2017 would be $34.44 per week, or $1,791 per year.
The progression of costs from 2009 to 2017 for a 15kWh per day rate of residential household consumption is shown in Figure 39, along with the annual percentage change in costs. The cost has risen from $1,079 to $1,791 in eight years, equivalent to a total (nominal) increase of 66 per cent. Indeed, costs have increased annually by more than than 10 per cent in four years – 2010, 2012, 2014 and 2017 – with the most recent increase of 10.4 per cent in 2017 caused by the near doubling of the fixed supply charge.
Figure 39 WA annual electricity costs: illustrative WA residential household, July 2009 to July 2017
2,000 +10.4% 1,800 +13.6% +3.0% +3.9% 1,600 +12.7% +4.5% 1,791 1,400 +5.0% +18.3% 1,622 1,639 1,575
1,200 1,510 1,442 1,340 1,000 1,276 81% 800 89% 90% 89% 1,079 90%
600 89% Annual l Electricity costs ($) 89% 89% 400 89%
200 19% 11% 11% 10% 10% 11% 11% 11% 0 11% 2009 2010 2011 2012 2013 2014 2015 2016 2017
Supply Charge Usage Charge
Notes: Illustrative weekly residential household energy costs are calculated for households consuming an average of 15Kw/h per day on Tariff A1. Source: Bankwest Curtin Economics Centre | Energy Operators (Powers) Act 1979 - Energy Operators By-laws 2006 (WA).
55 The WA government operates a one-off Hardship Utility Grant Scheme (HUGS) for households experiencing financial difficulties in paying their electricity, gas or other utilities bills. The HUGS scheme delivers up to $581 in hardship payments (equivalent to a third of the costs of 15kWh in electricity consumption), rising to $962 for residents living above the 26th parallel. HUGS payments are administered by utility providers for Commonwealth concession cardholders, while eligibility for those not holding a concessions card is contingent on them also signing up for financial counselling.
The rise in demand for HUGS grants, taken together with rising rates of customers going onto payment plans to service their debts and the growing number of disconnections are all indicators of increasing energy hardship in WA.
Household energy expenditure shares by income In recent conversations about affordable energy, some commentators have argued that the typical share of household expenditure on electricity, gas and other household fuels is a modest 3 or 4 per cent of total spending, and imply (and in some cases, assert) that claims about the impact of rising energy costs on financial wellbeing are overstated.
New analysis in this BCEC Focus on Industry report reveals that this conjecture fails to recognise the significant impost that energy costs can have on the family budget. Figure 40 shows how the share of household energy spending at different levels of income, using a variant of the classic Engel expenditure share curve (named after the nineteenth century German statistician Ernst Engel).
Figure 40 WA household expenditure shares on utilities, by income percentile: 2007-08, 2011-12 and 2014-15
(a) Couples, no children (b) Couples, with children
12 36 12 36
10 30 10 30
8 24 8 24
6 18 6 18 range (%) range (%) 4 12 4 12
2 6 2 6 gas and utilities expenditure (%) gas and utilities expenditure (%) Share of lone persons in percentile Share of lone persons in percentile Share of income devoted to electricity, 0 0 Share of income devoted to electricity, 0 0 5 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95 100 100 Percentile of equivalised household income Percentile of equivalised household income
(RHS) Relative share of lone persons Utilities spending share - 2007-08 (RHS) Relative share of lone persons Utilities spending share - 2007-08 Utilities spending share - 2010-11 Utilities spending share - 2014-15 Utilities spending share - 2010-11 Utilities spending share - 2014-15 Upper ci Lower ci Upper ci Lower ci
(c) Single parents (d) Lone persons
12 36 12 36
10 30 10 30
8 24 8 24
6 18 6 18 range (%) range (%) 4 12 4 12
2 6 2 6 gas and utilities expenditure (%) gas and utilities expenditure (%) Share of lone persons in percentile Share of lone persons in percentile Share of income devoted to electricity, 0 0 Share of income devoted to electricity, 0 0 5 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95 100 100 Percentile of equivalised household income Percentile of equivalised household income
(RHS) Relative share of lone persons Utilities spending share - 2007-08 (RHS) Relative share of lone persons Utilities spending share - 2007-08 Utilities spending share - 2010-11 Utilities spending share - 2014-15 Utilities spending share - 2010-11 Utilities spending share - 2014-15 Upper ci Lower ci Upper ci Lower ci
Notes: Household energy expenditure share schedules for each family type have been generated using local polynomial regression. The dotted lines for 2014/14 are confidence intervals to capture sampling variability. Household incomes (after housing costs) are scaled (equivalised) to control for family size. Separate schedules are presented for the three periods 2007-08, 2011-12 and 2014-15. Source: Bankwest Curtin Economics Centre | Authors’ calculations using HILDA Waves 6 to 15.
