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Slump in demand for power likely to continue

The downturn in electricity demand is showing no sign of ending, with the closure of large industrial plants in Victoria behind the next leg of the forecast decline over the national electricity market.

After slumping more than 7 per cent between 2009-10 and 2013-14, demand will slide a further 3.3 per cent over the next three years, according to the latest forecast of the Australian Energy Market Operator, which runs the national electricity market.

The closure of the Point Henry aluminium smelter in Victoria followed by the shutdown of the Caltex oil refinery in Sydney are the main near-term factors behind an estimated 9 per cent fall in industrial demand over the three years to 2016-17.

Also weighing on usage is demand for solar photo-voltaic systems, most notably in Queensland and Victoria. In NSW, the take-up has slowed after a surge, due to government subsidies earlier.

In 2013-14 alone these solar systems resulted in a 2.9 per cent reduction in electricity sourced via the electricity grid, AEMO said. ''In the short term we see electricity consumption continuing to decline,'' managing director Matt Zema said.

Reversing its earlier forecast of annual demand growth averaging 0.3 per cent in NSW in the three years to 2016-17, AEMO now reckons growth will decline 0.7 per cent a year after a steep 10 per cent slide over the previous five years.


Solar systems, on-site power generation for large users and the strong dollar hitting industrial output had all pressured demand.

In Victoria, a slump averaging 13.8 per cent a year in the three years to 2016-17 in industrial demand was behind an expected 2.1 per cent annual fall in electricity sourced from the grid, AEMO said. Even with the high penetration of solar systems, it expects household demand to offset some of the drop in industrial demand with the Point Henry and car industry closures.

The one area of growth is Queensland, with the start-up of a series of gas processing plants as its export projects come on stream over the next 18 months or so. Once that has run its course, usage will flatten, AEMO says.

EnergyAction chief executive Scott Wooldridge said the rate of decline might slow but there were few signs of it bottoming as large users move to lift energy efficiency.

''Large energy users are aiming to reduce their reliance on the grid by using solar or co-generation to cut their electricity spend, not unplugging from the grid,'' he said, ''but giving them that option in the future.''

''I doubt there will be a decline in the downtrend,'' Gilles Walgenwitz, principal consultant with Energetics said. ''AEMO, and others, routinely overestimate demand.''