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The great gas con: There are cheaper, cleaner alternatives

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Just how long can the Australian government and the gas industry continue the charade that there might be a solution to the surge in domestic gas prices? And what will it take before big business consumers follow the lead of households and smaller commercial and industrial customers and invest in their own cheaper and cleaner alternatives?

In Canberra on Thursday, as yet another “gas summit” hosted by prime minister Malcolm Turnbull ended without a “fix” to soaring gas prices, the Energy Users Group was complaining that one industrial customer in Queensland was being hit with a new gas supply contract at the usurious price of $23/gigajoule.

Frankly, it beggars belief that Australian industry is even bothering to ask for cheaper gas prices, when there are obviously cheaper alternatives available – for both electricity and for industrial gas users.

An Australian Renewable Energy Agency report last year identified how biogas, geothermal and solar thermal alternatives could provide industrial heat at the equivalent of $5/gigajoule – less than one-quarter of the price being asked for gas now. Why aren’t they embracing these patently cheaper and cleaner alternatives?

Part of the answer is the ingrained fossil fuel mentality in Australia. For so long, the true cost of fossil fuels has been hidden by massive cross-subsidies – to electricity users in remote and regional areas, and to big industrial customers.

This mentality, and failure to imagine alternatives, has been infused from the top: Since 2001, Australia’s energy ministers have been in lock-step with the fossil fuel industry. Ian Macfarlane and Martin Ferguson both left their political careers to take up positions as gas industry lobbyists. Gary Gray’s full-time job before being entering politics was with gas company Woodside, and he is now back in the mining industry with Mineral Resources.

This failure to imagine an alternative to fossil fuels has been shared by regulators, captured in their entirety by the powerful oligopoly that runs the energy industry in Australia.

It is laughable that organisations such as the AEMC and the ACCC should be asked to “investigate” rising prices in the electricity and gas industry. What have they been doing for the last few years?

There is no doubt, however, that Australian industrials are being screwed by the LNG industry, who contracted to sell more gas to overseas producers than they can produce.

It’s high time that energy consumers started to take matters into the own hands – big and small.

Australia’s gas market will never by pulled from the grasp of the current oligopoly. No amount of permits to extract coal seam gas from land owned by reluctant farmers will change the pricing equation. Domestic gas reservations won’t work either. It’s past time to look at other options.

As the Climate Council reports today, investing in gas for electricity as the “transition fuel” will lock in huge profits for the big fossil fuel oligopoly, as they have been accused of doing in the past few years. And it will lock in high pollution levels, even without accounting for unmeasured methane emissions.

In the electricity sector, there are already obvious alternatives to gas-fired generation. While some hysterical commentators, such as The Australian’s Robert Gottliebsen, warn of 10-15 days of blackouts next summer, the reality is quite different, and so are the short, medium and longer-term options.

The cost of solar PV and wind energy has plunged, and both are now well below the cost of new gas plants, and even the short run marginal cost of existing gas plants at current prices.

Even more spectacularly, the former boss of the Hazelwood power station, Tony Concannon, says that the combination of large scale solar PV and storage is already cheaper than gas, and another coal and gas industry veteran, Scott Armstrong, agrees, saying solar and storage are a more dependable and cheaper option than peaking gas generators.

Concannon’s Reach Solar has begun construction of a 220MW solar plant that could expand to 300MW and include storage in South Australia. Armstrong’s SolarQ is seeking approvals for a 350MW solar farm, expanding to 800MW and a lot of storage, in south-east Queensland.

But business does not need to wait for others to feed cheaper power into the grid. They could follow the example of Queensland zinc refiner Sun Metals, which is building its own 116MW solar farm to reduce the soaring cost of that state’s fossil fuel dominated grid, and to give it pricing certainty.

Or they could follow the example of the ACT government: By contracting to deliver 100 per cent of its electricity needs by 2020, the ACT has locked in fixed prices for wholesale power for the next 20 years. And most of it, apart from its initial solar contracts, are well below the current wholesale price of electricity.