56 POWER TO THE PEOPLE WA’s Energy Future 57
The first clear finding from Figure 40 is that energy share costs rise substantially as incomes fall, for all family types. Energy expenditure shares can rise beyond 10 per cent of total spending for those families in the lowest tenth of the income distribution (below the 10th percentile). This compares with energy cost shares of 3 per cent for typical families on middle incomes (around the 50th percentile) and below 2 per cent for those families with incomes in the top quarter (above the 75th percentile).
In fact, energy cost shares have risen over time for certain family groups. The red and orange schedules in Figure 40, which show energy cost shares in 2011-12 and 2014-15 respectively, are higher than the blue cost schedule for 2007-08. This is especially the case for single parent families (Panel c of Figure 40), and aligns closely with findings reported in two recent studies into energy poverty by BCEC (Cordwell et al, 2016) and by the Victorian Council of Social Services (VCOSS, 2017).
57
Power Energy is an absolute essential to attain, and maintain, a basic quality of life. In For many families managing the household budget, families strive for a roof over their heads, food on on low incomes, the table, healthcare, decent clothing for themselves and their children - and power. Energy provides a means by which people to heat their homes, prepare their meals, the cost of energy remain connected to their friends and communities, and access goods and services. is significant and So how do we make sure no one is left behind? forces them to Figure 40 makes very clear that appealing to the notion of ‘typical’ household energy compromise on spending fails to recognise that for many families on low incomes, especially those other expenditure with dependent children, the cost of energy is significant. For some, the financial items. burden of meeting housing and energy costs forces them to compromise on other expenditure items.
The next section of this BCEC Focus on Industry report provides an more in-depth examination of energy expenditure in Western Australia. We compare actual spending by different families in Western Australia to their comparators in other states and territories, and how this spending has changed over time. We also assess the share of households for whom energy spending represents a significant financial burden.
60 POWER TO THE PEOPLE WA’s Energy Future 61
Household energy costs and energy poverty
Table 6 compares the average weekly household expenditure on electricity, gas and other heating fuels for different family types, and across states and territories, using the Household Income and Labour Dynamics in Australia (HILDA) survey, with expenditure data uprated to July 2017. Western Australian households rank fifth overall in energy spending at an overall weekly average of $40.64. Couples with children spend more per week on energy than other family types, at an average of $49.31 per week. Single parent families spend $37.23 on energy costs, the second highest in value terms and higher still in income share terms given the lower typical incomes for this equity group.
Australia’s two territories rank highest in terms of average household energy expenditure, followed by Victoria and South Australia. These jurisdictional differences aren’t driven solely by energy costs, with some of the difference attributable to variations in climate, and the consequent use of heating or air conditioning.
Table 6 Average household energy spending, by state/territory & family type, uprated to June 2017 Couples, Couples with Single Lone Other All family no children children parents persons households types $ p/w $ p/w $ p/w $ p/w $ p/w $ p/w Northern Territory (a) 54.30 2 56.28 3 45.36 2 24.56 4 33.78 7 52.21 1 Australian Capital Territory 56.04 1 52.91 4 46.50 1 23.88 5 35.89 3 50.77 2 Victoria 41.35 3 56.31 2 42.56 4 29.27 1 36.10 2 46.54 3 South Australia 37.09 4 56.39 1 42.57 3 26.19 2 52.99 1 44.84 4 Western Australia 34.20 5 49.31 5 37.23 6 23.50 6 34.18 6 40.64 5 New South Wales 33.97 6 47.88 6 36.33 7 23.21 7 35.40 4 39.65 6 Tasmania 28.94 7 46.78 7 38.38 5 25.76 3 35.15 5 37.21 7 Queensland 25.79 8 42.92 8 28.33 8 18.65 8 32.86 8 33.79 8
Notes: Household weekly expenditure on energy is calculated for each family type using HILDA waves 14 and 15. Data are uprated to July 2017 using CPI. (a) Results for Northern Territory should be treated with caution due to small sample size. Source: Bankwest Curtin Economics Centre | Authors’ calculations using HILDA Waves 14 and 15.
Looking at Western Australian households in particular, Table 7 shows how average real household spending has changed in the State over the ten years since 2006-07. The largest growth in spending by WA households occurred between 2008-09 and 2010-11, rising by around $6.50 on average across all family types to $39.76 in the two years to 2010-11 in today’s prices. Energy spending has been relatively stable as an overall average since then, but for single parents the increase in spending has been far more acute – up 39 per cent in real terms over ten years, and 10 per cent over the last two years alone.
