More gas in electricity market will sting consumers, drive up emissions

Weaning Australia from coal power via an increased reliance on gas is not the climate and energy cure-all it is cracked up to be, a new report has warned – and offers little reduction in emissions and, crucially, no relief from rising power prices.

In a report published on Thursday, the Climate Council said Australia’s transition away from fossil fuels should include gas, if the nation was to be serious about its international commitments to tackle climate change, as well as local efforts to transform the ageing electricity market.

It’s a view that is fervently supported by Climate Councillor and energy sector veteran Andrew Stock, who oversaw development of the last three large gas power stations built on the east coast.

“Australia’s massive expansion of international gas exports is pushing up power prices here on home soil,” said Stock in comments accompanying the release of the report.

“We’re now in a situation where Australia has over-committed to its gas exports, resulting in even steeper domestic prices. Prices will only rise into the future,” he said.

Stock said using gas power as a stop-gap to transition to renewable energy and storage technology was not only financially risky, but would lock in up to a billion tonnes of extra pollution over future decades.

As the report notes, old gas plants in Australia, such as Torrens Island, are just as polluting as coal fired power stations. Newer plants, while less polluting than coal, aren’t much better once the entire supply chain of production is considered.

“Relying on gas requires a dramatic expansion in infrastructure, thousands more unconventional gas wells and brings substantial stranded asset risks.

“The point is – we can do the job of reaching zero emissions power well before 2050 without gas,” he said, adding we can do it “much cheaper with renewables”

Climate Councillor and former President of BP Australasia Greg Bourne said the clear message was, to leave the majority of Australia’s gas reserves in the ground.

“Don’t believe the hype,” Bourne said on Thursday. “Any perceived climate benefits for gas are short-term and potentially cancelled out with methane emissions created from gas production and its supply chain.

“Gas prices have been rising and all the evidence shows they will keep rising,” he said. “In contrast our report shows that renewable energy is now cost competitive with gas.”

This is an important point, particularly as conservative politicians and media sources continue to seek to blame wind energy, and large-scale renewables in general, for power price spikes in South Australia and the rest of the country.

As we have noted, the people who actually run and regulate the grid have made it clear that these price spikes have been caused primarily by the huge rises in gas prices to record levels, and supply constraints on main transmission lines – a trend that is illustrated in the MEI graph below.

And as we have also noted, South Australia – and other states – used to regularly suffer big price spikes of $5,000/MWh or more, before the arrival of wind and solar. Again, that was caused then by the high cost of gas and the costs of meeting demand peaks that have largely been removed by rooftop solar.

As the Climate Council report explains it, Australia’s LNG exports are pushing up the price of gas power at the expense of Australian households and business because domestic gas prices are now inextricably linked to world market prices for oil – a link that will continue for the foreseeable future.

Meanwhile, says Stock: “Clean, smart, affordable renewable energy power is available now.

“Technologies such as solar thermal, hydro and biomass plants can meet demand for electricity in Australia at all times of the day as well as meeting technical requirements for grid stability.

“Combining these technologies with wind, solar PV, and large-scale energy storage, can meet electricity demand round-the-clock, without locking in future emissions, or volatile high power prices.”

The report concludes that, in terms of gas, existing generators “may have a role in complementing wind and solar power while a broader range of renewable power sources are scaled up.”

And it recommends that policy makers focus on a national transition plan for Australia’s electricity system that ramps up a diverse range of renewables, energy efficiency measures, and storage technologies to phase out fossil fuelled electricity generation over the next two to three decades.

As part of this, it says governments should incentivise greater interconnection between states, increased competition in the electricity market, and a more distributed system spread over a range of technologies.