Australia is a liberalised power market with demand concentrated on the east coast. The market is leading the energy transition but also facing challenges, such as providing reliable and clean power as coal retires.
Demand growth averaged 1.1% in the past five years and is expected to reach -2.8% in 2020, and an average of 1% between 2020 and 2025. Lockdowns in major cities and social distancing measures due to the pandemic put downward pressure on Australia’s electricity demand, particularly in Q1 2020. Power demand in the National Electricity Market in March was down 7% year-on-year but this demand has started to recover.
With greater electrification and increasing population, Australia’s power demand is set to grow to 396 TWh by 2050.
Coal and gas dominate the power supply mix, contributing 30% and 31% of generation, respectively, in 2019. However, against the backdrop of energy transition and high renewable share targets, we expect more than 16 GW of coal capacity will be retired by 2050, more than half of which will happen in the 2030 to 2040 period.
Australia will provide US$39 billion of power generation investment opportunity in the next decade. Close to two-thirds of Capex will flow into new-build renewables over the next decade. An equal amount of investments will flow into wind and solar. Gas will dominate investment in fossil fuels.
Wood Mackenzie expects around 80 GW of renewables, or 56% of new capacity, will be added between 2020 and 2050. Solar capacity additions, due to solar’s competitiveness, will dominate renewables installation. Both onshore wind and utility-scale solar are competitive against gas already and are expected to outcompete coal by 2030 with a discount of close to 50%.
Modelled power price will gradually recover in the mid-2020s to US$35/MWh from US$28/MWh in 2020 as gas prices pick up. We expect the power price across the 2020-50 horizon to average US$45/MWh. South Australia has the lowest price in 2020 of only US$14/MWh despite having 40% gas share in the power mix. High renewables share has put downward pressure on power prices. Average end-user tariff is expected to remain almost flat through to 2050.
Find out more about the research by submitting the form on the right colum and getting a copy of the report brochure:
- Executive Summary
- Report Table of Contents
- Report List of Figures
- Graph: Total installed capacity outlooks into 2050 by power technology (battery storage, pumped storage, distributed solar, utility-scale solar, onshore wind, offshore wind, biomass, geothermal, hydro, fuel oil, gas and coal)
Wood Mackenzie Asia Pacific Power and Renewables clients can access the report here.