Federal energy minister Angus Taylor has confirmed the federal government will spend $600 million on a new gas fired generator in the Hunter Valley, continuing a remarkable fossil fuel spending spree that flies in the face of advice of climate scientists and energy experts.
The funding commitment for the 660MW peaking gas generator comes on the very same day that the International Energy Agency called for investment in new fossil fuel projects to stop immediately if the world has any chance of meeting climate targets.
It also comes amid an unprecedented spending spree by the Coalition government, even by its own standards.
As first revealed by Michael Mazengarb in RenewEconomy on Tuesday, Taylor has quietly filed new regulations that will force the Australian Renewable Energy Agency to commit funds to carbon capture an gas projects. It follows a raft of fossil fuel funding measures in the federal budget, which included virtually nothing for renewables and climate policies.
Earlier this week, Taylor announced a $2.4 billion package to support Australia’s two remaining oil refineries, despite committing little funds and policies to help Australia try and catch up with the switch to electric vehicles. The IEA says sales of new fossil fuel cars must end by 2035 at the latest.
In a statement distributed widely to media on Tuesday night (but typically not, it should be noted, to RenewEconomy), Taylor said the new gas plant at Kurri Kurri was part of the government’s “gas-led recovery” and would come from unallocated funding in the budget.
“Cheap power is crucial to ensuring families, businesses and job-creating industries in NSW can thrive, which is why we are committed to replacing the energy generated by Liddell to keep prices down,” Taylor said in the statement, which was finally posted on his website 12 hours later.
As RenewEconomy also revealed last week, the proposed plant’s environmental impact statement reveals that the plant will be rarely used, and will burn diesel for at least the first six months because it will not be possible to get enough gas to the plant.
It says the gas/diesel generator will run as little as 150 hours a year, a view shared by others in the market. There have also been questions raised about the ownership of the land that is hosting the gas plant. It is held by a controversial Liberal Party donor.
Taylor’s release, with the heading “Protecting families”, said: “We will not stand by and watch prices go up and the lights go off.”
But energy experts say these claims are nonsense, and even the Australian Energy Market Operator has made it clear that the gas generator is not needed for any “reliability gap”, nor will it deliver cheap power (burning gas and diesel in such generators is actually the most expensive electricity).
The industry has made it clear that Taylor’s threat to intervene in the market on behalf of the government owned Snowy Hydro had discouraged investment rather than encouraged it.
Energy experts also suggest the gas plant will result in less competition, because it will deliver to Snowy Hydro even more control over the “caps contracts” market, a crucial part of the market that influences consumer prices.
Energy Security Board chair Kerry Schott said recently that gas is “expensive power”, and all energy experts agree that peaking gas makes little commercial sense given the alternatives in the market, including battery storage – which would operate and deliver a variety of services all year round rather than just a few days.
Kurri Kurri will be the second new gas generator to be built in NSW, ostensibly to replace the ageing and decrepit Liddell coal generator which ceases operation in 2023. The NSW government is providing nearly $80 million (and the federal government $5 million) to support EnergyAustralia’s 316MW peaking gas generator at Tallawarra, on the basis that will be “hydrogen ready” within a few years of construction.
The response to the announcement was damming.
“The proposed Kurri Kurri gas power station is a waste of public money that will push up electricity prices and emissions, especially since it the proposed project will initially run on diesel fuel,” said Richie Merzian, climate and energy program director The Australia Institute.
“It was disappointing to see the Budget allocate $300m for gas projects, hubs, plans and related roads, now its just reckless to hear an additional $600m has been budgeted for an unnecessary gas plant in NSW.
“How bad is the business case for Kurri Kurri if Snowy Hydro needs the entire $600m capital cost covered by taxpayers rather than handling this all off the books.”
Analyst Bruce Robertson from the Institute for Energy Economics and Financial Analysis said there was no justification for the government to use public funds to build the Kurri Kurri plant.
“This is just gold plating of the energy system, which will lead to lower private sector investment in cheaper renewable energy and higher electricity bills for consumers. We don’t need over investment in expensive gas power generation.”
He noted the IEA report clearly signaled the end of gas and other fossil fuels. “And yet, in Australia, we have a government who is hell bent on subsidising a gas industry that is headed for rapid decline by 2030.”
See also: Coalition gas plant “reckless”; battery storage is much cheaper, says CEC
And: Revealed: Energy lobby group, Rio Tinto to receive ARENA grants