Better than that, the contracts have been structured so that if the wholesale prices are higher than the fixed contracts, then the excess goes back to ACT consumers, not the owners of the wind and solar farms. That means they pay well below consumers in other states, and go clean and green at the same time.

Gas, of course, is not just needed for electricity, but for other manufacturing purposes, particularly heat. But here, too, there are cheaper and cleaner options, as an Australian Renewable Energy Agency report delivered in 2016 made clear.

“There are opportunities for renewable energy to replace gas for industrial gas users today,” the report concluded, citing the potential of solar thermal, geothermal and biomass technologies.

Most were already cheaper than gas even at $5/gigajoule, although this depended on the amount of gas needed for those industrial processes. But with Australian industrial consumers being hit with contracts of four times that price, it is surprising that they are not already pursuing cheaper and cleaner alternatives

The ARENA report said solar thermal technologies to generate heat are viable for temperatures up to 150°C and worth consideration up to 250°C. Temperatures above that are economically more challenging depending on gas price assumptions.

solar thermal vs gas

 

The economics of biomass or biogas was even more compelling, particularly for those industries, such as paper, agriculture, food, beverage, and wood that get their biomass for free as a result of their manufacturing processes.

arena biomass gasThis graph below shows that for businesses needing 50,000GJ or more a year, geothermal was also a compelling option, even at prices of $5/GJ, which consumers in Australia are never likely to see again for gas.

geothermal vs gas

“The attractiveness of these opportunities will grow as gas prices increase and renewable energy technologies mature,” it says.

So, why aren’t they picking up these opportunities. Some solar investors say they are conducting talks, but little action has been seen – in contrast to the US and other countries where the likes of Facebook, Google, Amazon and Apple are aiming for 100 per cent renewables, and even the likes of Dow Chemical are investing heavily in wind and solar.

Andrew Richards, from the Energy Users Association, says it is because of the complexity, and the fact that renewable options require up-front investments, rather than paying-as-you-go commodity fuels. But he thinks that business is slowly getting their mind around the alternatives and looking carefully at the technology options.

Some, like the South Australian greenhouse tomato grower Sundrop, are using solar thermal technologies, and the Clean Energy Finance Corporation has backed other businesses looking to exploit biogas as an alternative to natural gas.

And more technology options will be on their way: Those outlined by the ARENA report include:

  • High temperature solar concentrator driven processes to convert biomass, water, gas or other fossil fuels into chemical feedstocks or new solar fuels.
  • Electrolysis of water to produce hydrogen as a feedstock or fuel.
  • High temperature solar thermal approaches to direct driving minerals processing and other thermal processes.
  • New advanced biomass gasification systems.
  • Innovative systems for purifying gas streams from gasifiers or digesters for use in sensitive direct combustion processes (ovens etc) or for injection to existing gas pipeline infrastructure.
  • New advanced biomass production or collection systems.
  • Targeted innovations to improve existing renewable energy technologies.

  

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  • Tim Forcey

    OOPS!

    This article is silent on heat pumps. Talk about an alternative to gas!

    This winter, don’t forget to try yours.
    (Instead of heating with gas.)

    Here’s how & why: http://reneweconomy.com.au/the-cheapest-way-to-heat-your-home-with-renewable-energy-just-flick-a-switch-92274/

    And also, join us on Facebook at “My Efficient Electric Home” if you would like to learn how to cost-effectively operate your home without using fossil fuels or wood. https://www.facebook.com/groups/996387660405677/

    • Tom

      When we bought our house in Tassie 6 years ago it had a 200L heat pump hot water service – a Dux one where the compressor is on the top of the cylinder. A few weeks ago I replaced it with a 300L electric element storage cylinder. I have become inefficient.

