While most commentators view gas as the obvious alternative fuel source to coal over the short term, this may not be as clear cut as it first appears. The future for gas generation in Australia will largely be determined by the outcomes for both the gas price and the carbon price post-2015.

Domestic gas prices are low at present but will become increasingly linked to international prices with the rapid growth of export markets. This in turn should see the gas price rise, and the operating costs of gas generators along with it, making them less competitive relative to coal.

The report models three scenarios where the gas fuel price and carbon price have been altered in order to see the likely effect on the fuel mix.

This report identifies a significant decline in greenhouse gas emissions from electricity generators in the Australian NEM for the second year running, with the falls largely confined to the black coal sector.

The decline is largely a result of subdued demand resulting from the GFC and the cooler La Nina weather pattern.

Output from gas-fired generators has more than doubled since 2005, and renewables are also on the rise, albeit off a very small base.

Low wholesale electricity pricing, coupled with the low pricing of Renewable Energy Credits (RECs) places Australia at risk of missing the country’s renewable energy target, according to a new report from RepuTex carbon analytics.

Australia’s renewable energy target calls for 20% of the country’s electricity to be generated from renewable sources by the year 2020, however RepuTex forecasts that the actual figure is likely to be between 16 and 17%.

With Qld and NSW labouring under reduced coal-fired generation capacity, gas and hydro have seen a spike in output for the month.

The report shows that peak demand has remained flat across the NEM, but average demand is slowly on the rise.

According to RepuTex: 

• Before any carbon costs are passed through, S&P ASX 200 companies are expected to face cumulative direct and indirect carbon costs (after Government Assistance) of approximately AUD $33.4 billion from FY 2013 through to FY 2022.
• RepuTex estimates that 43% of the above cost, or $14.6b, is expected to be passed through to consumers, leaving S&P ASX 200 companies liable for $18.7b over the 10 year period.
• All firms will be exposed to an indirect cost through the purchasing of electricity and supply chain inputs. These liabilities account for 43% of the total S&P ASX 200 carbon cost.
• Mid and small capitalised Materials and Industrials companies face the highest earnings impacts due to their lower revenues and generally lower levels of diversification.

 To receive RepuTex’s research update, A 2012 Carbon Price for Australia, part of RepuTex’s Carbon Insights package, please click here

Milder weather across mainland states in August led to a decrease in emissions from Black Coal in New South Wales and Queensland. Increased gas output and higher wind generation in southern states is likely to see further reductions in September. To year end FY 2011-12, RepuTex project a 3.7% year-on-year increase in power emissions, coming off a low base in FY 2010 due to low demand as a result of La-Nina climatic conditions.

To view a full breakdown of RepuTex’s August Emissions Insights Report, please download below

To download RepuTex’s full report, The Year That Was – Year Two of the Hang Seng Corporate Sustainability Index, please click on the link below.

This presentation concludes that the current proposed carbon price is not high enough to undermine generation from coal (black) but expected to drive investment into renewable technologies  or less carbon intensive technologies.

However, RepuTex does forecast generation from brown coal to drop by more than 40% by 2020, and shows the increasing contribution of renewable energy, albeit off a low base.