SoE 2009 > Human Settlement > 3.2 Energy

3.2 Energy

Fossil fuels currently meet 97% of New South Wales energy demands. One-quarter of the state's energy comes from electricity, 6% of which is supplied from renewable sources. An increased capacity for renewable electricity production has offset reduced supplies from Snowy Hydro due to the ongoing drought.

NSW meets most of its demand for energy from non-renewable sources, mainly coal, along with petroleum products and natural gas. The production and use of energy have significant environmental impacts, including being the main source of greenhouse gas emissions in NSW.

Despite stabilisation of consumption per household since 2002–03, total demand for electricity continues to rise as the number of households increases and manufacturing and service industries grow. With State Plan 2006 setting an increased use of renewable energy as a priority, diversification of NSW electricity supplies is growing strongly with electricity supplied from renewable sources (other than Snowy Hydro) more than tripling from 2003 to 2008.

The recently announced NSW Energy Efficiency Strategy and the legislated Energy Savings Scheme will continue to drive investment in cost-effective energy efficiency measures, building on the achievements of the former Energy Savings Fund, and the Climate Change Fund and Greenhouse Gas Reduction Scheme.

Transport continues to be the sector with the greatest use of fossil fuels, strongest growth in energy demand and slowest rate of fuel-source diversification. Electric vehicles, especially if the electricity is generated from renewable energy sources, hold considerable promise for improving the environmental performance of road vehicles.

NSW indicators

Notes: Terms and symbols used above are defined in About SoE 2009 at the front of the report.

Introduction

Energy is essential to the functioning of an advanced industrial society. NSW enjoys a reliable and secure energy infrastructure, important factors underpinning the stability and growth of our economy. However, the production of energy can have significant consequences for the environment.

Energy production and conversion, such as coal to electricity and gas to electricity in power stations, are the main sources of greenhouse gas emissions (carbon dioxide, methane and nitrous oxide), oxides of nitrogen, oxides of sulfur and particle emissions (see Climate Change 2.2 and Atmosphere 4.1). Coal mining can have significant impacts on surface and groundwater and disrupt ecosystems, as can the importation and refining of petroleum feedstock. The process of energy conversion is also highly inefficient in terms of the energy that is lost.

The stationary energy sector includes the generation of electricity and the direct combustion of fossil fuels for purposes other than transport. The mobile energy sector primarily encompasses fuel for transport.

The energy sector in NSW covers the production, transformation, distribution and use of energy. The state's energy demand is met by eight primary sources: coal, natural gas, water for hydroelectricity, bagasse (a waste product of the sugar industry), wind, wood (heating), solar (thermal and photovoltaic), and petroleum.

NSW produces and uses approximately one-third of Australia's energy, with large reserves of black coal and a substantial mining industry. Consequently, the majority of primary energy consumed is from coal to generate electricity. The Government has various programs in place to reduce this reliance on coal in the interests of improving air quality and reducing greenhouse gas emissions.

Status and trends

The amount and type of energy used by households, businesses and industries have significant consequences for the environment, including the depletion of natural resources, and the generation of air pollution and greenhouse gas emissions. Greenhouse gases contribute to climate change, which is projected to cause more extreme weather with higher temperatures, changing rainfall patterns, more storms and rising sea levels in NSW (see the Climate Change Chapter).

Energy sources

Coal

Black coal is the largest source of primary energy in NSW. The major coal resources are located in the Sydney–Gunnedah Basin, which extends from south of Wollongong up to the north of Newcastle, and across to the north-west through Narrabri into Queensland. These resources represent virtually all of Australia's best quality deposits of black coal. The southern coalfield is the main supplier of coking coal to the domestic steel industry. However, steaming coal used in electricity generation dominates production and exports: although just over two-thirds of mined coal is exported, less than 6% is coking coal for use in industrial processes (NSW Government 2008a).

A range of environmental impacts is associated with coal mining, including surface water and groundwater pollution, erosion, dust and noise pollution, and disruption to plants and wildlife. Depending on the type and location of the mine, there can be other significant environmental impacts. Mine subsidence can adversely affect hydrogeology, crack creek beds, and have an impact on water quality and biodiversity. Alteration of habitat following subsidence due to longwall mining has been declared a key threatening process under the Threatened Species Conservation Act 1995. Steps are now taken in mining operations to minimise these impacts. Good planning and environmental management minimise the impact of mining on the environment and help to preserve biodiversity.