61 Table 7 Average household spending on utilities in WA: by family type, 2006-07 to 2014-15 2006-07 2008-09 2010-11 2012-13 2014-15 $ p/w $ p/w $ p/w $ p/w $ p/w Couple only 29.86 32.19 35.72 35.88 34.20 Couple with kids 39.20 37.87 45.52 49.41 49.31 One parent with kids 26.79 31.84 33.78 35.96 37.23 Lone person 19.25 20.72 21.50 22.16 23.50 Other households 27.79 19.46 43.68 24.40 34.18 All family types 33.43 33.21 39.76 40.83 40.64
Notes: Household weekly expenditure on energy is calculated for each family type using HILDA waves 14 and 15. Data are uprated to July 2017 using CPI. Source: Bankwest Curtin Economics Centre | Authors’ calculations from HILDA.
As noted earlier, a focus just on average or typical spending conceals some wide variations in spending patterns for different family groups. To give more of an idea of the spread of energy spending commitments for WA households, Figure 41 reports the distribution of household energy expenditure shares using HILDA data for 2014-15. The typical (or “median”) energy cost shares are around 4.7 per cent overall for all household types, 4.6 per cent for single parent households and 4.8 per cent for couples with children. However, the spread of energy cost shares vary markedly by family type.
Single parents in particular commit to a far wider spread of energy expenditure as a share of after housing cost incomes. Around a quarter of single parents commit at least 10.2 per cent of their income towards energy costs, and one in ten spend at least 15.1 per cent.
Figure 41 Variation in household utility expenditure shares in WA, by family type: 2009 to 2017
State Lower Typical Higher Percentiles 10th 25th 50th 75th 90th Couple only 1.5 2.9 4.3 6.5 9.3 Couple with kids 1.9 3.3 4.8 6.7 9.5 One parent with kids 1.8 2.8 4.6 10.2 15.1 Lone person 1.4 3.1 5.2 8.1 12.2 Group household 0.4 2.9 4.6 8.3 10.0 Other one/multi households 3.5 4.3 5.6 7.8 10.8 All households 1.8 3.2 4.7 6.9 10.1
Other one/multi households
Group household
Lone person
One parent with kids
Couple with kids Family Type Couple only
All households
0 2 4 6 8 10 12 14 16 Spread of household energy expenditure shares
Source: Bankwest Curtin Economics Centre | Authors’ calculations from HILDA.
62 POWER TO THE PEOPLE WA’s Energy Future 63
High energy cost burdens materially affect households’ capacities either to cover heating costs, or in seeking to do so, to afford other household spending necessities. Figure 42 shows the share of WA households who report that they spend more than 10 per cent of their incomes on energy – a standard measure of ‘energy poverty’. The growth in the prevalence of high energy cost shares over time is quite apparent from these results, and for certain equity groups – especially for single parents, and older single men and women - the rate of growth in energy poverty has been significant.
Figure 42 Shares of WA households with more than 10 per cent of expenditure on utilities: by family type: 2006-07 to 2014-15
30
25 26.2
20 22.3 20.9 19.8
15 18.9 14.7 14.9 13.5 13.4
10 13.2 11.3 10.9 10.2 10.2 10.2 9.3 9.2 9.0 8.6 8.2
5 7.7 8.0 7.5 7.1 6.7 6.3 6.2 5.3 5.2 3.8 more than 10% of total spending after housing costs (%)
Share of families for whom energy costs (exc.motor fuel) are 0 Non- Non- Non- One Non- Non- Elderly Elderly Elderly Group/ elderly elderly elderly parent elderly elderly couple single single other couple couple couple with kids single single male female households only with kids with kids female female
2006-07 2010-11 2014-15
Source: Bankwest Curtin Economics Centre | Authors’ calculations from HILDA.
In a recent speech, John Durkan, Managing Director of the Coles supermarket chain, claimed that high energy costs were forcing people to compromise on either the quality or quantity of the food they buy – less fresh food, more cheaper options - or simply less food.
There is some evidence to support this claim. Figure 43 looks at how the shares of spending by WA single parents on energy, health and groceries vary both by income, and over time. As noted earlier, the share of income devoted to spending on energy has risen over time for low income single parents – as shown by the orange schedule in Panel (a) of Figure 43 for 2014-15 sitting above the red and blue curves for energy spending in earlier years. The share of household spending on groceries has fallen over the same period at most levels of income, and for health spending, those single parents on the lowest incomes have reduced their spending shares since 2007-08.
