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by Chris Hesman
Australia’s National Electricity Market (NEM) is experiencing record levels of electricity demand this winter, with prices in June significantly higher than the same time last year.
Let's look at whether this growth is solely due to colder weather or whether it reflects a genuine increase in demand capacity. To determine this, we utilized Yes Energy's TESLA Forecast Weather Decomposition tool to compare historic actuals to what would have happened under “seasonal normal” weather conditions.
The graph below shows the average monthly demand for June, July, and August across the NEM. It clearly indicates that 2024 has surpassed historic values, with only 2022 having a higher June, and forecasts suggesting 2024 will have the highest July demand on record. This is well above the average of the last seven years.
But is this growth due to just a colder-than-average winter, or is there an underlying increase in demand capacity?
The below graph uses our Weather Decomposition tool where the model predicts what demand would be under seasonal normal conditions. The removal of the weather effect allows us to analyze whether underlying growth in demand capacity or unseasonable weather is causing demand growth.
The graph below shows the weather-adjusted load (demand under seasonal normal weather) for the NEM. Winter 2024 is still sitting above the previous years, which indicates that there is an increase in demand capacity.
Breaking down the data by region, we see that Queensland and Victoria are the main contributors to this growth.
Conversely, demand in New South Wales has decreased compared to historical data, which bucks the trend.
Queensland and Victoria are seeing increased population growth and robust, healthy industrial and commercial sectors. Policy changes in Victoria such as banning new gas connections are likely to increase residential electricity demand for heating and cooling.
Source: Yes Energy's TESLA Forecasts
Source: Yes Energy's TESLA Forecasts
Source: Yes Energy's TESLA Forecasts
Conclusion
The key takeaway from this analysis is that the demand growth is genuine and likely to persist. This is important as power prices are at their highest since the start of the war in Ukraine, and traditional forms of flexible power generation are phasing out.
To learn more about Australia electricity demand forecasts, talk to our team or request a demo.
About the author: Since 2018, Chris Hesman has specialized in building and maintaining gas and power demand forecasts in Europe and the APAC region. At Yes Energy, Chris is a forecast analysis manager based in Auckland and oversees all power and gas forecasts in the APAC region, ensuring accurate and reliable energy predictions.
