Gas one of the key options to avoid power supply crunch

September 5th, 2017

Australia faces electricity supply challenges in the decade ahead if additional generation capacity is not brought on board, according to the Australian Energy Market Operator.

AEMO’s latest modelling, published today, shows reserves have reduced to the extent that there is a “heightened risk of significant unserved energy over the next 10 years”.

Moving to more gas-fired power is one way of addressing the challenge, as the recent Finkel Report noted and we explained previously.

This is a reality which has long been evident in the USA, where gas-fired electricity has underpinned an economic renaissance at the same time as cutting carbon emissions for the first sustained period in a hundred years.

As the Australian Financial Review reported this week, “stepping on the gas” is one of the “five ways to fix the grid without new coal power”.

The others are ‘cleaning up’ existing coal-fired power, increasing grid-scale storage (such as pumped hydro and large batteries), increasing interconnected small batteries and ‘demand response’ (using smart meters and appliances to reward customers for using less electricity when demand is high).

All of these measures are able to be implemented in tandem with wind and solar power – in fact they are options in what is an essential complementary role because of the intermittent and unpredictable nature of wind and solar availability.

What is needed is a practical, sustainable and affordable mix.

There is another dimension to energy policy – the need for more natural gas to power industry, agribusiness, small businesses (particularly restaurants and cafes) and the millions of consumers who depend on gas for home heating and hot water.

Natural gas is plentiful in WA and the NT, but supply is tight on the East Coast, meaning prices have risen.

To get prices down, more supply is needed – as unions, business and industry started to say several 3-4 years ago, and we noted in early 2015.

Despite those impassioned warnings of years ago, the situation has not only not improved, it has worsened, with irrational bans, moratoriums and other blockers to natural gas development afflicting two States plus the NT.

Victoria is the worst case in point, imposing policy which has been described by former Premier Jeff Kennett as  “criminal”, by Senator Nick Xenophon as “absurd”, and by former ACT Chief Minister Kate Carnell as “hurting businesses and costing jobs”.

Against this background, Queensland is the State “providing the leadership”, as Resources Minister Anthony Lynham said today in announcing a new $200 million natural gas project set to go ahead in the Surat Basin, in south-west Queensland.

And more was on the way, following the success of this tender-based development, Dr Lynham said.

Another tendering opportunity would soon be announced for two areas north of Surat in the Bowen and Surat basins.

“We are working to increase supply to the (East Coast) gas market and encouraging new local entrants,” he said.

Given it is also not only propping up domestic gas supply, but also supporting a nationally important, breakthrough coal-seam gas to liquefied natural gas export industry as well, Queensland really is doing the heavy lifting for Australia’s East Coast energy market.

As industry representative Rhys Turner said:

“While other states dither or, worse, lock-up urgently needed gas resources, Queensland is getting on with the job. The State Government recognises that the only way to put downward pressure on prices is to increase supply.”

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