      Why would anyone do something like this? We just could not stop the heat pump freezing up. At least once a year we would get someone in, but plumbers, electricians, and refrigeration mechanics would palm the problem off to each other. A couple of years ago we connected it to our otherwise redundant “Off Peak with Afternoon Boost” meter, which meant that it would turn off every day, allowing it to thaw. However, it started freezing up again and not heating the water up properly.

      Maybe there are better models for a cold climate, but it just had too many moving parts.

      • Tim Forcey

        Lots of stories at “My Efficient Electric Home” on facebook. Feel free to join in. https://www.facebook.com/groups/996387660405677/

        Yes, a fit-for-purpose heat pump has to have a defrost cycle. Our hot water heat pump (Sanden brand) is rated down to minus 10 C.

        In my original post, I was actually referring to using heat pumps (aka reverse-cycle air conditioners) for space heating. The Daikin units we have are rated down to minus 20 C.

      • Chris Fraser

        I didn’t think freezing them was likely anywhere in Aus. Thanks for the warning.Did anyone suggest moving the first pump indoors ?

        • Robert Comerford

          If you live in cold area like the New England Ranges they freeze regularly during winter. The reality is on nights when it drops below -5C I have to use the gas heater to get the lounge room warm. Also when the R/C goes into defrost we get cold air blown over us so then it gets turned off.. Not what we want on a cold night :>)

          • neroden

            Standard heat pumps have the freezing problem. You need to get a “cold weather heat pump”, which are specifically designed to NOT have this problem. In addition to the defrost cycle they use a different refrigerant, redesign the outside housing, etc. They weren’t available in the US until about 2 years ago — they’ve been available in Canada and Japan for a while.

          • Robert Comerford

            My r/c is rated at -10C. The best available in Australia when purchased in the mid naughties.

            However the -10C rating is b/s as many other users have discovered.

          • Tim Forcey

            An air con frosting-up (in reverse-cycle mode) occurs at zero deg C or even a bit warmer than that and especially if the outside air is humid. So then the unit should go in to defrost mode, which may or may not concern a user, yes depending on whether or not the user is sitting right under the path of the indoor air flow at the time. (During defrost, the air con is taking heat out of your room to melt the ice on the outside unit). I experienced a reverse-cycle air con operating quite happily in a Jindabyne NSW caravan park (ski season) at minus 10 C. But the air was dry and very cold so no frosting up issue. Back home in Melbourne during an entire winter heating season, I noticed our air con (rated to minus 20 C) go in to defrost mode once on a particularly cold morning (about plus 3 deg C outside).

      • nakedChimp

        Heat pumps in cold climates work more reliably when they get the heat from the ground.
        It’s probably due to Australia just being a small market and such cold climates like Tasmania being an even smaller part of that, that ground loop heat pumps aren’t publicized so much and hard to come by.
        Space wise and cost wise they shouldn’t be a problem.

        • Tom

          I’ve got a mate who did that. He has a big heat pump which heats water for in-slab hydronics throughout his house, and it pumps the refrigerant 16m underground to expand, transmitting the coldness into the earth.

          The reason that he did that was that this system has 5:1 efficiency, compared to 3:1 for a normal heat pump with the refrigerant being warmed by fanned air.

          He did have one hiccough – he once had a refrigerant leak underground, which involved protracted diagnosis followed by significant digging.

        • jamcl3

          My coils are vertical in a 10 foot deep, one foot wide trench.

      • neroden

        Oh, you need a “cold weather air source heat pump” designed to operate well below freezing and with a defrost cycle. There are models specifically designed for cold weather, mostly sold in Canada and Japan, though they *finally* showed up in the US in the last couple of years. I don’t know if you can get them in Tasmania, but that’s what you need.

      • jamcl3

        We have a ground source heat pump, no freeze ups.

