Power to burn as electricity use drops

Australia faces the largest power glut in the history of the national electricity market.

Electricity use has plunged so much that no new coal or gas base­load power generation will be needed over the next decade to comply with the nation’s famously conservative requirements for ensuring lights stay on.

A report to be released today reveals that this is the first time this has happened in the history of the electricity market, which was created in 1998 after the ­Hilmer review and spans the eastern and southeastern coasts.

This year, the surplus capacity is potentially between 7650 megawatts and 8950MW. Most of the excess is in NSW, Queensland and Victoria.

That is several times the size of Australia’s biggest power station, the 2880MW Eraring in NSW.

Even if electricity consumption were to grow at high levels for the next 10 years, by 2023-24 more than 4500MW could be withdrawn from the market without affecting the adequacy of supplies, the report finds.

The report by the Australian Energy Market Operator will again focus debate on warnings that federal and state policies, ­including the renewable energy target, have pushed the market to breaking point.

A review of the RET headed by businessman Dick Warburton is expected to be handed to the government this month.

Earlier this year, EnergyAustralia — which owns the Yallourn brown-coal power station in the Latrobe Valley — warned that big baseload coal plants “simply hope another business will exit first” as they would face hundreds of millions of dollars in redundancy and mine rehabilitation costs.

The report says electricity use will fall over the next three years because of the decline of energy-intensive industries, including the decline of Victoria’s Point Henry aluminium smelter and energy efficiency measures.

Continued strong growth in solar rooftop panels, especially in Queensland and Victoria, has also driven the trend.

The market operator’s managing director and chief executive, Matt Zema, said electricity consumption from the grid had continued to fall in 2013-14.

Mr Zema said that although the new report estimated there could be up to 8950MW of surplus capacity this year, investment could still be needed because of schemes to support renewable energy generation, to meet local “pockets” of growing demand, and to manage “intermittent generation”.

Wind and solar farms are intermittent and can require back-up generating capacity.

According to the report, there are 1165MW worth of projects that are expected to be commissioned between now and January 2016, including 940.2MW of wind farms and 219MW of large-scale solar.

Of proposed new generation capacity, 58 per cent is wind, 25 per cent is gas, 8 per cent is coal and 4 per cent is solar.

The report comes as the Australian Competition & Consumer Commission will today reveal that it has issued more than 250 notices related to the carbon tax repeal, pushing businesses in sectors including electricity and gas to detail how the repeal is affecting their prices.