Queensland to underwrite its first gas peaking plant in a decade as roadmap takes shape

The Queensland government will underwrite the state’s first gas peaking generator to be built in a decade, according to the co-developers of the Brigalow gas project.

ASX-listed gas pipeline owner APA Group and state-owned CS Energy signed a joint development agreement this week to build the 400 megawatt (MW) Brigalow gas peaking plant, next to the latter’s Kogan Creek coal fired power station. 

But with low cost solar eating into the revenues of the likes of higher cost gas, the state-owned entity has had to step in with a financial guarantee for the private company.

CS Energy will buy the power from Brigalow for 25 years under a hedge offtake agreement, specifically to limit APA’s exposure to low wholesale electricity prices. A small variable portion provides “the potential for higher returns” for APA.

The deal sets the project in motion for a final investment decision and operations to start in 2028, two years behind the original schedule.

The plan has been in motion since 2023 when GE Vernova was contracted to supply 12 aeroderivative turbines, with APA signing on to connect it to their gas network in 2024.

That timeline was supposed to be 2026, however, and for the plant to use up to 35 per cent hydrogen.

An APA spokesperson says the first of the turbine parts are due to arrive in mid-2026. 

Impossible without government support?

The project was strongly supported by the previous Labor government and that enthusiasm continues into the current LNP reign – but with a different tenor. 

Given the rising challenges posed by low-cost solar when combined with batteries and the high cost of turbine equipment, government support for new gas may be the only way this technology can be built.

But where the Labor government wanted the Brigalow gas power station in place to support renewables, the new Crisafulli government wants it in order to shut cleaner technologies out of the state’s generation pipeline. 

The partnership deal is the kind of electricity generation the state wants, according to treasurer and minister for energy David Janetzki.

Janetzki said the energy roadmap, which scaled back coal plant closures, beefed up cash for new gas generation, and effectively ruled out supporting new renewable energy projects after 2030 by assuming none will be built, supports gas peakers as a way to get “more affordable and reliable energy”.

“Energy Roadmap modelling indicates Queensland may have up to 4.1 gigawatt (GW) of gas-fired generation capacity by 2030, increasing to between 6.1GW and 8.3GW by 2035,” he said in a statement about the Brigalow news. 

“This forecast reflects our commitment to ensuring reliability is met through additional dispatchable capacity.”

The challenge from solar

It’s that government support which may allow the project to compete against much lower-cost solar projects. 

According to Renew Economy columnist Michael Barnard, solar is coming for gas everywhere around the world.

He writes that countries in south east Asia, Africa and even Europe are stopping gas power station proposals and cutting gas orders because solar is proving significantly cheaper and, in some places, more energy efficient appliances are reducing the need for extra generation.

APA Group says the current site does not require federal environmental approval, because it’s already cleared.

CS Energy had originally been looking at a different site near the Kogan Creek gas peaking plant that was deemed a controlled action under the EPBC, but it withdrew that application and switched sites when that assessment came through, APA told Renew Economy.

Not enough projects to meet Queensland gas dream

While the Brigalow gas power project is ahead of the game and provides the extra generation needed to get to the roadmap target of 4.1 GW of gas by 2030, Janetzki’s wish to lift that by 2035 to a minimum of 6.1 GW may be difficult to achieve. 

Not including Brigalow, Queensland has 1.4 GW of gas peaking plants in the development pipeline, according to RenewMap.

Of these 10 projects, five have development approval and of those, three appear to be moving ahead in a substantive way. 

The problem for these proposals is that turbine supply timelines are now so long and so expensive, that without strong government support these are not likely to be able to compete with low cost solar. 

Ge Vernova, the company supplying the Brigalow plant, highlighted the issue in its first quarter results this year. 

CEO Scott Strazik said turbine orders for “2026 and 2027 are largely sold out” and even at the start of this year, orders for 2028 were “materially” full. 

The company is focused on booking 2029 and 2030 turbine deliveries, he said during the first quarter earnings call in April this year. 

And booking those slots is expensive, according to a report by the Institute for Energy Economics and Financial Analysis (IEEFA) in October. 

“While turbine manufacturers are generally reporting wait times of around five years for larger turbines — up from two to three years earlier this decade — they are advising customers to plan according to seven to eight-year timelines,” it says.

“Capital costs for gas turbines are up nearly threefold in just the last two years, from between $US700–1,000 per kilowatt (kW) to an estimated $US2,400/kW today.

“Manufacturers are now also charging non-refundable reservation fees, with one developer reporting that they paid GE Vernova $US25 million to reserve a turbine for 2030 delivery.”

* This article has been updated with comments from APA Group.

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