Oil

Oil comprises the largest component of energy used in NSW and the Australian Capital Territory, with 45.7% of final energy use in 2007–08, as shown in Energy Update 2009 (ABARE 2009), which combines data for NSW and the ACT in a way that cannot be disaggregated. NSW is also the largest market for oil in Australia. Oil is primarily used in transport, with some used in the industrial and residential sectors.

NSW has no commercial oil production, and relies entirely on crude oil and refined products imported from interstate and overseas. However, there are opportunities for oil production, and more than 30 petroleum exploration licences have been granted.

Gas

Gas constitutes 8.2% of primary energy supply in NSW and the ACT (compared with 20% for Australia), which equates to 14.1% of final energy use in the state (ABARE 2009). Natural gas is supplied to NSW via pipelines from the Cooper Basin in South Australia and Longford in Victoria. Australia's natural gas prices are among the lowest of the OECD countries. In NSW, transport, industrial and commercial customers account for 83.4% of total gas sales, while supply of gas directly to households is relatively low at 16.6% (ABARE 2009).

Gas is Australia's fastest growing energy source and the proportion of NSW electricity generation capacity using gas is increasing quickly: about 8% of current capacity is powered by natural gas or coal seam methane, and approved developments, when they are completed, will extend this to nearly 20% of installed capacity.

Renewable and sustainable energy

Hydroelectricity accounts for most of the renewable energy used in NSW. Solar, wind and biomass resources are increasingly being developed, largely due to energy sector reforms introduced by the NSW and Australian Governments. About 24% of current NSW electricity generation capacity is powered by hydroelectric, bagasse and wind systems, and already approved solar, mini-hydro and wind developments, when completed, will extend this to nearly 26% of installed capacity.

The NSW Government has policy initiatives in place to promote favourable conditions for the development and use of alternative and renewable energy technologies, such as committing to a renewable energy target of 15% by 2020, the Greenhouse Gas Abatement Program, the establishment of renewable energy precincts, and managing and promoting the accredited national GreenPower Program.

The Australian Government has also encouraged the development of renewable and sustainable technologies through programs such as the Renewable Energy Target (see Responses) and the Generator Efficiency Standards. The Australian Government has proposed a national emissions trading scheme to start in 2011 (see Climate Change 2.2).

Energy use

Electricity: Currently, most of the state's electricity demand is being met by coal-fired generation, a carbon-intensive fuel.

Direct combustion: This is the non-electricity part of the stationary energy sector and includes:

• petroleum refining and the manufacture of solid fuels
• manufacturing and construction industries, such as metals, chemicals, pulp, paper and print, non-metallic minerals, and food and beverages
• on-site steam generation for hospitals, laundries and other commercial organisations
• small-scale combustion, such as home heating, on-site diesel generation and farm machinery.

Direct combustion (transport): The non-electricity part of the mobile energy sector includes:

• road – passenger vehicles, motorcycles, light commercial vehicles, buses, trucks
• rail (other than electrified)
• air – domestic and general aviation
• sea – coastal shipping.

Energy production

Energy production refers to the total production of primary energy by all energy-producing enterprises in a country or state over a given period of time. This includes the energy embodied in mineral commodities mined locally and exported to another state or country where the energy is ultimately produced. In NSW and the ACT during the 2007–08 financial year, 3629 petajoules (PJ) of primary energy was produced (ABARE 2009). Over 98% of this primary energy production was from non-renewable sources, such as coal and gas, with the remainder coming from such renewable sources as wood, bagasse and hydropower. Renewable and non-renewable categories can be used to characterise primary energy production in NSW and the majority of the energy is from coal, which is non-renewable (98.8%). Other fuels contribute only a very small percentage to the total amount: wood accounted for 0.6%, followed by water to generate hydroelectricity (0.3%), natural gas (0.4%) and bagasse (0.2%) (ABARE 2009).