63 Figure 43 Share of spending on utilities, health and groceries by WA single parents, by income percentile: 2007-08, 2011-12 and 2014-15
(a) Utilities
12 36
10 30
8 24
6 18 range (%) 4 12
2 6 gas and utilities expenditure (%) Share of single parents in percentile Share of income devoted to electricity, 0 0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95 100 Percentile of equivalised household income
(RHS) Relative share of lone persons Utilities spending share - 2007-08 Utilities spending share - 2010-11 Utilities spending share - 2014-15 Upper ci Lower ci
(b) Health and pharmaceuticals
12 36
10 30
8 24 6 18 4 range (%) 12 2
0 6 gas and utilities expenditure (%) Share of single parents in percentile Share of income devoted to electricity, -2 0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95 100 Percentile of equivalised household income
(RHS) Relative share of lone persons Health spending share - 2007-08 Health spending share - 2010-11 Health spending share - 2014-15 Upper ci Lower ci
(c) Groceries
50 50 45 45 40 40 35 35 30 30 25 25
20 20 range (%) 15 15 10 10
gas and utilities expenditure (%) 5 5 Share of single parents in percentile Share of income devoted to electricity, 0 0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95 100 Percentile of equivalised household income
(RHS) Relative share of lone persons Food spending share - 2007/8 Food spending share - 2010-11 Food spending share - 2014-15 Upper ci Lower ci
Notes: Household energy expenditure share schedules for each family type have been generated using local polynomial regression. The dotted lines for 2014-15 are confidence intervals to capture sampling variability. Household incomes (after housing costs) are scaled (equivalised) to control for family size. Separate schedules are presented for the three periods 2007-08, 2011-12 and 2014-15. Source: Bankwest Curtin Economics Centre | Authors’ calculations from HILDA.
64 POWER TO THE PEOPLE WA’s Energy Future 65
Households’ access to solar technologies
In earlier discussions, we noted the rapid growth in household rooftop Solar PV installations. In Western Australia, the combined capacity of distributed household rooftop solar currently amounts to some 730MW in electricity generation, equivalent to the capacity output of one of the state's largest power stations and one tenth of the state's total electricity generation capacity from non-renewable fuel. By 2020, distributed electricity generation is forecast to grow to 2,000MW.
Set against a background of rising energy costs, part of the ongoing debate on the future of energy highlights the trend for more households to move `off-grid' through Solar PV installations. With more use of emerging technologies in battery storage, distributed generation, this future direction includes a greater potential for households to produce as well as consume electricity, either to the current grid, or through new micro-grids, with exchange facilitated by new developments in blockchain (Green and Newman, 2017a).
To address high energy costs, households can be encouraged to manage energy usage by modifying energy consumption behaviours or through smart metering solutions. While WA currently operates a fixed electricity tariff structure, consumers in other states are incentivised to take advantage of peak and off-peak tariff charges. But some emerging technologies are not as yet accessible to all equity groups. Going `off the grid', installing Solar PV - ideally with storage solutions - sound compelling, but for many householders, such technology is inaccessible, either because they can't afford the up-front costs, because they live in rented accommodation, or because their properties are not suitable for solar installations.
Figure 44 Share of suitable WA dwellings with rooftop Solar PV installed: to June 2017, by level of socioeconomic disadvantage
35 30.9 29.4 28.7 28.9 28.9 30 27.3
25 21.1 21.5 18.8 20 16.0
15
10 7.4
5 Share of suitable dwellings with rooftop solar PV (%)
0 Decile 1 Decile 2 Decile 3 Decile 4 Decile 5 Decile 6 Decile 7 Decile 8 Decile 9 Decile 10 All (lowest) (highest)
Level of socioeconomic advantage (Decile of SEIFA index of Relative Socioeconomic Advantage and Disadvantage (IRSAD)
2001-2015 2016 2017
Notes: Dwellings deemed suitable for Solar PV installation currently include separate houses, or semi-detached row or terraced houses, a classification that follows ABS Cat.No 4631.0 (Table 11). Local Government Areas are classified into deciles of the SEIFA Index of Relative Socio-Economic Advantage and Disadvantage using 2011 Census data collated in Abs Cat. 2033.0. The number of Solar PV installations in each LGA are aggregated from postcode level using ABS concordances. Source: Authors' calculations using Clean Energy Regulator data on solar PV by postcode to June 2017, ABS Census 2011 and 2016 data, and Abs Cat. 2033.0.
