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Electricity sales and maximum demand forecasts for Tasmania to 2045 CONFIDENTIAL A report for TASNETWORKS Prepared by the National Institute of Economic and Industry Research (NIEIR) ABN: 72 006 234 626 416 Queens Parade, Clifton Hill, Victoria, 3068 Telephone: (03) 9488 8444; Facsimile: (03) 9482 3262 Email: [email protected] December 2014 TON812-TasNetworks-Dec 2014-revised 090315/Transend/2014/December While the National Institute endeavours to provide reliable forecasts and believes the material is accurate it will not be liable for any claim by any party acting on such information. Contents Page no. 1. Introduction and study scope 1 1.1 Background 1 1.2 Data to be provided by TasNetworks 4 2. The economic outlook for Australia and Tasmania to 2024-25 6 2.1 Introduction 6 2.2 The world and national outlook 8 2.2.1 Introduction 8 2.2.2 The world economy 9 2.2.3 The economic outlook for Australia to 2020 15 2.3 The Tasmanian outlook 25 2.3.1 Introduction 25 2.3.2 Summary of scenarios 25 2.3.3 The economic outlook for Tasmania to 2018-19 27 3. Electricity forecasting methodologies and modelling assumptions 30 3.1 Methodology – electricity sales forecasts 30 3.2 Methodology – forecasts for system maximum demand 34 3.3 Carbon (CO2e) pricing impacts 37 3.4 Major industrial load (MI) 39 3.5 An assessment of the temperature sensitivity of Tasmanian daily demands 44 3.6 Time profile of winter maximum demands 48 3.7 The impact of gas supply on electricity sales 49 3.8 The contribution of non-scheduled generation and wind 50 3.9 Assumed price elasticity for Tasmania and how it will contribute to the forecast model 51 3.10 A summary of the impact of greenhouse policy on Tasmania 52 4. Tasmanian electrical energy forecasts to 2045 53 4.1 Electricity sales by customer class 53 4.2 Electricity generated 57 4.3 Natural gas sales to 2045 65 5. Tasmanian maximum demand forecasts to 2045 67 5.1 Introduction 67 5.2 A review of the 2014 winter MD forecast 68 5.3 Forecasts of system maximum demand – summary of approach 68 5.4 Forecasts of summer and winter maximum demands – 10th percentile 69 5.5 Forecasts of summer and winter maximum demands – 50th percentile 72 Contents (cont.) Page no. 6. PeakSim’s maximum demand projections 98 6.1 Background 98 6.2 Data and assumptions 101 6.3 Implied historical PoE levels 102 6.4 Projections 104 Appendix A: Explanation of forecast input 108 Appendix B: Backcasting the Tasmanian winter MD 110 Appendix C: Forecast evaluation and errors 113 Appendix D: Energy MD projections for Tasmania for the next 30 years 118 Appendix E: A brief description of major industrial and small major loads – Tasmania 145 Appendix F: PeakSim metrics 149 Glossary 157 List of tables Page no. 2.1 Australian GDP growth u der each scenario 7 2.2 Formation of Australian GDP 14 2.3 Tasmanian economic growth rate by scenario – 2007-08 to 2034-35 26 2.4 Macroeconomic aggregates and selected indicators – Tasmania 27 2.5 Indicators associated with demand projections – Tasmania 29 3.1 Reconciliation of customer class categories with ASIC industries 33 3.2 Diversity factors at Tasmanian system MD for large and small industrials 35 3.3 Summer and winter percentiles for lowest average temperature days 36 3.4 Real electricity prices – Tasmania 38 3.5 Summary statistics, Comalco – winter 2014 half hourly load 40 3.6 Summary statistics, Norske Skog – winter 2014 half hourly load 41 3.7 Summary statistics, TEMCO – winter 2014 half hourly load 42 3.8 Summary statistics, Nystar – winter 2014 half hourly load 43 3.9 Temperature sensitivity summer and winter MDs 44 3.10 Actual and fitted winter maximum demands – 1994 to 2014 46 4.1 Total electricity sales by class – Tasmania 58 4.2 Industrial energy – Tasmania 59 4.3 Major load energy – large and small majors 60 4.4 Major load energy – small majors 61 4.5 Small scale PV – Tasmania 64 4.6 Tasmania: Gas consumption 66 5.1 Maximum winter demands – Tasmania (including non-scheduled generation) 74 5.2 Maximum winter demands – Tasmania (excluding non-scheduled hydro generation) 75 5.3 Maximum winter demands – Tasmania (excluding non-scheduled hydro and wind generation) 76 5.4 Maximum winter demands (10th, 50th, 90th percentiles) – Tasmania (including non-scheduled generation) 77 5.5 Maximum winter demand (10th percentile) – Tasmania (including non-scheduled generation) 78 5.6 Major load non-coincident winter MDs – large and small majors 80 5.7 Major load non-coincident winter MDs – small majors 81 5.8 Major load coincident winter MDs – large and small majors 83 5.9 Major load coincident winter MDs – small majors 84 5.10 Maximum summer demands – Tasmania (excluding