Dutton’s gas plan will run out of gas – unless he embraces wind and solar

If Peter Dutton’s plan to redirect gas from exports and into the domestic market manages to substantially increase the supply of gas for chemical and materials manufacturers, they’ll be very thankful. 

As a range of ACCC reports will attest, ever since gas liquefaction plants in Gladstone, Queensland began exporting large quantities of gas overseas, manufacturers of nitrogenous chemicals, and products that need high temperature heat like glass, bricks and some metals, have found it very hard to contract a reliable supply of gas at prices that wouldn’t send them bankrupt. 

But those manufacturers need to be wary that what Dutton gives with one hand, isn’t taken away by the other hand through increased use of gas in the electricity sector. 

Dutton and several of his shadow ministers have repeatedly declared that in the 20-year interim period until nuclear power plants are planned to come online, they would expand the use of gas-fired power plants instead of what they claim is unreliable renewable energy. 

In Dutton’s budget reply speech, he points the finger clearly at renewable energy as the cause of increased power prices and a threat to energy reliability.  He states,

 “At the very centre of Labor’s cost-of-living crisis is, of course, the skyrocketing cost of energy. And that’s due to Anthony Albanese and Chris Bowen’s reckless renewables-only policy trainwreck.”

He then goes on to say,

“You can’t run a full-time and functioning economy using part-time and unreliable power… Bills will keep going up….Our energy grid will become more unstable with a greater reliance on ‘sometimes-on’ power, which equals blackouts and brownouts.”

Dutton then explains his alternative approach,

“The only way to drive down power prices quickly is to ramp-up domestic gas production. Tonight, I announce our National Gas Plan.  This plan will prioritise domestic gas supply, address shortfalls, and reduce energy prices for Australians…We will immediately introduce an east coast gas reservation. This will require a proportion – between 50-100 petajoules of spot cargo exports – to be delivered to the domestic market.”

So Dutton’s plan to help revitalise Australian manufacturing and solve the cost of living crisis is an extra 50 to 100 petajoules of gas per year, and putting a stop to the expansion of unreliable renewable energy.

So would 50 to 100 petajoules make a big difference? Total Australian east coast gas market gas consumption from the combination of manufacturing, homes and commercial buildings and power generation is around 500 petajoules per annum.

So in that context an extra 50 to 100 petajoules is meaningful.  But that is in circumstances where gas power generation is a small bit player in electricity generation, providing just 5% of total power supply last year.

Yet Dutton and his colleagues have been saying it will play a far larger role in electricity production in the future.  In a press conference on 28 March, Dutton was asked why he wasn’t talking much about nuclear power in recent weeks. Dutton replied,

“it’s important to point out that our plan has gas and a lot of gas in the system between now and when nuclear can come online in 2035 to 2037. The Prime Minister’s plan of renewables rolls out over about a 15-year period. It is much more expensive than our plan… what we announced last night for an east coast gas reservation means that we can get the price of electricity down because gas is used to create and generate electricity.”

In a radio interview the next day in responding to a similar question Dutton stated,

“I want to make sure that we’ve got reliable power as well, and that’s exactly what nuclear does, but it doesn’t do it until the mid to late 2030s – and gas is the way in which we get from now to then.”

These comments have been echoed by his deputy David Littleproud who told Sky News on 24 March, that their electricity plan was cheaper than Labor’s because,

“When you look at the operating costs, that in the long term, has shown that nuclear energy is cheaper, but in the short-term, to get down your energy bill …. Gas is the only way you can do that, because it’s the only input that you can ramp up supply quickly. The others in building a coal fired power station, a nuclear power plant, or even a wind or solar farm of industrial scale, takes too long, whereas gas, you can get into the grid in 12 to 18 months and put that downward pressure on energy prices.”

So this indicates they plan on gas, rather than renewables filling the gap from retiring coal until the nuclear plants can be built.

In that context 50 to 100 petajoules doesn’t go very far at all.

The chart below illustrates how much gas would be required to replace the electricity that came in 2024 from each of the coal generators due to retire within the next decade.

I’ve provided both a low estimate assuming the efficiency of a combined cycle gas turbine (50%) and a high estimate assuming the efficiency of a single cycle gas turbine (33%). While this is not part of the policy discussion, as some extra context I’ve also shown how much gas you’d need if you wanted to get rid of some reckless renewable energy that came from rooftop solar last year.

What this illustrates is that Dutton’s entire extra supply from his National Gas Plan disappears up a gas turbine smokestack if there isn’t an ongoing expansion of renewable energy to fill the gap from retiring coal generators. It would therefore do nothing to improve availability of supply for manufacturing and nothing to reduce gas prices.

Alternatively, maybe his plan is actually to subsidise the coal generators to prop them up beyond their owners’ planned retirement dates. If that’s the case, then Peter Dutton needs to explain how much extra electricity consumers will have to pay on their power bills to subsidise these power station owners to keep the plants open. 

Tristan Edis is director of analysis and advisory at Green Energy Markets. Green Energy Markets provides analysis and advice to assist clients make better informed investment, trading and policy decisions in energy and carbon abatement markets.

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