Morrison Gas Unplan to burn taxpayer dough in stranded assets

Via the ABC:

The Federal Government’s planned gas-led recovery could turn out to be a mirage, according to energy experts who question the economic case for investing in gas infrastructure when fossil fuels are being rapidly replaced by renewable energy sources.

In September, Prime Minister Scott Morrison announced a plan to “reset the east coast gas market” by “unlocking gas supply” and “delivering an efficient pipeline and transportation market” to drive the nation’s economic recovery.

Mr Morrison also issued a warning to electricity companies.

“To ensure affordable, reliable power, we need the market to deliver 1000 megawatts of new dispatchable capacity,” he said.

“If not, my Government will step up and we will fill the gap.”

The Prime Minister said the government-owned Snowy Hydro company would build a gas generator in the Hunter Valley if the electricity sector failed to meet the energy shortfall left by the scheduled closure of the coal-fired Liddell power plant in New South Wales.

Yet the energy market operator has revealed that several planned projects in the state would exceed the interim reliability shortfall.

“Let’s be clear,” Minister for Energy and Emissions Reduction Angus Taylor told 7.30.

“The market operator said there’s a reliability gap of substantially more than that when you go out a few extra years.

“But we’re also focused on affordability, not just reliability.

“We’re losing up to 1,600 megawatts of capacity when Liddell closes.

Tony Wood, energy director at the Grattan Institute, told 7.30 that promoting a gas-led recovery was “quite an extraordinary step and almost certainly unnecessary”.

“The wish that gas prices would one day be as cheap as they used to be, is almost certainly doomed,” Mr Wood said.

“Building long-term gas infrastructure, it almost certainly will be a stranded asset at some point in the future.

“A gas-led recovery is likely to turn out to be a mirage, to be honest.”

A ‘reckless’ and ‘dangerous’ course of action

Jillian Broadbent, former chair of the Clean Energy Finance Corporation, described the Government’s planned intervention as “reckless” and “a dangerous decision”.

Ms Broadbent said she too was concerned that gas infrastructure such as pipelines and gas hubs could become stranded assets.

The Australian Petroleum Production and Exploration Association (APPEA), which represents Australia’s oil and gas producers, told 7.30 its members were well-placed to drive the economic recovery.

“In the last decade, our industry invested $350 billion in Australia in projects for both domestic supply and export to our trading partners in Asia,” it said.

“Supporting a gas-led recovery doesn’t mean we’re looking for direct financial support from the Government or that we’re asking for other energy sources to be excluded from the mix.”

Ultimately, the states and territories might undermine the Federal Government’s gas plan with their own renewable energy plans.

NSW Energy and Environment Minister Matt Kean described gas as “actually a very expensive way of generating electricity”.

“My focus is on ensuring the families and businesses of this state get access to the cheapest forms of reliable energy,” Mr Kean said.

“We’re taking a technology-neutral approach to that, and in doing so we know that the cheapest forms of reliable energy are wind, solar, pumped hydro and batteries.”

Where our electricity comes from now, and tomorrow

The National Energy Market generates almost 200 terawatt hours (TWh) of energy each year to power households and businesses.

Coal still accounts for 68 per cent of the energy mix, but is on the decline, with 10 coal-fired power stations having closed since 2012.

Seven of the remaining 16 coal-fired stations in the national energy market are expected to close over the next 20 years.

Renewables, such as wind, hydro, grid-scale and rooftop solar and batteries, currently account for almost 24 per cent of our energy generation annually.

Gas currently accounts for 8 per cent.

The forecast for gas, according to the energy market operator, is to play a supporting though declining role as Australia transitions to new renewable energy sources.

While residential and commercial gas consumption has risen, total domestic consumption in eastern Australia has declined 21 per cent since 2014, when gas exports took off, and the domestic gas price rose.

“That record level of investment we’ve seen in solar and wind in recent years, is all about bringing down our emissions. But we need to have those complementary dispatchable energy sources.”

Santos set to drill wells in Narrabri

Despite 23,000 submissions, the majority of them objecting to the project, Australia’s largest domestic gas supplier Santos has received NSW Independent Planning Commission (IPC) approval to drill up to 850 gas wells in northern NSW.

Mr Taylor said the Narrabri gas development was one of many different projects across the country that were needed to deliver more affordable gas.

“We need that supply,” he said.

Santos chief executive Kevin Gallagher said the project would access an “abundant energy source” to increase manufacturing and industrial capacity, and that “no gas project could lead to higher gas prices”.

“One of the benefits of the Narrabri gas project in particular, is that it will bring gas closer to those New South Wales markets. The suppliers, the sort of buyers, [are] the manufacturers, the industrial users,” Mr Gallagher said.

However, local landholder and one-time Greens candidate Peter Willis has concerns about the approval process.

“I don’t believe Santos or the IPC would have had enough time to go through all the tens of thousands of submissions, with proper due diligence,” he said.

Mr Gallagher disagreed and noted “the vast majority” of submissions were “form submissions by the same sort of core people submitting them”.

