Executive summary
Energy transition towards net zero Since the International Energy Agency’s (IEA) last review of Australia in 2018, the Australian Government has stepped up its climate ambition at the federal level, building upon the goals and policies of states and territories. In June 2022, the Australian Government submitted a revised 2030 Nationally Determined Contribution (NDC), pledging a 43% reduction of greenhouse gas (GHG) emissions by 2030 from 2005 levels, an increase from the previous government’s target of 26-28%. This target was legislated alongside the NDC commitment to achieve net zero emissions by 2050 in the Climate Change Act 2022. Australia caught up with the pace of emissions reductions pledged by other advanced economies and more closely aligns with a trajectory compatible with the Paris Agreement. In October 2022, Australia joined the Global Methane Pledge.

Industrial emissions mitigation policies Accounting for 23% of Australia’s energy-related GHG emissions, the industry sector has been the key focus of climate mitigation policies. Australia’s manufacturing industries have decreased their carbon intensity faster than other major economies, including Canada, Japan and the United States. Mining emissions sector trends have remained fairly stable.

Carbon intensity of manufacturing and mining industry sectors per value added in Australia, 2005-2020

Australia’s carbon crediting scheme (ACCS, formerly the ERF) is a voluntary scheme to credit domestic reductions in GHG emissions. The Australian Government purchases Australian Carbon Credit Units (ACCUs) through the CER from eligible offset projects (“carrot”). The Safeguard Mechanism complements the scheme to ensure that large facilities keep their emissions below baselines set by the CER (“stick”). A facility’s annual emissions must exceed the 100 000 t CO2-eq threshold to be covered by the Safeguard Mechanism.

Overview Australia’s total final consumption has broadly followed the GDP trend since 2005, albeit at a slower pace. Between 2000 and 2021, GDP increased by 75%, while TFC increased by only 13%, showing a decoupling between economic growth and energy demand. Since 2014, energy demand has remained relatively stable around an average of 3 370 PJ, even as GDP grew by 16% and population by 10%. In 2020, both GDP and TFC dropped markedly because of the Covid-19 pandemic. In 2021 GDP recovered to above 2019 levels, while TFC remained similar to the value in 2020.

Energy demand and drivers in Australia, 2000-2021

Australia’s energy innovation chain, policies, and institutional governance

The Department of Industry, Science and Resources leads Australia’s technology and innovation missions for all relevant industries, under the authority of the Chief Scientist, Dr Cathy Foley. The DCCEEW leads, with DFAT, Australia’s global engagement on technology partnerships. The DCCEEW has recently created a new division for International Climate and Net Zero Pathways, which links Australian innovation and international engagement and co-operation. The Australian Research Council is the main funding agency for research grants, ARENA promotes early-stage R&D in renewable energy, energy efficiency and electrification. CSIRO is dedicated to research and analysis and the CEFC, Australia’s green bank, promotes commercial investment in renewables, energy efficiency and low emissions technology on behalf of the Australian Government.

Knowledge management
In 2019, the share of climate-related patent applications in all technologies followed the OECD trend, growing at the beginning of the decade and slightly declining afterwards.

New patents in clean energy technologies in Australia, 2000-2019

Over the past decade, Australia’s share of climate-related patent applications in all technologies has been similar to the OECD average. on a falling trend since its peak in 2010. New patents in climate change mitigation technologies were 10% of all patent applications in 2019, compared to 9% in the OECD.

Hydrogen and CCS clusters and hubs across Australia

Power systems in Australia
The NEM is the most extensive integrated power system and wholesale electricity market in Australia, incorporating five states and the Australian Capital Territory and covering all of the east coast through to South Australia. Western Australia has two separate systems: the South West Interconnected System (SWIS) and the North West Interconnected System. The AEMO operates the NEM and the Wholesale Electricity Market for the SWIS, which is not connected to the NEM and not a focus of this review.

Electricity generation mix and power systems in Australia

The National Electricity Market The NEM is comprised of five regions: Queensland, New South Wales (includes the Australian Capital Territory), Victoria, South Australia and Tasmania. The NEM transmission system is long and weakly interconnected. Its topology reflects its genesis as a collection of state-based power systems serving local centres of generation and load. Six cross-border interconnectors link the five state-based transmission networks. Three of these are owned by state governments. The other three are privately owned. There are three DC interconnectors: Directlink (NSW-QLD Terranora), Murraylink (VIC-SA) and Basslink (TAS-VIC); and three AC interconnectors: Heywood (VIC-SA), Victoria to NSW Interconnector, and Queensland-NSW Interconnector (QNI).

The Australian Energy Market Operator’s electricity outlook: Step Change Scenario up to 2050

In January 2021, wholesale electricity prices across the NEM (on a volume-weighted average basis) were below 70 AUD/MWh in all regions. This reflects higher shares of VRE, more rooftop solar PV, lower contributions from coal and gas (and related fuel costs), and lower demand. However, in June 2022, wholesale prices (on a weighted weekly average) in the NEM reached more than 300 AUD/MWh. Weekly average prices in Queensland reached more than 650 AUD/MWh, as illustrated.