65 To see this, Figure 44 presents estimates of the share of `suitable' properties with rooftop Solar PV installations across Local Government Authority (LGA) areas in Western Australia, but where LGAs are in addition classified in deciles according to the level of socio-economic disadvantage - the lower the decile, the greater the local area disadvantage.
Figure 44 shows there to be a very clear socio-economic gradient in household solar installations in Western Australia, with rooftop Solar PV installed in only 7.4 per cent of suitable dwellings in areas in the lowest socio-economic decile, and 16 per cent of suitable houses in the second lowest decile. The share of WA households with Solar PV installations rises and flattens to around 30 per cent for mid to high socioeconomic areas (deciles 5 and upwards).
New household Solar PV installations across Western Australia in 2016 - shown in maroon in Figure 44 - acted to reduce some of this socioeconomic gradient. Nevertheless, WA still has a good way to go to match other states in terms of equity of households' access to Solar PV across the socioeconomic spectrum.
Comparing Western Australia with other states and territories (Table 8), the State ranks third in the share of suitable dwellings with Solar PV installed - an estimated 27.3 per cent to June 2017. Queensland ranks top on this overall measure, at 33.7 per cent, followed by South Australia at 33.2 per cent. However, the uptake of household Solar PV in WA's lower socioeconomic areas (the bottom three deciles in Table 8) does lag behind almost all other state jurisdictions. Greater access to renewable energy options is something WA should seek to address in moving to a new energy landscape.
Table 8 Shares of suitable WA dwellings with rooftop Solar PV installed: to June 2017, by state/ territory and level of socioeconomic disadvantage Share of suitable dwellings with rooftop Solar PV installations State or territory Level of disadvantage NSW Vic QLD SA WA Tas NT Decile 1 (most disadvantaged) 16.5% 0.0% 4.2% 29.7% 7.4% 21.2% 0.0% Decile 2 20.6% 14.0% 36.1% 30.4% 16.0% 11.0% 12.7% Decile 3 21.8% 18.5% 28.7% 34.7% 18.8% 13.7% 3.2% Decile 4 21.0% 21.4% 30.3% 34.3% 21.1% 15.0% 5.5% Decile 5 20.3% 18.5% 38.4% 33.0% 29.4% 15.6% 0.8% Decile 6 16.4% 19.3% 26.2% 38.5% 28.7% 11.1% 7.3% Decile 7 16.0% 16.8% 37.9% 31.8% 28.9% 14.4% 10.9% Decile 8 12.0% 19.8% 35.5% 62.2% 28.9% 13.6% 18.1% Decile 9 14.4% 13.6% 30.5% 31.6% 30.9% 15.4% 11.6% Decile 10 (most advantaged) 11.6% 10.7% 0.7% 30.7% 21.5% 0.0% 5.8% All 16.8% 16.2% 33.7% 33.2% 27.3% 14.0% 12.3%
Notes: Illustrative weekly residential household energy costs are calculated for households consuming 15kW/h on Tariff A1. Charges are those presented in Figure 38. Source: Bankwest Curtin Economics Centre | Authors’ calculations from WA Treasury (sources as for Figure 38).
66 WA’s Energy Future: Summary and Discussion WA’s Energy Future: Summary and Discussion
For this second report in the Bankwest Curtin Economics Centre’s Focus on Industry series, we look at a sector facing arguably the most significant transformation in its lifetime – the energy sector.
Australian states have experienced significant price rises in recent years. We now have some of the most expensive power in the world, and energy hardship is an emerging national concern. At the same time, the way in which we produce, distribute and consume electricity is changing rapidly with the advent of ‘disruptive’ technologies and the move to a decentralised grid.
We are on the cusp of an energy revolution. But are we ready for the journey? Do we know what to expect on the way? And do we have a clear roadmap to take us to the new energy future?
The report looks at the current energy landscape in Western Australia, looks at our innovation and productivity capabilities, and our preparedness for the energy revolution now upon us. The report highlights the key challenges, risks and policy issues requiring attention to ensure that WA’s energy system provides reliable power to the state’s households and businesses at the right time, in the right place, and at a price that all can afford.
68 POWER TO THE PEOPLE WA’s Energy Future 69
Evolution of the WA energy sector
The Western Australian energy sector is already different from those in other state and territory jurisdictions. Our isolation from the Eastern states saw WA’s energy market develop separately from the national energy grid, building reliable and resilient generation capacity. Yet this hasn’t protected the state from the national affliction of electricity and gas price inflation.