  • Eb

    In July 2015, ARENA announced it’s new priorities which included ‘renewables for use in industrial processes’, (ie displace gas). Apart from the alumina refining study, this priority doesn’t appear to have stimulated any new projects yet.
    Doesn’t help that some gas supply contracts are shifting to fixed costs being more than variable costs, so a ~70% reduction in annual gas consumption may only lead to a ~30% reduction in annual bills! Maybe time to revisit coal & LPG boilers for those winter months when the solar thermal may need boosting! Though I prefer heat pumps.
    The report discussed in this article is available here:

    https://arena.gov.au/resources/renewable-energy-options-for-australian-industrial-gas-users/

    • D. John Hunwick

      The Turnbull Government will FORCE gas until the community reacts more strongly against it. People turning to gas need access to well-publicised sources as to why they should NOT go for gas by accessing information on the alternatives and how (and how much) to do it.

  • Malcolm M

    What alternative is there for gas as a feedstock for nitrogen fertiliser manufacture ? Incitec Pivot use gas as a feedstock for their urea plant at Gibson Island in Brisbane, and their ammonium phosphate plant at Duchess near Mount Isa. Without gas at a reasonable price, the Duchess plant and associated phosphate mine would probably close.

    Their alternative has been to build a huge new urea plant in Louisiana, where they are currently paying ~US$3/GJ. They saw the writing on the wall for Australian manufacturing and have already off-shored a portion of it.

    • Malcolm, A good example and yes gas is still a vital energy source for many industries large and small. The US has cheap domestic gas A) because they have lot of gas (as do we) and B) their politicians and bureaucrats are much smarter and legislated a reservation policy! What idiots allowed all our gas and more to be sold off-shore by big gas companies and what benefits are we really getting from it?
      It also amazes me that we have to ship our iron ore and coking coal off-shore to be turned into steel, which we then buy back. Same goes for bauxite and many other minerals that we are endowed with. The opportunities that we have to add value and increase employment are almost endless but where is the PM that said he would “seize the opportunities” and “provid the economic confidence that business needs.”

    • Ian

      You might be surprised to learn that each person urinates 25g urea a day. 3 million people would produce 75 tonnes of urea a day! That’s 27 thousand tonnes a year.

    • Tim Forcey
  • Ian Brimblecombe

    In nitrogen fertilizer manufacture the gas is used as a source of hydrogen. This could be obtained from water using electrolysis via renewable energy.

  • Barri Mundee

    Homes in Victoria still rely heavily on gas for heating, hot water and cooking. We replaced our gas cooktop with induction when the cooktop had to be replaced but we still have gas hot water storage and ducted gas heating. I doubt if we will be replacing these gas appliances until they fail.

    In the meantime we have to put up with escalating prices. And this scenario will apply for many homes across Victoria.

    For many home owners the cost of installing a heat pump for hot water and several inverter systems to achieve a similar standard of comfort as with gas will be a heavy burden.

    • Tim Forcey

      Yes agree.

      But many Victorians have already installed reverse-cycle air cons (heat pumps) and they do not know they can be the cheapest way to heat.

      Folks need to find the “heat button” on their remote control, and save!

      https://theconversation.com/hot-summer-nights-and-cold-winter-evenings-how-to-be-comfortable-and-save-money-all-year-long-51046

    • neroden

      Redo your insulation before you do anything else. This cuts the size of the heat pump when you need to put in.

      • Barri Mundee

        We added extra roof insulation and retrofitted DG windows several years ago and hunted down air leaks so the house is now much more thermally efficient than before. Plus we have 3kw solar. We also have an evaporative cooler that works very well and costs almost nothing to run.

        On most summer days the house stays comfortable until well into the afternoon when the cooler is turned on.

  • Just_Chris

    $23 /GJ is just bonkers, that is around $0.08 /kWh! If you need electricity you’d have to at least double that due to the efficiency of a gas power station. That is well above the price of electricity for a large industrial user or for renewable energy generators.

    At that sort of price, for heat generation, heat pumps are a no brainier and simple dumb resistance heater’s probably make sense in some instances. One thing is an absolute given though, prices won’t stay that high, demand will collapse in big double digit % points at that sort of level taking the price with it. As the author points out at that price there is no shortage of alternatives for either power or heat.