Weekly wholesale electricity prices in the National Electricity Market, December 2020- June 2022

Gas supply and demand Production In 2021, Australia’s natural gas production was 156 bcm, making it the seventh-largest producer in the world. Natural gas production has increased substantially in recent years, driven by a rapid expansion of the Australian LNG industry on both the east and west coasts. The most significant production of conventional gas occurs in the basins of the North West Shelf, off Western Australia. The North West Shelf basins (Northern Carnarvon, Bonaparte and Browse) accounted for 63% of Australia’s total gas production in 2021. Significant quantities of conventional gas are also produced in the Gippsland Basin (in south-eastern Australia) and the Cooper Basin (mainly in the south-western part of Queensland). Unconventional production is dominated by coal seam gas and occurs predominantly in the Bowen and Surat Basins in Queensland, which together accounted for 25% of Australia’s total gas production in 2021. Coal seam gas from the Bowen and Surat Basins is processed at three major liquefaction plants off the eastern coast of Queensland (Queensland Curtis LNG, Gladstone LNG and Australia Pacific LNG).

Australia’s gas production, consumption and exports, 2000-2021

Natural gas reserves Over the coming decade, Australian natural gas production is forecast to decrease in the east, relying on supply from a number of existing fields which are in decline. Conversely, gas production is expected to remain stable in Western Australia, thanks to two substantial new offshore fields, the Scarborough and Crux fields.

Natural gas reserves and resources in Australia

The Scarborough field, developed by Woodside Petroleum, is Australia’s most significant offshore natural gas project, holding reserves of around 200 bcm. Woodside Petroleum received key approvals to proceed with the project from the Australian Government and the Government of Western Australia in April 2022. Gas is expected to be processed and exported from a second LNG train (Train 2) at the Pluto LNG onshore facility from 2026, which received FID in 2021.

Forecasts from the ACCC and the AEMO have flagged the risk of significant gas shortfalls in the winter of 2023, particularly if gas demand rises sharply as a result of extreme weather or capacity outages at coal-fired power plants. In such a case, supply to the south-east, where there is currently no LNG import capacity, could be constrained by insufficient pipeline and storage capacity. There are also medium-term risks to the security of gas supply related to the ongoing decline of production in fields which have traditionally supplied the south-eastern regions, such as those in the Bass Strait (off the coast of Victoria). The AEMO’s Gas Statement of Opportunities (AEMO, 2022b) forecasts an adequacy gap from 2032 onwards, as domestic production is declining fast while demand is coming from power generation. The AEMO builds its analysis on redirecting LNG exports to the domestic market (through the Heads of Agreement).

Projected annual adequacy in south-eastern regions in Australia, Step Change Scenario, 2022-2041

Concern about the security of supply to gas markets in the south-eastern regions has grown at the same time as Australia’s LNG exports have risen significantly. The Government of Western Australia obliges gas producers operating in its jurisdiction to reserve around 15% of production for the domestic market. Queensland’s Australian Market Supply Condition is the only current arrangement in the eastern states. Under normal circumstances, the major LNG producers in Queensland are under no obligation to supply the local market and are free to export the totality of their production. In 2021, Queensland producers exported their production in the form of LNG, mostly under long-term contracts. The remaining volumes not exported under long-term contracts were sold on Asian LNG spot markets.

Malaysia has historically been Australia’s largest source of crude oil and refinery feedstocks, with net imports from Malaysia of 62.2 kb/d in 2021. Net imports from the United States grew substantially in 2020 but fell back in 2021 (23.4 kb/d). Australia is also a relatively significant net importer from the United Arab Emirates (24.5 kb/d in 2021). Australia is a net exporter to several Asian countries, including Singapore (50.2 kb/d in 2021), Thailand (10.7 kb/d) and China (4.7 kb/d in 2021).

Australia’s crude oil, natural gas liquids and refinery feedstock net imports by country, 2000-2021

Oil products demand Total oil products demand in 2021 was 1 020 kb/d, up 2% from 2020 but 13% lower than in 2019 (Figure 10.3). Declining oil product consumption in 2020-2021 is largely a result of the Covid-19 pandemic. Prior to 2020, oil product demand had followed an upward trajectory since the mid-2000s. Average annual demand growth for oil products was around 1.5% from 2010 to 2019. Before 2020, demand growth had been driven by mining and transport, with diesel consumption growth being particularly strong, increasing from 358 kb/d in 2010 to 513 kb/d in 2021. In 2020, the transport sector accounted for 62% of total oil product demand, followed by the industry sector (22%). International bunkers accounted for 9% of demand. The government’s 2019 Liquid Fuel Security Review found that growth in liquid fuels demand would likely continue until the mid-2030s. Future growth in oil product demand is expected to continue to be led by diesel from the transport and mining sectors.

Map of oil infrastructure in Australia

Australian critical minerals at operating mines and major deposits

Global collaboration
Australia is active globally to accelerate regional and global co-operation to boost critical minerals uptake. Australia collaborates with a range of countries, including India, Japan, Korea, the United Kingdom, the United States, the European Union and its member states. These engagements help to address potential supply chain risks; advance research; and promote ethical, sustainable practices. In July 2022, the Australian Government and the IEA co-hosted the Sydney Energy Forum. The forum agreed to accelerate project investments and partnerships that expand and diversify the supply of critical minerals and other key materials in the Indo-Pacific region. Australia is a member of the Minerals Security Partnership, which includes its founding members Canada and the United States, along with Finland, France, Germany, Japan, Korea, Sweden, the United Kingdom, and the European Commission. Additionally, Australia is a founding partner of the Energy Resource Governance Initiative, designed to promote sound mining sector governance and resilient energy mineral supply chains. At the initiative’s one-year anniversary, members recognised the increasing demand for energy resources, including critical minerals. In line with this recognition, the CMO is continuing to promote Australian ethical and environmental standards internationally.

Source:http://IEA