Energy policy in Australia has long suffered at the hands of a simple lie being easier to accept than a complex truth. The federal election was remarkable in all sorts of ways, but one of those was that the Australian public backed a complex truth and they overwhelmingly rejected a simple lie.
They rejected nuclear power and a massive campaign to hoodwink Australia into backing a solution riddled with risk and uncertainty, likely to have enormous costs and be decades away. Instead, they provided a strong mandate for Australia to proceed with renewables, backed up by batteries, pumped hydro and a small amount of gas.
They saw through unprecedented misinformation and a ferocious campaign against renewable energy and for nuclear power. More than anything, Australian’s demonstrated they wanted the truth and could handle that truth. No one said that replacing Australia’s aging coal generation fleet over a decade or so would be easy, or straight forward. But the election showed that it’s time for more honesty with the Australian public.
At the start of this year, amidst waves of misinformation and anticipating another contentious election campaign, the clean energy industry launched a new campaign to ensure the Australian public got the facts. We wanted to make sure the Australian public had access to the facts about clean energy and the alternatives. It’s working.
As the dust settles on the election, we have a lot more to do to ensure the public understand the complexity and nuance of Australia’s energy transition. One of those areas is about the role of gas in the electricity system. So let’s get it straight.
Firstly, the fact is that a small amount of gas-fired electricity generation is playing an important role today, and according to the experts will be necessary for the foreseeable future. That might be an inconvenient truth for some people, but it is the reality for now. It’s a small role, compared to the massive role renewable energy and energy storage is already playing and is expected to in the future.
The Australian Energy Market Operator (AEMO) states that “As coal-fired power stations retire, renewable energy connected with transmission and distribution, firmed with storage, and backed up by gas-powered generation is the lowest-cost way to supply electricity to homes and businesses through Australia’s transition to a net zero economy”.
Importantly, AEMO also projects that gas generation capacity (MW) will produce much less energy (MWh – actual output) than it does today, with a reduced capacity factor for any gas generation of around 7% on average.
AEMO projects gas generation will play a narrower and more focussed role, providing rare but important coverage of seasonal shortfalls, as opposed to its current role in regularly providing peaking support. AEMO is currently forecasting that gas-fired generation capacity will increase from 11.5 GW now to 15 GW in 2050, including replacement of 9.3 GW of the current capacity that is expected to retire over coming decades.
This 15 GW is a relatively small amount of gas capacity when considered alongside the 135 GW of new large-scale renewable generation and the 56 GW of combined utility and distributed energy storage needed by 2050.
The experts tell us that energy storage will play a much bigger role than gas generation in the long term. Energy storage represents a cleaner, lower cost alternative to gas generation and investors are pouring billions into developing more of these assets – last year alone we saw a record 4,000 MW of new energy storage projects, with more than double that due to connect in the next few years. The faster we can deploy clean energy and a range of storage solutions, the faster we can reduce our reliance on gas.
Having an over-reliance on gas would create significant risks and challenges for the energy transition. CSIRO’s GenCost analysis confirms that gas-fired generation is high cost, exacerbated by the increasing exposure of the already concentrated Australian gas market to price shocks caused by geopolitical events, such as the Russian war in the Ukraine.
Clean Energy Council’s recent analysis of retail price impacts in the Impact of a delayed transition on Electricity Bills report showed power bills would be almost $500 higher for an average household per year if we dramatically increased our reliance on gas.
So for now, we need a bit of gas, but as little as possible.
In the long term, the least cost and most reliable energy system will be powered by a suite of renewable energy solutions – wind, small and large-scale solar, hydro – combined with a more robust grid and various energy storage solutions including batteries, pumped hydro and emerging storage technologies. It is crucial that any gas policy does not undermine investor confidence or dilute price signals for investment in these least cost and most important solutions.
The priority of the Clean Energy Council, governments, and regulators must be to deliver on the mandate of the Australian people, to provide clear investment certainty to accelerate the deployment and development of renewable energy and energy storage and a least cost, reliable and clean energy future.
It’s complex and nuanced, but it’s important that we are straight up with Australians as we share the full story of what the least cost transition looks like.
Kane Thornton is chief executive of the Clean Energy Council.