A proposed high-pressure underground pipeline connecting the Narrabri gas field to the Hunter Valley has NSW Government approval to cross Mr Willis’s land near Quirindi.

A pipeline to nowhere?

The pipeline’s proponent, Garbis Simonian from Hunter Gas Pipeline, must now negotiate access for a maintenance easement with up to 500 landholders.

Farmers like Mr Willis have objected to giving workmen access to their properties.

“We hope our initial refusal of access to our paddocks is sufficient for them not to be able to prove to the Government they can gain the easements in the first instance,” he said.

The pipeline will run right through the Hunter electorate of Labor MP Joel Fitzgibbon.

Mr Fitzgibbon said he supported the pipeline because it would provide “economic opportunity for my people”.

“My interest is in the reliable and affordable gas it provides and the jobs that will flow from that,” he said.

But retirees Susan and Roland Johnson, who knew the pipeline had approval to cross their land when they bought their property at Stanhope in the Hunter Valley, are worried the pipeline will become a white elephant.

The pipeline’s expected route was changed and is now closer to their home.

“Why spend billions of dollars on what will become a stranded asset?” Mrs Johnson asked.

Quite right. There now has to severe doubts about any and all of the Gas Unplan, which was really just an excuse for the corrupt Narrabri project anyway. Add to the above the new NSW renewables plan that explicitly unwrites the development of 2GW of power storage. That will not be enough to end gas given powering the state for an hour by itself will not be enough from time-to-time amid the duck curve and occasional intermittency issues (we’d probably need three hours worth to finish gas off) but it’ll be plenty most of the time rendering gas production occasional at best.

That is enough to guarantee no more construction of gas turbines. And if the Morrison Government goes ahead with its intention of building them then by definition it will be building assets that are virtually never used. That is, they’ll be stranded. So why would anybody invest in expensive Narrabri gas, either? It will also be stranded. Gas can’t compete on any level playing field today:

Australian energy costs compared

Tomorrow it’s completely buggered. By that, I mean 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

A much better idea is to install LNG imports terminals that are cheaper and can ratchet down quickly as gas goes the way of oil over the next three decades.

The simple truth is, energy policy all by itself proves hands down that the federal Coalition is the worst economic manager imaginable.

David Llewellyn-Smith

Comments

  1. Display NameMEMBER

    With the covid commissions un-transparency in place they have probably almost got their syphon hooked up to consolidated revenue to start sucking tax payers dollars into a black hole (their pockets).

  2. I think you’re getting a little ahead of yourself DLS if you think renewables and batteries are going to power Australia from sunset to sunrise any time soon, or if you think gas-fired generation wont be needed as coal-fired plants are shuttered… Narrabri is an environmental disaster of epic proportions, however that doesn’t mean gas won’t play a key role as coal is phased out, if indeed it goes that way.
    Lack of domestic gas reservation for Australia is still the great national treason of the last decade – having this up in the MSM lights is the best we can do for now to effect real change… renewables have all the public momentum they need, but they have their limits until storage gains economic economies of scale or a step-change in storage density/ technology.

    a good read to better understand the current economic and engineering challenges associated with the energy transition for anyone interested in the technical detail: https://www.mdpi.com/1996-1073/13/18/4839

    in the interim, write Scomo a letter and ask WTF happened to his promise made/broken to Centre Alliance in exchange for his tax-cut legislation a few years back… and write to Rex Patrick, and ask him WTF kind of dirt Scomo has on him that has silenced him on this issue that was once so dear to his heart!

    • TheLambKingMEMBER

      I think you’re getting a little ahead of yourself DLS if you think renewables and batteries are going to power Australia from sunset to sunrise any time soon or if you think gas-fired generation wont be needed as coal-fired plants are shuttered

      Within 10 years 100% Solar/Wind/Battery (SWB) will be less than 3c/kWh (https://www.rethinkx.com/energy.) This will be cheaper than fossil fuel costs. We have enough coal to cover the rapid replacement by SWB – there will not be a gas power station built in Australia (unless the LNP underwrite one.) Within 5 years EV’s will cost the same as petrol cars so will dominate car sales. You are underestimating the exponential decreases in prices.

      And once we have 100% SWB power most days we will be producing at least 50% more power than we can currently consume – so we will get to a world of ‘free power’. This will disrupt. People will stop using gas for almost everything if power is free during the day.

        • TheLambKingMEMBER

          within ten years people will stop using gas.

          Ah, taking 1 and 1 and making 3!

          I said within 10 years SWB will be super cheap. I also said people will stop using gas. I didn’t say that people will stop using gas within 10 years! Once SWB is so cheap (10 years) there will be increasing amounts of excess free power in the system (we are already seeing -ve prices) and people will start finding use for free power. In 10 years time it will make sense for most houses to have solar + battery which will cover 98% of days – but produce more power than can be consumed MOST days. Why would you replace gas heating when it dies with another gas system when you are already producing enough electricity to cover the heating/cooling? Think of all the gas heating system in industry that will get replaced with ‘free’ power during the day? Think of the hydrogen that will get produced with ‘free’ daytime power?