Over the period from 1960–61 to 2007–08, the production of non-renewable fuels has continually shown an upward trend, increasing from 438 PJ to 3590 PJ (Figure 3.4). Growth in the production of renewable energy did increase from 1960–61 to 2000–01, although over recent years renewable energy production has decreased to levels similar to those recorded in the early 1960s, due to a decrease in the use of wood and reduced supply from hydroelectric schemes because of the drought (ABARE 2009).

Figure 3.4: Primary energy production in NSW and the ACT, 1960–61 to 2007–08

Source: Derived from ABARE 2009

Notes: The data source combines data for NSW and the ACT in a way that cannot be disaggregated.

Electricity generation

Since 1996 the generation, distribution and supply of electricity in south-eastern Australia has been amalgamated under the National Electricity Market. This means that the state's generation and consumption of electricity is not isolated, and from time to time NSW may import electricity from interstate or export electricity to other states, although on average NSW is a net importer (AER 2008). The Australian Energy Market Operator operates the National Electricity Market as well as the retail and wholesale gas markets of south-eastern Australia.

In 2007–08, NSW generated 76,836 gigawatt-hours (GWh) of electricity, the majority of which is from coal (93.4%). Another 1.3% of the electricity generated comes from other fossil fuels. The rest is from hydropower (4.5%) and other renewable energy sources, such as wind, landfill gas and solar energy (0.8%) (ESAA 2009).

Electricity generation from coal increased from 91% in 2000–01 to 93.4% in 2007–08, whereas that generated from renewable sources fell from 7.5% to 5.3% over the same period (ESAA 2001; ESAA 2009; Register of Renewable Energy Certificates). Much of the decrease in electricity from renewable sources can be attributed to a lower output from Snowy Hydro because of the drought reducing the water available to generate hydroelectricity. Forecasts of generation availability prepared by the Australian Energy Market Operator confirm the lower production forecasts for generation by Snowy Hydro.

Pressures

Energy consumption

In 2007–08, NSW and the ACT consumed 1602 PJ of primary energy, 97.5% of which was from fossil fuels, such as coal, petroleum and natural gas. Renewable energy sources, such as wood, solar, bagasse and hydropower, represented 2.5% of primary energy consumption in NSW, and the mix of fuels used has changed little over the last six years (ABARE 2009).

The consumption of energy from non-renewable sources in NSW has shown a long-term upward trend. This is being driven by population and economic growth as well as changes in people's behaviour, consumption patterns and lifestyles. Coal consumption has increased from 350 PJ in 1960–61 to 848 PJ in 2007–08, up by 143%, most of which is used for electricity generation. Petroleum consumption is up by 235% since 1960–61 and natural gas has increased from 0 PJ in 1975–76 to 132 PJ in 2007–08, down slightly from a peak of 148 PJ in 2002–03 (Figure 3.5; ABARE 2009). However, the production of primary energy from renewable sources has not seen much growth since 1975 due to reduced production of hydroelectricity (due to drought) and wood offsetting increased production from bagasse, wind and solar energy.

Figure 3.5: Primary energy consumption by fuel in NSW and the ACT, 1960–61 to 2007–08

Source: Derived from ABARE 2009

Notes: The data source combines data for NSW and the ACT in a way that cannot be disaggregated.
* Data of energy from bagasse, solar, hydroelectricity, and wood is an estimate. Wind energy is not included as it is a very small source of primary energy.

Final energy is the energy supplied to the end user. Final energy consumption includes secondary energy, such as electricity, and therefore excludes the coal used to generate electricity. Heat and conversion losses in power plant facilities and refineries, as well as transmission and distribution losses, are also excluded, accounting for the discrepancy between the total amounts of final and primary energy consumed.

In 2007–08, the final energy consumed in NSW was 1042 PJ, of which 45.7% was from petroleum (used mainly in the transport sector) and 24.5% from electricity usage (mainly in the industrial, residential and commercial sectors). Natural gas (14.1%) and coal (12.5%) made up the remaining energy consumed (ABARE 2009).

Energy consumption by sector

Figure 3.6 depicts the trend in final energy consumed by major sectors of the economy in NSW and the ACT. In 2007–08, the transport sector used 42.4% of the total final energy (1042 PJ), which includes all fuel used for transport in the industrial, residential and commercial sectors. The industrial sector consumed a slightly lower proportion (37.9%), followed by residential and commercial, which used 11.9% and 7.8%, respectively (ABARE 2009).

