Gas helps generate a fifth of Australia’s electricity, but it should be firing up much more generation capacity to help replace ageing coal-fueled power stations say energy distributors.
According to Energy Networks Australia (ENA) chief executive officer, John Bradley, some Australian governments are “sleeping through their wake up call on energy security”.
“Victoria lost 14pc of its firm power generation capacity as the coal-fired Hazelwood power plant shut down, but new bans on gas development and exploration have just been introduced in Victoria,” he said.
“Victoria is also Australia’s largest manufacturing sector dependent on gas.
“Almost 2 million Victorian households also rely on natural gas for hot water, heating and cooking.”
ENA, the peak national body for about 25 gas and electricity distribution businesses, argued gas development bans threatened not just household and manufacturing sector gas bills, but also the national electricity security.
Gas already played a lead role in electricity production in South Australia where it generates an average 60pc of the state’s power needs, and much more in low wind generation periods.
Mr Bradley noted gas also sustained consistent power supplies nationally, giving the grid flexibly to respond to ups and downs in demand and intermittent renewable generation capacity from solar and wind sources.
Gas-fired generation not only balanced the relatively volatile output from solar and wind, it actually enabled more use of renewable sources within the national grid.
However, global warming watchdog, the Climate Council of Australia, said while many industry and political groups believed more gas development could help transition Australia into a low carbon electricity generation system, this was unrealistic.
It argued if greenhouse emissions were to be restrained enough to keep global temperatures from rising more than two degrees, Australia could not afford to increase its reliance on gas, even in the short term.
In a submission the Finkle Inquiry’s independent review into the national electricity market’s future security it warned tackling climate change required most of the world’s fossil fuels be left in the ground – including Australian gas.
Using existing gas-fired generators to complement wind and solar power while scaling up renewable energy technologies, energy storage and energy efficiency measures may deliver some limited benefit, but the Climate Council said the end goal should be phasing out all fossil fuel quickly.
Building new gas power plants and infrastructure based on policies which fostered new development, such as an Emissions Intensity Scheme, risked “locking-in” expanded gas use for decades.
New power plants would also require “dramatic expansion of new unconventional gas exploration and development, and associated delivery infrastructure” at big costs which investors would expect to return dividends over a long period.
The Australian Energy Market Operator (AEMO) has warned a looming shortage of gas could soon result in blackouts.
It predicted southern state gas deficits within two years unless better supply options were locked in.
But lobbying efforts by the energy sector to have new gas fields developed still won’t deliver gas at globally competitive prices, or in time to plug the domestic energy shortfall according to financial analyst, Bruce Robertson.
“Gas companies have been successful at restricting supply to the domestic market and forcing up prices, which has helped subsidise their big export costs,” said Mr Robertson, who works with the US-based Institute for Energy Economics and Financial Analysis.
He said globally gas production faced a glut.
It was likely at least one of eastern Australia’s high cost liquefied natural gas export plants, which are projected to divert about 1430 petajoules of Australian gas to overseas markets by 2020, would not survive global competitive pressures and would “have to shut at some point”.
In the meantime, however, reserving a portion of Australia’s existing abundant gas supplies for domestic use (about 630 petajoules a year, or about 5pc more than current demand) could guarantee supplies and keep domestic prices in check.
While developing new gas fields such as NSW’s Gunnedah Basin around Narrabri and the Liverpool Plains might seem like the answer to domestic and export needs, he said that coal seam gas would cost more than $7 a gigajoule at 2017 prices to extract, or 114pc more than the US benchmark price.
Delivery costs around Australia would push the price up even further.