Only gas reservation can save Labor from renewables doom

Via EnergyQuest at the AFR:

One third of Queensland’s new $84 billion LNG export industry is likely to be forced to close down by 2025 due to shortages of coal seam gas reserves and the need for shipments to be diverted to local users, according to a detailed analysis of the sector.

The findings by consultancy EnergyQuest warn that the Queensland export plants may never reach full-scale production and that last year’s utilisation rate of about 82 per cent on average may be the best it ever gets.

The analysis is based on a year-long, bottom-up examination of the Queensland LNG sector’s exploration, production, supply and price risk outlook led by EnergyQuest principal Graeme Bethune, who found the plants are relying on estimates for gas reserves that could fall well below expectations.

Sounds good to me. Though unless the local economy is protected by strengthened domestic reservation as soon as possible then the bill for the gigantic capital misallocation will be visited directly upon households and business in the form of rampaging utility bills.

That will include electricity prices because, as we know, gas sets the marginal cost in the National Electricity Market. This is especially so if Labor pursues its renewables agenda (as it should) and the NEM becomes more reliant upon intermittent power, via The Australian:

Labor’s 45 per cent emissions-­reduction target would push electricity prices 50 per cent higher, cost workers up to $9000 a year in lower wages and wipe $472 billion from the economy over the next decade, according to the first independent modelling of the energy policies of both the government and opposition.

The Coalition’s commitment to meeting a 26-28 per cent reduc­tion under the Paris Agreement would also come at a cost, with $70bn in cumulative economic losses by 2030 and a 2 per cent hit to real wage growth.

The research, which is currently under peer review in the US, has been authored by Brian Fisher, the former head of the Australian Bureau of Agriculture and Resource Economics, who served under the Hawke, Keating and Howard governments as a chief adviser on climate policy.

The modelling is not yet available but it will be right if Labor does not prevent any increase in gas prices as reserves dwindle and renewables expand. Gas is the peaking or dispatchable power substitute when renewables are limited and so long as its price is high so will power bills be, costing the economy dearly. Notice its expanding role as price setter in SA and VIC:

Eventually power storage will take over the role but that will take a decade and more.

In the meantime, Labor must strengthen domestic gas reservation or its plan for carbon mitigation will kill its government stone dead.


David Llewellyn-Smith
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  1. There are a number of gas turbine proposals – both single (gas turbine) and combined cycle (gas + steam turbine) all on hold at the moment. I worked on many of the construction estimate proposals and they all got abruptly canned just we the construction crews for Curtis Island and the gas fields out Dalby started to mobilise about a decade ago. It’s the combined cycle projects which can supplement the coal fired plants as base load generators.

    However all the rent seekers in the renewable’s sector are opposed to additional base load power flooding the market as they can make lots of $$$$$ when the spot market peaks. Snowy Hydro are on record that their business case only makes sense on the current market rates, and any additional base load power sinks their project to the bottom of Lake Talbingo.

    You can harp on all about bad coal in Australia, the impact of one or two Mitsubishi or Posco supercritical units replacing Australia aging 1960’s &1970’s technology. But meanwhile China they are still rolling them out and ain’t going to give coal away anytime soon. And according to the spruike in the video (from about 0.30 in the video) “Our coal-fired power plants emit about the same amount of soot, sulfur dioxide and nitrogen oxides as gas-fired power plants”

    • I’m looking at sticking in just off shore the GC
      150 wind turbines in a 300m spaced grid 10 deep 15 wide
      Initial numbers show its the cheapest form of electricity supply for here, 4 eva
      and I’m gunna zap a few sharks just whilst I’m at it.

      • In increase reliability, wind turbine developers should not be allowed to directly connect to the grid without a battery storage system to backup and moderate their fluctuations.
        “We get a tax credit if we build a lot of wind farms. That’s the only reason to build them. They don’t make sense without the tax credit.”…….Warren Buffett

    • Interesting factoid, china’s power grid is government owned and centrally planned.
      If Australia’s was as well, instead of being privatised, then rent seekers simply wouldn’t exist and planning would be centrally done.
      The capital expense on a power station is huge, with a return on investment time of decades I presume. No one is going to make that investment privately into the massive uncertainty of our ridiculous privatised power system, especially considering the players with the expertise make increased profits for no capital expenditure from increased prices due to shortage. Privatisation has been a massive failure, as expected for a natural monopoly, and until they bite the bullet and partially or completely re nationalise it, the problem won’t be fixed.

      • interesting factoid
        no one knows when someting like fusion will come along and make many renewables redundant
        If I was going to do it, I would build a half dozen of the SC plants, with the boiler section easily removed from the turbine, power station
        If fusion comes along, you just build a fusion boiler,and connect it to the turbine.
        too easy.

      • Commercial Nuclear Fusion has been 15 years away now for about 60 years! You may as well talk about using a canned unicorn meat power station.

        …..while right now(well, by the time the Coal plants stop working, or 2030, whichever is closer) we could go 100% solar during business hours and run on wind and hydro at night. Wind during the day can power the batteries and pumped hydro. Build ultra-high voltage long distance lines to connect the states (including WA to SA) and fill the gaps with gas. Simple.

      • Lammy
        how come no one believes you
        everything of which you speak is easy to do and implement
        how come no one is doing it?

      • >everything of which you speak is easy to do and implement
        Cost. It has only been in the last few years where renewables have been cost competitive. The good news is that wind, solar and batteries are halving in price every 5-10 years! So at sometime in the next 10-20 years firing up a coal power station wont be cost effective!

        >how come no one is doing it?
        What? Lots of States and Countries are going down this path! And I did say some time before 2030.

      • “how come no one is doing it?”
        Because it is far more profitable to let the power stations slowly close and make ever increasing profits from the existing assets. Any new players will be priced out of the game short term, with the encumbents continuing to profiteer after that. See Telstra behaviour after privatisation of the PSTN for precedent.

    • Pot, meet kettle. Both balck.
      Nothing more pathetic than a minerals council blogger complaining about the rent seeking of others.

  2. I’ve been saying as much on MB for about a year now.
    EnergyQuest has the number wrong however. 2 of 3 LNG trains will shut. There’s only room for 1. The last one standing will be with the longest time to its next refinance event.

    • I agree
      those reserve calculations were out the window about 3 months after they tapped the first cg field
      it was well covered here.