Analysis of the trend in energy consumption by sector shows that the consumption of energy in the transport sector has increased markedly from 240 PJ to 442 PJ over 34 years, which is at an approximate rate of 6 PJ per year. Energy consumption in residential and commercial sectors has also steadily increased but at a slower rate (see People and the Environment 1.3). Overall, the final energy consumption of the industrial sector has been increasing since the mid-1980s, although prior to that there was a declining trend.

Figure 3.6: Final energy consumption by sector in NSW and the ACT, 1973–74 to 2007–08

Source: Derived from ABARE 2009

Notes: The data source combines data for NSW and the ACT in a way that cannot be disaggregated.
* Includes agriculture, mining and manufacturing
** Includes general commercial, construction, and water, sewerage and drainage industries
Certain consolidation and modifications of the ABARE data were provided by DII to avoid double counting and allocate energy use into appropriate sectors.
Final energy consumption includes electricity, and so consumption by the electricity generation sector is not shown here. Also not shown are the energy conversion losses in power plants and refineries: for example, in 2007–08 waste heat from power plants amounted to about 486.7 PJ – more than the energy use in any individual economic sector in NSW.

Figure 3.7 shows the main energy sources used in final energy consumption by the four major economic sectors. The proportions of these fuels are:

• petroleum 45.7%
• electricity (excluding hydroelectricity) 23.1%
• coal (excluding electricity generation) 12.5%
• gas 14.1%
• renewables (hydroelectricity, wood, wood waste, bagasse and biofuels) 4.6%.

The transport sector was the major user of petroleum in NSW in 2007–08, and electricity use was highest in the residential and commercial sectors.

Figure 3.7: Final energy consumption in NSW and the ACT by fuel and sector, 2007–08

Source: Derived from ABARE 2009

Notes: The data source combines data for NSW and the ACT in a way that cannot be disaggregated.
* Excludes inputs to electricity generation
** Includes bagasse, solar, wood, wood waste and hydroelectricity

Energy use in the transport sector: Another pressure in the energy sector is the increasing demand for fuel for transport. NSW has the largest number of vehicles of any Australian state (ABS 2009b), and there is an increasing trend in energy consumption by the transport sector, with an average annual growth of 2.4% since 1973–74 (Figure 3.6). This is the strongest growth in energy use in NSW across all economic sectors, and most of this energy is derived from petroleum (Figure 3.7). A breakdown of energy consumption within the transport sector is detailed in Human Settlement 3.3.

As well as being the economic sector with the greatest consumption of fossil fuels, transport has a slow rate of uptake of alternative fuel sources. Heavy reliance on the combustion of fossil fuels has environmental and health impacts, including greenhouse gas emissions (Climate Change 2.1) and air pollution (Atmosphere 4.1). Electric vehicles show considerable promise for improved environmental performance for road vehicles, especially if supplied from renewable energy sources.

Electricity consumption

In 2008, NSW and the ACT used 71,900 gigawatt-hours of electricity (DII data 2009). In 2007–08, the industrial sector accounted for 43.1% of overall consumption, followed by the residential (31.0%), commercial (24.2%) and transport (1.6%) sectors (ABARE 2009) (Figure 3.8).

Figure 3.8: Electricity consumption in NSW and the ACT by sector, 2007–08

Source: Derived from ABARE 2009

Notes: The data source combines data for NSW and the ACT in a way that cannot be disaggregated.

In 2008, non-renewable energy sources, such as coal and natural gas, were the major sources of fuel for electricity at 94.1%, while renewable energy sources provided the rest: 1.7% from Snowy Hydro and 4.2% from renewable sources (see also Figure 3.11). Solar water heaters (in their capacity to displace electricity use from electric hot water systems) account for 49.5% of non-Snowy renewable energy, followed by landfill gas (16.5%), biomass (19.2%), hydropower (7.9%), wind (1.8%) and solar photovoltaic systems (5.2%).