  • Ian

    Biomass gasification is currently limited in size to around 20MW thermal for the latest versions. This is only suitable for piston engines and, maybe, small gas turbines. The costs of plant are high and the payback is quite lengthy. A long term reliable and cheap biomass supply is a must. The producer gas can vary in quality with feedstock changes and can cause equipment to go from running to stopped very easily.

    One advantage of gasifiers is their ability to consume anything vaguely combustible, even plastics and tyres. They do have the potential to reduce the volume going to landfill and to make a big dent on future landfill emissions.

  • Craig Allen

    I’ve just driven through the Victorian and South Australian wheat belts from Melbourne through to the Eyre Peninsula. The amount of straw and chaff from wheat and other crops that is burn off each year is astounding. A search online reveals that various groups have investigated whether this can be gathered and used for biofuel – but none have got much beyond trials. I wonder if it will ever be economic? Ironically much of the cost of gathering and transporting the crop residues is due to the cost of the deisel that runs the machinery and trucks. Perhaps sometime in the future (if batteries can be radically improved) the equipment and trucks can be electrified and charged from on-farm solar.

    • Richard

      The batteries don’t need to be radically improved . They are good enough now. Hence the John Deere electric tractor prototype that was demonstrated recently. It’s coming fast. 5-10 years will see the first farms in Oz
      With electric tractors powered from their own solar farms. Maybe sooner!

      • Craig Allen

        I think you are underestimating the size of the batteries that are needed. That John Deere prototype had 130kWh battery and 300kW peak power output. So running at half power it could run for an hour. The tractors used in cropping have power outputs of 200 to 500kW and will typically run 12 to 20 hours per day for weeks on end during seeding time in addition to when herbicides and pesticides are applied and when paddocks are fallowed. The headers that reap crops are also massive machines and run around the clock during harvest. Semi-trailer trucks with three trailers can pull over 100 ton of grain, have engines putting out 500Kw and also are run around the clock during peak seasons.
        So, in answer to my own question, batteries with at least one or two MWh are probably needed.

        • Richard

          That is true but it is just a prototype to test the tech. I believe you are right about the at least 1 whr for very large tractors but that is doable at the moment, hence the tesla semi and others entering the trucking market. Obviously it will be more feasible for huge machines when batteries get a bit cheaper and smaller per kwr storage. But still, if you can swap the pack easily it may already be viable or soon will be.
          But not all farms have giant tractors. There is a big market for smaller tractors and machines that are not run as much where battery tech applied correctly would already be viable.
          And of course the amount of area needed to be occupied by solar panels to power this stuff is insignificant as far as a farm is concerned.
          The huge advantages of a farm being able to provide all it’s own fuel needs through solid state technology and much simpler and cheaper to maintain machines is a market tantalizingly close.

          • Craig Allen

            But then you have the problem during the harvest and planting seasons of thousands of farms needing to recharge thousands of massive batteries, requiring thousands of GWh of energy per day. And the tractors and harvesters are out doing laps around paddocks far from any charging let alone battery swap infrastructure. I can’t see how it can possibly be done. I suspect that we are always going to need liquid fuels for these purposes unless into the foreseeable unless there is some truly miraculous breakthrough in energy storage technology. Sure, there are smaller tractors in use on small farms and orchards, but the bulk of the diesel use occurs on the big properties with big machinery during certain key months of the year across vast areas of inland Australia. It would be interesting to see someone do a desktop analysis for somewhere like the Eyre Peninsular to work out what it would realistically take to get to 100% renewable energy use.

          • Richard

            Hi Craig.This is a very rubbery back of the envelope analysis. I’m not an expert in this area. But here goes on a totally arbitrary setup.

