Grattan: Morrison Gas Unplan to lift power prices

From Tony Wood at Grattan:

Far from fuelling the recovery from the COVID recession, natural gas will inevitably decline as an energy source for industry and homes in Australia, according to a new Grattan Institute report.

Flame out: the future of natural gas shows that a combination of economics and environmental imperatives imperil the industry.

Australia must reduce emissions over coming decades to meet our international climate change commitments. Gas is a fossil fuel, so the gas sector is no exception.

The east coast has already burned most of its low-cost gas, and will not go back to the good old days of low prices, so gas will become an increasingly expensive energy source.

Over time, gas will decline, economically and environmentally. Rather than indulging in wishful thinking or living in denial, the Federal Government and the gas industry – and its customers – should start planning now for a future without natural gas, or at least with a dramatically reduced role for natural gas.

The Prime Minister has talked up a gas-fired recovery for manufacturing, raising expectations of big price reductions. But the report shows that eastern Australia faces inexorably more expensive gas. If the Government tries to swim against this tide by directly intervening in the market, taxpayers will pay the price via big subsidies.

Even if the Government could significantly reduce gas prices, the benefits to manufacturing are overstated. The companies that would benefit most contribute only about 0.1 per cent of gross domestic product, and employ only a little more than 10,000 people. And much of this gas-intensive industry is in Western Australia, which has low gas prices already.

The Government’s best role is to support the development and deployment of the low-emission alternatives that can replace natural gas in manufacturing, such as renewables-based hydrogen and renewables-based electricity.

Nor does gas stack up as a ‘transition fuel’. As Australia’s coal-fired power stations retire over coming decades, it would be more expensive to replace them with gas than to switch to more renewable energy such as wind and solar.

Gas will play an important backstop role in power generation when the sun isn’t shining and the wind isn’t blowing, but this does not require large volumes of gas.

In the home, too, Australia must either replace natural gas with low-emissions substitutes such as biomethane or hydrogen, or switch to electricity, for heating and cooking.

It is already clear that households would save money and Australia would reduce emissions if new houses in NSW, Queensland, South Australia, and the ACT were all-electric. Governments in those places should impose a moratorium on new gas connections.

Basically right already:

Australian energy costs compared

Tomorrow it’s decisive. By that, I mean gas is 400% more expensive than renewables within five years:

Price of solar and batteries over next 5 years
Price of solar and batteries over next 5 years

Of course, we also need gas for manufacturing which should be delivered via reservation, same as WA. There is plenty of cheap eastern gas but it is going to Asia:

Energy is the weirdest and most distorted political economy in Australia, which is really saying something. The latest craziness is Morrison Gas Unplan which is threatening to build stranded gas generation assets if the private sector will not, which it won’t because it’s busy doing this instead:

On Saturday, AGL went a mega-step further towards achieving its goal of 850 MW of new large-scale battery storage integrated into its generation portfolio by FY 2024, with the announcement of a 250 MW, four-hour-duration battery system to be built in stages on the site of its Torrens Island Power Station in South Australia.

Gas for power is dead unless it is subsidised in the name of identity politics, which is the Morrison Unplan.

David Llewellyn-Smith


  1. “There is plenty of cheap eastern gas but it is going to Asia”
    Not according to Tony Wood/Grattan… “The east coast has already burned most of its low-cost gas, and will not go back to the good old days of low prices.”

    I believe there WAS plenty of cheap eastern gas…

  2. “The east coast has already burned most of its low-cost gas, and will not go back to the good old days of low prices…”
    – bollocks!

    The east coast has already committed to export most of its low-cost gas, and Australian residents and businesses will not go back to the good old days of low prices, since Scomo and the federal government chooses to let a cartel of exporters profit on the global market without first reserving sufficient supply for the domestic market.

    Since they got the first paragraph arse-about, the whole premise of this Gratten brain fart is flawed. complete rubbish

  3. “Nor does gas stack up as a ‘transition fuel’. As Australia’s coal-fired power stations retire over coming decades, it would be more expensive to replace them with gas than to switch to more renewable energy such as wind and solar.”

    – BOLLOCKS Tony Wood! Ever heard of intermittency mate? Tell me more about how ‘wind and solar’ will magically be a base-load power generation substitute to back-fill closing coal-fired generation? #magic #unicorns and #rainbows Tony! WHat does a 5 or ten thousand MWh battery pack cost Tony? more than a few hundred MW of gas-fired turbines? you’re #dreaming

  4. Good to see you’ve finally dropped NG as the transition fuel idea.
    It always was a good idea but the implementation came 10 years too late to be effective.
    Today we’ll go straight from Coal to Solar + Wind + Storage and because Australia will make this leap directly it needs to invest 100% of available transition dollars in making the Renewables transition rather than supporting an alternative “intermediate path”.
    If everyone is on board with this transition than it will not only be possible rather it will be world leading.
    Lots of expertise will be developed in Australia that’s globally needed to understand how to achieve stability in large scale Renewable networks.
    This is an opportunity that Australia needs to embrace and not completely stuff up by diluting our transition dollars though an NG intermediate step.

    • Well, I’m not so sure we should drop gas as a transition fuel.

      This is a complex and frightening issue. After 50 years of doing nothing, the issue of GW has suddenly become so pressing that everyone is jumping on the solar/renewables bandwagon without knowing a great deal about it.

      An op-ed in the Wall Street Journal of a new report entitled “If You Want ‘Renewable Energy,’ Get Ready to Dig” points out the physical impossibility of renewable energy (mainly wind and solar power) and battery storage transitioning the world to a “new energy economy”. The transition would require “the biggest expansion in mining the world has seen and would produce huge quantities of waste.” Wind turbines, solar panels, and storage batteries are made from nonrenewable materials that wear out and must be decommissioned, generating millions of tons of waste. For example, to meet the Paris accord benchmarks, the solar power required by 2050 would result in the disposal of solar panels equivalent to over double the tonnage of the world’s current plastic waste.

      According to the author, Mark Mills, building one wind turbine requires 900 tons of steel, 2,500 tons of concrete, and 45 tons of non-recyclable plastic and solar power requires even more cement, steel, glass, and other metals—notably rare earth minerals. Global demand for rare-earth minerals would need to increase by between 300 percent and 1,000 percent by 2050 to meet the Paris renewable goals.”

      So if correct, and I’ve read it elsewhere also, it seems that other than reducing, there is no replacement for FFs, particularly oil – that magical once-only store of ancient sunlight which has given us such marvelously available, storable, tranportable, cheap, but ultimately, irreplaceable energy – which we’ve frittered it away in the shortest time possible on gewgaws and baubles and now find ourselves hard up against the limits to growth.

      For Australia, with little oil left, little storage or refining capacity, at the @rse end of a world heading into troubled and possibly conflict-riven times, in some ways, it makes sense to use the cheap and accessible oil we have access to now to set up gas for the future as a back up.

      Of course, the unpalatable truth is that we have to give up on growth. And no politician of any stripe will do that, or tell the population the sad truth of our predicament – because there is no solution other than to stop what we’re all doing.

      • cobalt, lithium, nickel and manganese… among others… All the fanciful ‘net zero carbon 2050’ pledges ignore the fact that these critical elements are finite and increasingly difficult to come by!

  5. “to replace the UK’s fleet of cars (currently 31.5 million) entirely
    with EVs, it would require “just under two times the total annual world cobalt production, nearly the
    entire world production of neodymium, three quarters the world’s lithium production and at least
    half of the world’s copper production during 2018”

    but yeah, zero net carbon 2050 all round cos its unlimited clean & green!!