A key pressure on energy is the increasing demand for electricity. The trend in rising electricity demand in NSW is being driven by population and economic growth as well as changes in people's behaviour and lifestyles. Figure 3.9 shows actual and forecast trends in electricity consumption under three growth scenarios (AEMO 2009; TransGrid 2009). This data is for native electricity as generated, which not only includes major power plants but also smaller generators located in the distribution network. Changes to the NSW economic climate, such as the global financial crisis that triggered a severe economic downturn in late 2008, have resulted in lower forecasts which were released in 2009.

Figure 3.9: Actual growth and forecast trends in electricity generation in NSW under varying growth scenarios

Source: TransGrid 2009; TransGrid data 2009

Since 1994–95, the use of electricity per household has increased significantly, but has stabilised since 2002–03 (Figure 3.10). Electricity was the most common energy source used by NSW households to power home heating and cooling systems. An estimated 1.37 million (52%) of households used reverse cycle air-conditioning or other electric heating to heat their homes (ABS 2007a) with ownership of air-conditioners almost doubling in the last 10 years (DEWHA 2008b).

Figure 3.10: Residential electricity consumption per NSW/ACT household, 1994–95 to 2006–07

Source: ABS 2009c; Energy Supply Association of Australia data 2009

Notes: Information from the Energy Supply Association of Australia combines data for NSW and the ACT in a way that cannot be disaggregated.

Figure 3.11 shows the trend in consumption of electricity from renewable sources since 2001. Electricity supplied from renewable sources other than Snowy Hydro (such as landfill gas, wind and biomass) more than tripled from 2003 to 2008. Overall, however, these increases have not fully offset reduced generation from Snowy Hydro because of a lack of water due to the ongoing drought.

Figure 3.11: NSW consumption of electricity from renewable sources

Source: DII data 2009

Responses

Energy sources

State Plan 2006

State Plan 2006: A new direction for NSW (NSW Government 2006a) has identified the increased use of renewable energy as a priority, with the following target under Priority E2: 'By 2010, 10% of electricity consumed in NSW will be from renewable sources, rising to 15% by 2020'. The federal renewable energy target of 20% by 2020 creates a broader national objective. This is closely linked to State Plan Priority E3: Cleaner air and progress on greenhouse gas reductions. A review of State Plan 2006 commenced in August 2009 and this may adjust some of the plan's priorities and targets.

NSW Government measures and programs

To increase the supply and consumption of renewable energy and other types of low-emission energy generation, the NSW Government is implementing a range of measures and programs.

GreenPower, initiated by the NSW Government, is now a national accreditation program which encourages consumers to purchase accredited renewable electricity products through their energy retailers. In 2008, GreenPower made up approximately 0.7% of the total electricity consumed in NSW. This is 37% higher than the amount consumed in 2007. Since January 2007, NSW electricity retailers have been required to offer a minimum of 10% accredited GreenPower as an option to all new customers.

The Renewable Energy Development Program is offering $40 million from the NSW Climate Change Fund over five years from 2007 to 2012 to demonstrate and support the early commercialisation of new renewable energy technologies that generate or displace grid electricity for stationary energy. Round 1 of the program allocated $27 million to seven renewable energy projects encompassing a range of technologies, including biogas, geothermal and solar thermal.

Renewable energy precincts: The NSW Government has identified six areas of the state that show the greatest potential to generate electricity from wind: the NSW–ACT cross-border area, the Central Tablelands, the New England Tableland, the Upper Hunter, the South Coast and Cooma–Monaro. In these renewable energy precincts, development proposals for wind farms will receive streamlined planning and approvals. In addition, the threshold for critical infrastructure under the Environmental Planning and Assessment Act 1979 will be lowered from 250 megawatts to 30 MW for renewable energy generation facilities within these precincts. Development fees will also be waived for any major renewable energy project classified as critical infrastructure.

To further maximise investment in renewable energy, a feed-in tariff scheme is being developed which will pay households which generate electricity from rooftop solar photovoltaic systems.

The Department of Planning will review national wind farm development guidelines, which are due in early 2010, with a view to improving the NSW development assessment framework for the farms. The Government is consulting with the sector to explore ways to further improve the process for future projects.

