Australia Primed to Benefit From Future Energy Demands
- Wednesday, 05 October 2011
Background
In mid-September, the United States’ Energy Information Administration (EIA) released a report outlining global energy trends to 2035. The report titled, International Energy Outlook 2011, forecasts a 53 per cent increase in global energy use over the coming decades. The changing nature and requirements of international energy demand present an opportune space for the Australian sector.
Comment
Predictably, China and India are projected to lead future energy demand, accounting for half of the total growth in future energy use. Their economies will continue to rely heavily on coal-fired energy generation and will drive demand for Australian coal. Hydrocarbon energy will continue to dominate the global transportation sector and industrial markets. Continuing concerns over climate change, however, will encourage a diversification of energy sources and a gradual shift from hydrocarbon dominance.
In this context, Australia’s strong energy credentials must be marketed. The nation’s reputation as a secure and reliable energy resource supplier, with a ‘proximity premium’ to key markets, seemingly guarantees continued prosperity. Realisation of energy opportunities, however, will rely on the continued diversification of the energy sector and the long-term development of natural gas and uranium.
According to the EIA report, the global electricity and industrial sectors will drive an increased demand for natural gas. The report suggests that the lower carbon intensity of gas, compared to other fossil fuels, coupled with its low costs and fuel efficiency, make it a viable source of future energy requirements. The late-September confirmation of the Wheatstone Project, in Western Australia’s north, and the continued development of similar gas projects, mean Australia is well-placed to meet projected changes to demand. It is important, however, that Australia should seek to maximise the opportunities available within the sector. As noted in the EIA publication, scope exists for greater development of unconventional gas resources, including shale gas and coal-bed methane. It is imperative that community and safety concerns over unconventional gas are allayed, and the sector is developed to maximise Australia’s economic opportunities.
Conscious of ongoing uncertainty in the nuclear power industry since the Fukushima nuclear crisis, the report was cautious in its outlook for the sector. Citing increased community objections in Europe, highlighted by Italy, Germany and Switzerland phasing out nuclear power operations, the EIA suggested a potential decrease in uranium demand. While this bodes well for the Australian natural gas sector, which can expect increases in demand, the administration’s projections are likely to cause concern for the uranium industry.
Critics, however, contend that changes to demand for uranium from Europe will be absorbed by other markets. Globally, there remain 440 commercial nuclear power plants in over 30 countries, still requiring nuclear fuel material. Attempts by China and India to guarantee domestic energy consumption will drive uranium demand. Australia has the world’s largest uranium reserves, yet is currently only responsible for 16 per cent of world supply. Current impediments to the growth of the industry, including legislation preventing the sale of uranium to India and the lack of alignment of Federal and State policy, represent missed opportunities and must be resolved.
With an abundance of energy resources and markets in close proximity, Australia has a solid energy export base. Yet, to build on these foundations and realise the nation’s potential as a global energy player, Australia must diversify both its energy exports and markets and promote its strong energy credentials, particularly in comparison to other market competitors.
Daniel Ossevoort
Future Directions International Research Intern
Northern Australia and Energy Security Research Programmes
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