For Western Australia, some key drivers of rising energy prices have included:
• the period of rapid population growth and industry expansion;
• significant investment in network infrastructure and generation capacity, coupled with an over-prediction of energy demand
• costs of maintenance upgrades to bring the state’s transmission system up to standard, adding to cost pressures from rising wholesale energy prices
• an overestimation of demand for network electricity, linked to a failure to foresee the extent of household investment in rooftop Solar PV.
The structural shift in WA energy demand in 2010 was not predicted to occur at anything like the pace that eventuated. In no sense was this specific to Western Australia; the AEMC regards over-forecasting of energy demands to have occurred all across Australia. Over-forecasting of demand led to excess capacity and short-run pressure on energy prices.
Many energy experts trace the origins of recent increases in energy prices back to overly optimistic forecasts of future demands for network electricity at the start of the decade, caused in large part by a significant underestimation of household take- up of solar PV installations and advances in energy efficiency.
• Greater infrastructure cost commitments require demand to grow to maintain energy price stability, but instead, the combination of falling demand and rising infrastructure costs led to reverse economies of scale in which a greater share of fixed and sunk costs are borne by a smaller share of electricity consumers. The structural drop in electricity demand in Western Australia created excess capacity that some energy economists have estimated at up to 1000MW - the equivalent of three 300MW power stations.
69 The future energy landscape
This Focus on Industry report finds that Western Australia currently lags well behind other states and territories when it comes to investment in large-scale renewable energy capacity. The drive towards renewables has been led by households who have responded to energy prices by moving to rooftop solar PV systems, some 730MW in aggregated capacity.
Emerging technologies and falling prices for solar PV and battery storage are disrupting the traditional utility business model and opening up possibilities for new models – including more localised and distributes solutions like micro-grids, precinct scale responses and ‘citizen utilities’. Energy companies are now facing some stark choices – they can innovate and adapt to the new world, or look for their way out … but at some point existing energy assets are likely to become stranded and business as usual will no longer be an option.
A fundamental change in the mix of energy sources towards renewables is clearly part of WA’s energy future. But there remains work to be done to increase the level of generation relative to capacity for renewable energy sources – and hence it is hard to see a medium-term future for energy that doesn’t involve traditional non-renewable generation in some form.
The solution requires innovative localised responses through citizen utilities and the development of new residential precincts incorporating renewable energy generation at scale; innovation and adaptation from large energy utilities to new business models; and regulations and policy settings that ensure the most efficient price transition to a new energy future with effective protections for customers’ basic rights to ensure that no-one is left behind.
Efficient, cost-effective storage solutions for renewable (but variable) wind and solar energy will be a game changer for the energy sector. So too will be the advent of new technologies that can dispatch power from renewable stored energy to the grid, at scale and at a rate that responds to peak load demands.
Electricity production capabilities are still largely tied to power generation that needs to respond to the different load demands between peak and shoulder periods in the morning and evening, and off peak periods at night and during the middle of the day.
Gas turbines and reciprocating gas generators currently fill this role, supplementing base load generation from coal-fired power stations that deliver cheaper electricity but can’t so easily be ‘turned up and down’ to match time of day variation in load.
Although the marginal cost of wind and solar power is low, the costs of maintaining a generation contingency to cover peak load demands, downtime or failure, and variations in climate necessarily add to the electricity price.
But with storage solutions that can dispatch power to the network at scale to meet variable residential electricity demands, there is an opportunity for power generation - from either from renewable or non-renewable sources – to be uncoupled from load demands.
This offers the enticing prospect of more efficient utilisation of productive capacity - and a reduction in redundant capacity – which would massively contribute to reduced energy prices.
70 POWER TO THE PEOPLE WA’s Energy Future 71
Energy affordability
Affordable energy provides the means by which people to heat their homes, remain connected to their friends and communities, and access goods and services. Yet this report finds that energy affordability remains an issue for many families, and for many, a growing issue.
Our findings show that high energy costs impose a significant burden for many households, especially those on low incomes. Single parents, and older age single men and women are more likely to be in energy poverty. A quarter of single parents in WA spend more than a tenth of their after-housing costs income on electricity, gas and heating, with one in ten spending 15 per cent or more. And there is evidence that some families are compromising on other essentials to meet rising energy costs, including food and healthcare.
So how do we make sure no one is left behind?
Time-of-use tariff arrangements (with higher costs in peak and shoulder periods) would incentive households with solar PV and storage to draw electricity from ‘behind the meter’ to see them through to the low cost tariff period.
However, households without solar PV access could be left to face peak period pricing – and our research shows that more of these families are already at higher socioeconomic disadvantage. The potential for a separation of energy markets separation on socioeconomic lines is a concern that must be countered in any future energy market arrangements.