Retail competition: Since 2002 the NSW energy retail market has been fully competitive, with households able to choose their retail supplier and either negotiate a contract or pay a default price which is regulated by the Independent Pricing and Regulatory Tribunal. This has enabled retailers to offer a range of GreenPower options to their customers.

Renewable energy targets

In 2007 NSW established a target for renewable energy, which has been incorporated into the expanded national Renewable Energy Target scheme. The expanded scheme was endorsed by the Council of Australian Governments in April 2009, and has been implemented through federal legislative amendments passed in August. The scheme sets a target for renewable energy that is more than four times the size of the former national Mandatory Renewable Energy Target. The target will increase annually, commencing in 2010, reaching 45,000 gigawatt-hours by 2020, and then be maintained at that level to 2030 when the scheme will end. By requiring that 20% of Australia's electricity supply is from renewable sources by 2020, the Renewable Energy Target scheme will drive major new investment in renewable energy infrastructure, especially wind power.

Energy efficiency

Energy efficiency is essentially about achieving more with less by using energy wisely and avoiding energy wastage. Increased energy efficiency in homes, business and industry can provide both financial benefits by lowering electricity bills and environmental benefits by reducing greenhouse gas emissions. It also cuts costs to the economy by producing more economically efficient energy consumption and supply patterns.

NSW Energy Efficiency Strategy: NSW is implementing energy efficiency measures to reduce the cost of greenhouse gas mitigation and consumers' power bills and improve economic performance. These goals can all be achieved because there are considerable opportunities to save money by reducing energy consumption instead of increasing energy supply.

The purpose of the $150-million strategy is to:

• cut greenhouse gas emissions from energy consumption
• reduce the impact of rising energy prices on businesses and the community by lowering energy consumption
• delay the need to construct additional energy generation and distribution infrastructure.

A number of energy efficiency programs, covering small businesses, low-income households and community organisations, operate under the NSW Energy Efficiency Action Plan (NSW Government 2008b) and are funded from the Climate Change Fund (see Climate Change 2.2).

Building Sustainability Index

The Building Sustainability Index (BASIX) was introduced by the NSW Government in 2004 to ensure that new homes are designed and built to high energy and water efficiency standards. Each new home in NSW must meet a greenhouse gas emission reduction target compared with the average home built before the introduction of BASIX. For Sydney and coastal NSW, this target is 40%. Since July 2007, BASIX also covers all residential alterations and additions which cost more than $50,000.

For BASIX-compliant single residential dwellings built in the 2005–08 reporting period, the commitment to energy savings translates to a reduction of greenhouse gas emissions equivalent to more than 173 million kilograms of carbon dioxide. This is the same as taking more than 39,000 cars off the road each year (DoP 2008a) (see also Climate Change 2.2).

Energy savings by high energy users

The NSW Government requires designated businesses, government agencies and local councils who are high energy users to prepare Energy Savings Action Plans. By the end of 2008, 235 of these plans had been approved by the Minister.

NSW Climate Change Fund

The NSW Climate Change Fund (CCF) commenced in July 2007 and comprises a number of funding programs totalling $717 million until 2012. Projects approved under the former Energy Savings Fund are also now administered under the CCF as are programs announced under the NSW Energy Efficiency Strategy in June 2008. CCF projects have a significant focus on energy efficiency and savings and also cover a range of alternative generation (such as cogeneration and renewable energy) and education initiatives.

Localised or distributed generation projects and promotion of technologies, such as solar water heaters, are often characterised as energy savings projects as they decrease demand for electricity from coal-fired power stations. Some projects under the CCF also achieve sustainable reductions in peak demand, thus helping to partially offset the need for new generation capacity or an increase in the size of the network in some areas.

Energy Savings Scheme

An Energy Savings Scheme has been legislated to drive investment in cost-effective energy efficiency measures, building on the achievements of the Greenhouse Gas Reduction Scheme, but separate from it. The scheme, which started on 1 July 2009, sets annual energy savings targets for electricity retailers starting at 0.4% of total electricity sales in 2009–10 and increasing to 4% by 2013–14, where they will remain until 2019–20. The targets will provide clear financial incentives for businesses to provide energy efficiency services to consumers by developing creative, cost-effective programs that reduce energy use. The Energy Savings Scheme is expected to drive energy efficiency gains which would not be achieved by the carbon price under the national emissions trading scheme proposed by the Australian Government to start in 2011 (see Climate Change 2.2).

