The ABC has thankfully paused in its race and sexuality wars to report on something that affects us all: how the gas cartel destroyed Australia’s energy transition. The only thing missing from this report is how the cartel lied about having enough reserves to cover its export contracts and then vacuumed up all of the spare gas and exported that as well. A crucial oversight.
As for batteries filling the gap by 2030, it is difficult to say. We are certainly going to see a major ramp-up given the profits on offer. But the Evil Gas Cartel, as well as manifold policy errors, is injecting a lot of risks so that may hold investment back.
Gas solves everything and without it, you can resolve nothing for a long time. Which is one reason why I keep fighting for it.
As for the Australian Petroleum Production and Exploration Association Chief executive Samantha McCulloch, who is quoted in every article written on this subject, it is time to ban her and APPEA from coverage.
She is not an objective voice and APPEA is the evilest lobby in Canberra.
A few short months ago, Western Australia’s Premier Mark McGowan delivered a stunning piece of news.
The state government would close its two remaining coal-fired power stations by 2029 and plough billions of dollars into new renewable and storage capacity as the energy transition in the west hit top gear.
But sitting behind the announcement, just out of eyeshot, was a telling footnote.
WA’s great leap towards a clean energy future would be underpinned by gas.
“What we have is gas power,” Mr McGowan said when asked how the government would ensure the lights stay on when the sun doesn’t shine or the wind doesn’t blow for days at a time.
Across the developed world, it’s a similar story as countries seek to hedge their renewable energy investments with big bets on gas-fired power.
In the United States, gas accounted for about 40 per cent of the electricity generated in 2020, the International Energy Agency notes.
In Japan, the fuel’s share of the electricity mix has roughly doubled over the past 30 years to almost 40 per cent.
And in Ireland – which perhaps more than any other country is turning to wind to produce its power – gas provided a whopping 50 per cent of the country’s electricity in 2020.
Gas a ‘bridge’ for many countries
For all of these countries, gas is the proverbial bridge between an electricity system running on coal-fired and nuclear generation and one powered by wind and solar resources.
Green Energy Markets director Tristan Edis says the common thread is the flexibility of gas.
“If you’re familiar with a wood fire versus your gas stove, your gas stove is instantaneous … it switches on straight away and you can turn it up and down very quickly,” Mr Edis said.
“Whereas your wood-fired stove takes a long time to go up and down.
“Now, coal is not quite as inflexible as your wood stove but it’s your illustration about why gas is seen as this flexible fuel.”
That flexibility is increasingly being seen as vital in the pivot towards renewable energy, which is inherently intermittent and uncontrollable.
Bruce Mountain from the Victoria Energy Policy Centre recently noted that coal-fired power was the opposite of flexible.
Indeed, Professor Mountain said coal generation was designed to run more or less at full capacity all the time – to provide the “baseload” of supply in the market.
“They’re not built to the flexible,” Professor Mountain told the ABC’s 7.30.
“They’re like driving a B-double through a city centre – it’s inefficient, they can’t do the stop-start.”
Coal, renewables incompatible
Coal’s incompatibility with green energy might have partly driven the WA government’s decision to shut its coal-fired power stations by 2029, but the state’s abundance of cheap gas helped, too.
Critical to Mr McGowan’s calculation was a domestic gas reservation policy that requires 15 per cent of a project’s reserves to be set aside for the domestic market.
Legislated in 2006, the obligation helped entrench gas at the centre of industry in WA, where the fuel typically provides more than a third of the state’s electricity needs.
As a result of the obligation and friendlier policies towards exploration companies, gas prices in WA are roughly $5 to $6 a gigajoule — a tiny fraction of those in the eastern states.
“When you have a reservation policy with gas, you can turn gas power stations on immediately,” Mr McGowan said.
Amid rapid-fire announcements by governments and industry in the Eastern States that they, too, will fast-track the closure of coal plants, questions have been turning to what role gas might play in Australia’s biggest electricity system.
Mr Edis reckons the answer is simple – he says gas will have a negligible part to play.
And he argues the reason for that is similarly straightforward.
Unlike WA, Mr Edis notes there are no domestic gas obligations on the east coast.
Exports cruelled chances for gas
Instead, major producers including Santos, Shell and ConocoPhillips have virtually unfettered rights to export supplies in the form of super-chilled liquefied natural gas (LNG) to markets in Asia.
“The moment we decided we were going to export gas to Asia via the LNG plants in Gladstone, we completely changed the story about the role gas would play in the east coast electricity system,” Mr Edis said.
“Previously, I think there was a general expectation that as we decarbonise the system, gas would replace coal as the predominant base load source of fuel.
“Then once we started up the LNG facilities, it jumped up to about $8 a gigajoule and now we’re seeing prices of $40 a gigajoule.
“That converted gas into an incredibly expensive fuel. And that meant that gas is not going to replace coal.”
Mark Hanna, a director at Energy Market Strategies and an LNG industry veteran, agreed that an unwillingness to impose domestic reservations in the eastern states had “exacerbated” supply shortages.
But he said other factors were at play, including gas exploration bans and restrictions in states with big populations such as Victoria and New South Wales.
On top of this, Mr Hanna noted that banks and investors were also increasingly shying away from funding gas activity.
Combined, he said these forces were making gas exceptionally scarce, which in turn was making it unaffordable as a transition fuel.
Bans ‘compounding’ shortages
He added that even if Australia’s eastern states wanted to significantly boost gas-fired generation capacity, such constraints would make it extremely difficult to achieve.
“Everything is undermining the requirement and the usefulness and the competitive nature of gas at this point for the east coast,” Mr Hanna said.
Australian Workers’ Union national secretary Daniel Walton said it was “crazy” Australia was dealing with an acute shortage of gas given its position as one of the world’s biggest suppliers of the fuel.
Mr Walton, who last week exposed fault lines inside Labor by attacking the Albanese Government over what he said was a “dud deal” with major producers, said the costs to Australia from the gas shortage were becoming clear.
“It’s just a crazy situation we find ourselves in as a country,” Mr Walton said.
“And what we know is these problems are only going to get worse – they’re not going to get easier.
“We’ve failed energy policy for more than a decade and, unfortunately, it’s all coming home to roost.”
For Mr Walton, one of the answers to Australia’s energy woes lay in a reservation policy to make sure there was more gas available for the domestic market – and at an affordable price.
“This won’t put the gas companies out of business,” he said.
“It will make a marginal dent in what would otherwise be extraordinary profits for these companies.”
Gas to be ‘break-glass’ fuel
The Australian Petroleum Production and Exploration Association said it was exploration bans and regulatory uncertainty that were hampering the availability of gas – not exports.
Chief executive Samantha McCulloch said the best way to bring down prices was more supply.
“Sideshow debates and name calling do nothing to deliver better policy outcomes for Australia,” Ms McCulloch said.
Mr Edis said, realistically, it was too late for gas to play a major role in Australia’s energy transition, which he argued would be held together by increasingly powerful and sophisticated battery storage technology.
He said there would still be a need for gas in the years ahead, but it would be a marginal one.
“The current role of gas is as this filler fuel,” Mr Edis said.
“By 2030, it will have been completely stolen by batteries.