New developments in technology have the potential to smooth the peaks and troughs of electricity load at the network, precinct or household level through efficient and dispatchable power storage. The challenge is to get the incentive settings right, ensuring least cost options applicable to different environments, and to households in different socioeconomic circumstances.
71 What does the Finkel Review mean for WA?
A number of the recommendations in the Finkel Review are already in play in Western Australia.
By virtue of WA’s isolation from the National Energy Market, the state’s energy network already includes system infrastructure with relatively high levels of security. The greater challenge regarding the Finkel recommendations is the need to ensure that the state’s interests are kept at the forefront of the management and oversight of Australia’s electricity system.
The Finkel report supports carbon pricing as a means to accelerate low emissions targets and price externalities associated with emissions, but is agnostic on the question of tariff structures. This may be an important part of the story, creating behaviours that can improve efficiencies in the electricity system but without imposing cost burdens on families at greatest socioeconomic disadvantage. There has also been significant public concern regarding tariff arrangements in play in some states and territories that are often less than transparent, and that invite confusion and uncertainty on the part of consumers.
The Finkel recommendation relating to market oversight calls for a national energy security panel. However, given the fundamental transitions underway in energy markets nationally, and given the recent concern regarding rising energy prices, the scope of this panel seems too narrow. Rather, we need a panel that looks holistically at security, reliability and affordability in the context of a changing energy landscape.
72 POWER TO THE PEOPLE WA’s Energy Future 73
Regulation
The energy market is exceptionally complex, probably more so than any other market, and far from the economic notion of a ‘perfectly competitive’ market with demand, supply and price converging efficiently. The case for effective regulation is all the more imperative in Western Australia given the rapid changes taking place in the state’s energy markets from ‘disruptive’ technologies, growth in distributed electricity generation, and a rising share of producer-consumer households.
With regulation and planning functions for the wholesale electricity market recently transferred to AEMO, one concern for Western Australia has been to ensure that the national body retains local knowledge of the WA energy system, and ensures that energy reliability, security and affordability to WA households and businesses remain at the forefront of any rule or regulatory changes.
WA’s regulatory framework needs to be future-proofed, flexible and adaptable to different energy futures. With more distributed electricity generation, and the emergence of new possibilities for distribution and trade, it seems inevitable that the regulatory landscape will have to change.
It is tempting to imagine that our energy future will include a far lighter touch to regulation. But this ignores some of the core features of a market characterised by risk and uncertainty, challenges in predicting future demand trends, and in meeting variable demands, imperfect competition and market power by large scale industry players. All provide conditions for some form of regulatory intervention.
As part of the intervention framework, subsidies need to be carefully considered in terms of their base rationale, impact on market competitiveness, and coverage of different energy sources. We need to be careful to consider all criteria by which intervention and regulation should be judged – affordability, security, reliability, efficiency and equity.
And whatever direction is taken, it is important not to lose sight of the fact that regulatory systems are in large part about consumer protection. It is critical that such protections remain in place as energy markets evolve, however large the place of distributed generation in the energy future.
73 A roadmap to our energy future
The journey to Western Australia’s energy future requires clear leadership and a collaborative approach from all stakeholders to transformation, adaptation and change. The greatest challenge is to agree on solutions that will improve affordability and breadth of access, and defend against the risks of a bifurcation of electricity markets in which households in socioeconomic disadvantage are either excluded from the benefits of new technologies or bear higher electricity costs as a result.
To navigate the journey effectively, we need a clear roadmap, one that integrates existing and emerging energy technologies from non-renewable and renewable power sources, as well as the huge and growing latent capacities of household solar PV installations.
An important part of the journey towards improved affordability is to optimise productive capacities of all platforms while maintaining equity, reliability, security, and minimising negative externalities. This will ensure that prices are as competitive as possible, and reflect the most efficient, equitable use of resources that also deliver on environmental low-emissions targets.
Another challenge is to manage the risks associated with non-renewable stranded assets losing value as the move to non-renewable sources gathers pace.
From our reading of the array of contributions on the topic, the current debate on the future of energy points to a highly contested space.
This emphasises the importance of leadership, informed by the best knowledge and insights from research, business and community stakeholders, to optimise and integrate all energy technologies (existing, developing and emerging) within a less adversarial conversation.
Western Australia needs a clear statement of direction to navigate a way through the energy revolution that’s upon us. This will give greater certainty to the energy future we can all expect – and critically, ensure that no one is left behind.
Our energy future should be one that really does provide Power to All the People.