Alternative transport fuels and new vehicle technology

The NSW Government, through the Cleaner Vehicles Action Plan, has made a significant commitment to improve air quality in NSW and reduce fuel consumption, dependence on oil and greenhouse gas emissions by developing the market for cleaner new motor vehicles.

NSW established Australia's first mandated biofuel (ethanol) petrol component in 2007 and this was expanded from 1 October 2009. Under the revised mandate, NSW petrol wholesalers need to ensure that from 1 January 2011 ethanol makes up a minimum 6% of their total petrol sales (with all non-'premium' grade petrol required to be 10%). A 2% biodiesel mandate has also been introduced, rising to 5% from 1 January 2012. Biodiesel is produced from domestic renewable resources, such as vegetable oil, and is the only alternative fuel that can be used directly in existing unmodified diesel engines.

National initiatives

The NSW Government supports and engages in federal government initiatives.

The National Australian Built Environment Rating System (NABERS) is a performance-based rating system for existing buildings. This program is managed by the Department of Environment, Climate Change and Water. NABERS rates a building on the basis of its measured environmental impacts, such as energy, water, stormwater runoff and pollution, sewage, landscape diversity, waste and toxic materials, and provides an indication of how well they are being managed.

The Green Car Innovation Fund is a $1.3-billion fund to provide grants via a competitive process to organisations in areas such as research and development and early-stage commercialisation of technologies that significantly reduce fuel consumption and greenhouse gas emissions from passenger vehicles.

The National Framework for Energy Efficiency is a comprehensive policy framework which is developing further a range of cost-effective energy efficiency measures already being implemented at a national or regional level, with an increased focus on national coordination.

The National Strategy on Energy Efficiency is a joint state–federal strategy that will accelerate the adoption of energy efficiency strategies across all governments. It will help households and businesses reduce their energy costs and improve productivity and reduce the cost of greenhouse gas abatement under the national emissions trading scheme proposed to start in 2011 (see Climate Change 2.2). The Council of Australian Governments agreed that the strategy will include streamlined roles and responsibilities for federal, state and territory governments (COAG 2009) and that it would encompass all areas of the economy where there are opportunities to make substantial cost-effective energy efficiencies, including in commercial and residential buildings, appliances and equipment, industry and business, government, transport, skills, innovation, advice and education. The strategy will build on existing measures under the National Framework for Energy Efficiency. The NSW Government is contributing its Energy Efficiency Strategy as a key component of the national strategy.

The Clean Energy Initiative will support research into, and development and demonstration of, low-emission energy technologies, including industrial-scale carbon capture and storage, and solar energy. Under this initiative, the Solar Flagships Program will provide funding support for the construction and demonstration of large-scale solar power stations, such as solar thermal, photovoltaic or energy storage technologies. The target is to generate 1000 megawatts of electricity. The NSW Government has established the NSW Flagships Taskforce to progress state participation in the federal program.

Future directions

Greater use of renewable energy and improved energy efficiency are essential in creating a sustainable energy sector.

In the medium to long term, the scale and type of new baseload electricity generation capacity will have a major influence over the sector's environmental and health impacts. It is therefore important that this is a major consideration in assessing options for new generating capacity.

The NSW Government has a fuel-neutral policy for the technology and fuel type for the next baseload power stations. However, it is recognised that proponents will make decisions about investment in new power stations in the context of the proposed national emissions trading scheme to start in 2011 and the Renewable Energy Target. The most recently commissioned power stations are gas-fired.

Industrial cogeneration provides opportunities to produce electricity and heat simultaneously using a single fuel and this is another possibility for more efficient energy conversion.

Ongoing assistance for research into, and development of, cleaner fuels and technologies would improve their commercial viability and encourage greater uptake.

In many cases, measures that reduce greenhouse gas emissions, such as energy efficiency and the uptake of renewable and gas-fired electricity generation, also reduce emissions of regional air pollutants and other associated environmental impacts. Future policy efforts should seek to harness these co-benefits.

Further work could also review the technology, infrastructure, policy and legislation that is having an impact on the commercialisation of electric vehicles.