Energy consumption

Over the past four years household energy consumption has dropped¹. It is almost impossible to say why this has occurred. Rising electricity prices are could be considered a factor, but this theory raises something of a chicken-and-egg problem, because a decrease in consumption drives up electricity prices². The carbon price is a factor, although it only accounts for a small part of the overall increase in electricity prices. Another factor would be the the various state and federal subsidies and rebates that have come and gone over the past decade on solar power, insulation and other energy-reduction initiatives. And then, of course, there is the possibility that a growing environmental conscience in our society is influencing our behaviour.

Untangling all of those factors, and determining the direction of causation for some of them, is impossible.

One thing is certain. Electricity consumption is on the decline. And this is a good thing.

Quarterly household consumption of electricity, gas and other fuel, chain volume measures

Newly released data from the ABS also shows which of our industries are becoming more energy efficient. Unfortunately, this data only takes us up to the 2011-12 year, which means we don't get to see the impact of the carbon pricing scheme. I'll have to dig through the National Accounts to see if there is any more recenty quarterly data.

The graph below shows the change in energy intensity in a selected industries. This is a measure of how much energy is used per unit of economic output. An increase means an industry is becoming less efficient. And decrease; more effecient.

Energy intensity, % change from 2008-09

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¹Numbers courtesy of ABS National Accounts.
²Yes, decreasing electricity consumption pushes up electricity prices. The largest cost in the production of electricity is the maintenance of infrastructure (colloquially referred to as “poles and wires”), and these costs are largely unaffected by fluctuations in consumption (except that spikes in consumption may require infrastructure upgrades, driving the maintenance costs up). So, as consumption of electricity drops, the unit price goes up. Think of electricity production as a pie – it is always the same size (the total cost of production), and the less slices that are cut out of it (less units of electricity are consumed), the bigger each slice is (the more each unit of electricity costs).