            With current solar panel tech you need about 8Msq of panel to produce 1kw, taking into account inverter/ losses and 5kwh a day on average.. So a 1 gwh tractor would require a panel area of 1600 sqm( or 100m by 16m strip of panels) to recharge it everyday to full capacity. With that sort of area of panel, there would be excess to sell back to the grid over a year and it would power the rest of the farm operation, other vehicles, houses etc.
            At the moment Tesla supplies a 200kwh power pack battery for stationary storage. So if you want 1mwh storage you need 5 of them.
            Each pack weighs 1.5T and is about 2.1cum volume.

            They are announcing the Tesla semi in September of this year, so it will be interesting to see what improvements in specs have been made and how they have engineered it.
            Based on current prices for the power pack, the best guess i can come at, for 5 by 200mwh power packs (1mhr) might be 500 thou, but that is very rubbery and the price for lithium batteries seems to be sinking rapidly atm.
            As for the solar array. A 200kw system with ancillaries might cost 300 thou(that price seems to be dropping rapidly also).
            It would be a mini farm power station. Pretty pricey at the moment. But it is getting within the realm of possibility, hence why John Deere is looking into it.
            The upsides would be no on farm power or fuel costs across the life of the system(25years?), sale of energy back to the grid, reduced maintenance costs on tractor/car engines and longer vehicle life.

            This is all a fast moving feast at the moment and there may be other battery techs also ready to swoop in on the large power vehicle market, including hydrogen fuel cells. Given how cheap solar panels are becoming, farmers are looking good to provide for all their own energy needs sooner rather than later I believe.

        • jamcl3

          Or automated battery swap stations. Or fast charge abilities. Or…

  • Les Johnston

    There appears to be an assumption held by poorly informed that gas is essential for human life. Without data justifying the claim, a comprehensive assessment shows that there are lower cost options. Generation of gas fear is a feature of the liberal government driven by ignorance rather than hard cost data. It is time that economic arguments with documented data from audited public accounts was used rather than fear mongering.

  • Miles Harding

    Perhaps it’s better to view gas as a ‘transition fuel’ and as such, it provides a bridge between coal and a fuly sustainable electricity system.

    Presently, we are suffing a hangover from those days when gas was being promoted as the fuel for modern life. In WA, we saw perversions such as solar hot water effectively mandating gas boosters and gas cooking being almost universal. I suspect the other states are similar.

    For consumers using gas for cooking and, particularly, heating it is proving to have been an expensive mistake, but one that may have been justified in its time.

    On the generation side, I see gas as having a place as we transiton away from all fossil fuels.
    In WA, gas is available and reasonably priced (for now…), reducing the urgency of a transition plan. The eastern states are another matter and events are now driving the transition and the timeframe is immediate.

    The root of the issue is our immense consumption of fossilised energy that must soon be obtained from (truly) sustainable sources. Any models I have seen suggest that this is, at the least, very difficult and it may be impossible to maintain any semblance to our exponential business as usual as we are forced to use energy at the rate we can collect it.

    Biofuels are not an answer in themselves. The amount needed to replace gas (and coal) is enormous and will either be impossible or severely distort agriculture. One aspect that is not discussed is what burning crop residue may do to nutrients in the soil. Much is already ‘lost’ to the produce, but much more may be lost to smokestacks.

    It is informative to attend a biofuel lecture, then extrapolate to a panacea solution. Invariably, a large fraction of agricultural production is diverted. This suggests to me that it is useful only as a boutique fuel or to cover the shortfall from a 90%+ renewable electricity system.

    De-gassing the suburbs will mean electric cooking and heating/cooling, which will significantly increase peak energy demands, exacerbating supply issues. I feel that, in order to reduce domestic gas use, domestic batteries that can meet most of household peak demand behind the meter will be needed.
    Batteries have the added advantage of providing a huge peak buffer, reducing the amount of interim gas peaker capacity needed, as well as reducing wholesale super-peak few events per year.

    Paradoxically, batteries can save coal generators by reducing ramp rates so the generators can operate, but will keep wholesale prices at or below their break-even, so they are doomed in any case..

    We need public policy that isn’t trying the save coal generators.