non-scheduled hydro and wind generation) 86 5.11 Maximum summer demands – Tasmania (including non-scheduled generation) 87 5.12 Maximum summer demands – Tasmania (excluding non-scheduled hydro generation) 88 5.13 Maximum summer demands (10th, 50th, 90th percentiles) – Tasmania (including non-scheduled generation) 89 5.14 Maximum summer demand (10th percentile) – Tasmania (including non-scheduled generation) 90 List of tables (cont.) Page no. 5.15 Major load non-coincident summer MDs – large and small majors 92 5.16 Major load non-coincident summer MDs – small majors 93 5.17 Major load coincident summer MDs – large and small majors 95 5.18 Major load coincident summer MDS – small majors 96 6.1 Projections of winter (non-coincident) maximum demand for key segment 106 6.2 Projections of summer (non-coincidence) maximum demand for each segment 107 B.1 Actual temperatures and POE level based on temperature at winter MD 112 C.1 RMSE 115 C.2 Theil’s inequality coefficient calculations 116 D.1 Electricity sales by class 118 D.2 Maximum demands (including non-scheduled generation) – WINTER 121 D.3 Maximum demands (including non-scheduled generation) – SUMMER 124 D.4 Maximum demands (excluding embedded generation) 127 D.5 Maximum demands (excluding wind and embedded generation) 130 D.6 MI load excluding losses 133 D.7 Retail sales by class 139 D.8 Retail energy maximum demands 142 F.1 Accuracy measures of implied 50% probability of exceedance winter maximum demand level 152 F.2 Accuracy measures of implied 50% probability of exceedance summer maximum demand level 152 F.3 Estimated model parameters for winter 155 F.4 Estimated model parameters for summer 155 List of figures Page no. 2.1 Australian GDP growth by scenario 6 2.2 Australia – Short-term international borrowing requirement to GDP ratio 9 2.3 World – Real GDP growth rate 13 2.4 Australian GDP 16 2.5 Overseas exports and imports of goods and services 17 2.6 Current account deficit 18 2.7 Housing sector 19 2.8 Labour market 20 2.9 GDP and employment 20 2.10 Average weekly earnings and CPI 21 2.11 Interest rates 22 2.12 Exchange rate and trade weighted index 23 2.13 Tasmanian GSP growth by scenario – 2007-08 to 2034-35 25 3.1 Schematic of energy/electricity forecasting model 32 3.2 Real carbon price 37 3.3 Half hourly load, Comalco – winter 2014 40 3.4 Half hourly load, Norske Skog – winter 2014 41 3.5 Half hourly load, TEMCO – winter 2014 42 3.6 Half hourly load, Nystar – winter 2014 43 3.7 Actual and fitted winter maximum demands – 1991 to 2014 46 3.8 Tasmanian winter maximum demands – Tasmanian top 30 system peaks – number of evening peaks 48 4.1 Tasmanian electricity sales by class – total – Base, high and low scenarios 55 4.2 Tasmanian electricity sales by class – residential – Base, high and low scenarios 55 4.3 Tasmanian electricity sales by class – commercial – Base, high and low scenarios 56 4.4 Tasmanian electricity sales by class – industrial – Base, high and low scenarios 56 4.5 Tasmanian total electricity generation by scenario – base, high and low scenarios – 2005 to 2045 57 4.6 Total PV customers, Tasmania 63 4.7 Total PV capacity, Tasmania 63 5.1 Tasmanian winter generated maximum demand (including embedded generation) 10th percentile 71 5.2 Tasmanian summer generated maximum demand 10th percentile 71 5.3 Tasmanian winter generated maximum demand 50th percentile 73 5.4 Tasmanian summer generated maximum demand 50th percentile 73 6.1 Electricity demand and weather relationship during a typical summer 99 6.2 Implied historical probability of exceedance level and observed winter maximum demand 102 6.3 Implied historical probability of exceedance level and observed summer maximum demand 103 6.4 Projections of winter maximum demand at 10%, 50% and 90% probability of exceedance levels 104 6.5 Projections of summer maximum demand at 10%, 50% and 90% probability of exceedance levels 105 List of figures (cont.) Page no. B.1 Actual and fitted winter maximum demands – 1991 to 2014 110 B.2 Comparison of actual winter MDs with 10th, 50th and 90th backward projections 111 F.1 Implied winter maximum demand for each % probability of exceedance 149 F.2 Implied summer maximum demand for each % probability of exceedance 150 F.3 Observed and implied number of maximum demand events for past winters 153 F.4 Observed and implied number of maximum demand events for past summers 154 1. Introduction and study scope The TasNetworks invited the National Institute of Economic and Industry Research (NIEIR), trading as National Economics, to develop electricity sales projections for Tasmania to 2045. Maximum demand forecasts for Tasmania were also requested for summer and winter peaks to 2045.