Market insights

Victorian power consumption falling despite strong population and economic

23 June 2016

Victoria has the fastest growing population of all the states and is experiencing strong economic growth yet its electricity consumption continues to fall. Energy efficiency activities installed under the Victorian Energy Efficiency Target (VEET) Scheme can explain 75 per cent of the reduction in consumption and is contributing to a more efficient and resilient Victorian economy.


Electricity consumption rising in Australia

After falling for a number of years electricity consumption in the National Electricity Market (NEM) increased by 1.1 per cent in 2015. This trend has continued into 2016 with consumption 1.1 per cent higher for the 5 months to end May 2016 compared to the same period last year (after allowing for the impact of the 2016 leap year).

The 4.3 per cent increase in consumption in Queensland can largely be explained by the ramp-up of the LNG industry. The 8.3 per cent reduction in Tasmania can be substantially attributed to demand reduction due to the Basslink cable outage.


Victorian electricity consumption falling

What is intriguing is the reduction in electricity consumption in Victoria, down 179 GWh. The Point Henry smelter and rolling mill closed in 2014 so this does not impact on the reduction. Victoria is experiencing strong economic growth, employment growth and population growth (Figure 1) so we would expect to see an increase in electricity consumption similar, for example, to NSW of around 1 per cent rather than a 1 per cent reduction.

Figure 1   Victorian Economic Parameters (Source: Victorian State Budget, April 2016)

There will be a range of factors that may contribute to the reduction, such as climatic differences, industry structure changes, energy efficiency etc.


VEET Scheme impact

Our particular interest is to explore the impact that the VEET Scheme has had on reducing electricity consumption. This has been an important initiative in de-coupling energy consumption from population and economic growth.

Based on analysis of the VEET Registry, and allowing for the delay in creation of certificates, we estimate that nearly 400,000 energy efficiency installations took place in Victoria over the 12 months to May 2016. These installations created a total of 6.5 million Victorian Energy Efficiency Certificates (VEECs) under the Scheme (Table 2).

 

The roll-out of LED lighting and other efficient lighting products in the residential and commercial sectors have been the predominant energy efficiency activities taking place over the last 12 months (Table 2). The activities taking place under the Scheme over this time have resulted in approximately 324 GWh of electricity reduction on an annual basis. This is equivalent to 135 GWh of energy savings over the 5 month period to May 2016.

 

The reduction in Victorian electricity consumption over the five month period (Table 1) amounted to 179 GWh. Energy savings of 135 GWh under the VEET scheme have been material, easily accounting for 75 per cent of the observed reduction in electricity use. This has meant that growth in Victoria’s population and economic activity has been achievable without growth in electricity consumption and associated greenhouse emissions.