74 Glossary and Technical Notes Glossary and Technical Notes
Gross Value Added (GVA) Gross Value Added is the measure of the value of goods and services produced in an area, industry or sector of an economy. In national accounts, GVA is output minus intermediate consumption.
Gross State Product (GSP) Gross State Product (GSP) is a measure of the economic output of a state, province or region, and serves as the counterpart to gross domestic product for a country. Conceptually, GSP is measured on the same basis as GDP, although there are practical difficulties in measuring ‘import’ and ‘export’ flows across state boundaries, and attributing state-specific income accruing from factors of production in national and multinational firms.
Watt hour (Wh) Watt hour is a derived unit of energy used or produced in one hour period. Typically, consumption of a 40” LED TV that runs for one hour will be 40 watt hour. There are a number of incremental units of measurement for energy, namely Kilo, Mega, Giga, Tera, Peta, Exa and etc. From each scale to next there is 1,000 unit jump. Therefore, one Kilowatt hour (KWh) will be 1,000 Watt hour and one Megawatt hour (MWh) will be 1,000 KWh, one Gigawatt hour is 1,000 MWh or 106 KWh. Terawatt hour and Petawatt hour are large scales used for aggregated values. One Terawatt hour is 1,000 MWh and one Petawatt hour is 1,000 Terawatt hour.
Joule (J) According to the International System of Units, Joule is a unit of energy equivalent to one watt for one second and therefore one joule is 1/3600 of a watt-hour. Joule is used more often to measure thermal energy or derived energy in physics. Similar to any other units of measurement there are incremental scales such as Kilo, Mega and etc. Joule can be converted to watt as well by considering that 1 watt hour is 3,600 joules or 1 joule is 0.000277778 watt hour.
Solar PV A Photo Voltaic (PV) system consists of an arrangement of several components, including solar panels to absorb and convert sunlight into electricity.
Bio energy Bioenergy is renewable energy made available from materials derived from biological sources.
Hybrid energy A hybrid energy system, or hybrid power, usually consists of two or more renewable energy sources used together to provide increased system efficiency as well as greater balance in energy supply.
76 POWER TO THE PEOPLE WA’s Energy Future 77
Abbreviations ABS: Australian Bureau of Statistics
AER: Australian Energy Regulator
AEMC: Australian Energy Market Commission
AEMO: Australian Energy Market Operator
AER: Australian Energy Regulator
GJ: Gigajoules
GW: Gigawatt
GWh: Gigawatt-hours kW: Kilowatt kWh: Kilowatt-hours
LNG: Liquefied natural gas
LPG: Liquefied petroleum gas
MW: Megawatts
MWh: Megawatt-hours
NEM: National electricity market
OECD: Organisation for Economic Co-operation and Development OPEC Organization
PJ: Petajoules
SGU: Solar Generation Unit
SWH: Solar Water Heater
WEM: Western Australian Electricity Market
77
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81 82 Disclaimer While every effort has beenma de to ensure the accuracy of this document, the uncertain nature of economic data, forecasting and analysis means that the centre, Curtin University and/or Bankwest are unable to make any warranties in relation to the information contained herein. Any person who relies on the information contained in this document does so at their own risk. The centre, Curtin University, Bankwest, and/ or their employees and agents disclaim liability for any loss or damage, which may arise as a consequence of any person relying on the information contained in this document. Except where liability under any statute cannot be excluded, the centre, Curtin University, Bankwest and/or their advisors, employees and officers do not accept any liability (whether under contract, tort or otherwise) for any resulting loss or damage sufferedb y the reader or by any other person.
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Authorised Use © Bankwest Curtin Economics Centre, August 2017 Bankwest Curtin Economics Centre Focus on Industry Report Series ISBN: 978-1-925086-68
This report was written by: Rebecca Cassells, Alan Duncan and Yashar Tarverdi from the Bankwest Curtin Economics Centre at Curtin Business School.
It can be cited as: Cassells R, Duncan A, Tarverdi Y (2017), ‘Power to the People: WA’s Energy Future’, Bankwest Curtin Economics Centre, Focus on Industry Series, Issue #2, August 2017.
The authors would like to thank: Chris Twomey, John Hewson and Steven Bond-Smith, as well as numerous stakeholders from the policy and business community for their insights and contribution to the report.
This report uses unit record data from the Household, Income and Labour Dynamics in Australia (HILDA) Survey. The HILDA Project was initiated and is funded by the Australian Government Department of Social Services (DSS) and is managed by the Melbourne Institute of Applied Economic and Social Research (Melbourne Institute). The findings and views reported in this paper, however, are those of the authors and should not be attributed to either DSS or the Melbourne Institute.
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