Over the next two decades, Australia’s energy future will be dominated by three intersecting factors:
- the need to deliver secure, reliable and competitively priced energy for a growing population and economy
- the further expansion of our energy exports to Asia and other growth markets
- the need to become more energy efficient across the economy and to dramatically reduce carbon emissions and transform to a clean energy economy.
Australia is well positioned to respond to these needs and secure a strong and positive energy future. Our position is underpinned by our enormous endowments of energy resources, a strong and stable economy with well-established and robust energy markets, a highly skilled workforce, our established reputation for innovation, and our world-class research and development base.
Growing regional demand for energy will continue to underpin our development
The world’s population stands at 7 billion, and the energy requirements of larger industrialising and more urbanised populations will continue to drive strong growth in energy demand. By 2035, the International Energy Agency projects global energy demand to grow by around 40%, and 90% of that growth will occur in developing economies, particularly China and India (IEA 2011a).
As the world’s ninth-largest energy producer and a near neighbour to Asian economies, we are well placed to cement our role as a leading energy supplier to those nations and to assist their economic development. This is reflected in the tripling of our energy exports from $24 billion in 2004–05 to $69 billion in 2010–11, when they accounted for a third of Australia’s total commodity exports.
Over the next two and a half decades, Australia’s energy production is projected to more than double, largely due to export growth. We are the world’s largest coal exporter and third-largest uranium producer, and in future years will be the world’s second-largest liquefied natural gas (LNG) exporter. Our energy exports will continue to support higher living standards for billions of people in our region.
Australian coal production is expected to continue its strong growth by an annual average of 8%, from a value of $14 billion in 2010–11 to an estimated $20 billion by 2016–17 (BREE 2012b).
Our gas production is expected to increase dramatically by 19% per year to quadruple by 2017 (BREE 2012b). Since 2007, more than $175 billion in capital expenditure has been committed to onshore and offshore Australian LNG projects. Shell’s Prelude floating LNG project is a world first and offers the opportunity to unlock currently stranded gas resources in remote offshore areas.
Our gas production will be boosted by ‘unconventional’ gas, particularly coal-seam gas (CSG) and potentially shale and ‘tight’ gas. Australian CSG production increased from 2% to 11% of total gas production in the five years to 2010–11, and future output will be bolstered by three CSG-to-LNG projects, worth $50 billion, being built near Gladstone.
Australia’s extensive uranium resources, mining expertise and leadership role in nuclear non-proliferation have made us an important supplier of nuclear fuel. Our uranium is also important in satisfying the world’s need for low-carbon energy.
Through this diverse portfolio of energy exports—and our efforts to develop clean energy technologies, such as carbon capture and storage and renewable energy technologies—Australia is well placed to help our customers manage their long-term efforts to address climate change.
Our changing domestic energy sector
Our domestic energy sector is also changing in fundamental ways. Through key reforms and measures being implemented under the Australian Government’s Clean Energy Future Plan, we have begun the necessary long-term transition to a clean energy economy.
Coal currently accounts for 75% and gas around 15% of electricity generation. While coal and gas are expected to continue to underpin our energy security for many years, this balance is projected to change significantly in the coming decades.
Renewable energy will account for at least 20% of our electricity generation by 2020 and this may rise further to around 40% by 2035. By 2050, most of Australia’s conventional fossil fuel power generation is likely to have been replaced with clean energy technologies in the form of wind power; utility-scale and distributed solar power; geothermal energy; and coal- and gas-based carbon capture and storage systems. In 2050, greenhouse gas emissions from the electricity sector are expected to be 76% below what they would have been without a carbon price.
Domestic energy-use patterns are also changing. The possibilities offered by new smart energy technologies and appliances are already beginning to change the way we use and manage energy in our households and enterprises. For example, distributed generation systems are becoming more reliable and affordable energy options for many homes and businesses. As these changes unfold, new business models will emerge. Energy suppliers and industry more generally—along with government—have a role to play in educating consumers and offering innovative products to help meet consumer needs, particularly where demand-side products can be offered to help reduce peak load.
Our gas and liquid fuel markets are also undergoing important structural changes, driven by a closer integration with global markets and supply chains, the growing development of new technologies such as electric vehicles and alternative fuels, and expanding sources of supply and demand competition. These factors have introduced new dynamics and transitional pressures in these markets and for some downstream industries (such as plastics and chemicals) that rely on them for fuel or feedstock. The full implications of this have yet to be established and need to be closely monitored.