The future for gas generation: Do we really need it, and in what form?

The debate about future need for gas-fired generation seems to be unnecessarily polarised. 

Clearly, we need ways to maintain reliable energy services when variable renewable generation falls short of demand. But we have a lot of options.

As I have often pointed out, efficiency improvement in building, appliance, business and industry efficiency could make a big difference. They must be targeted at activities that consume gas or electricity (including gas-fired electricity) at critical times, usually cold or hot extremes.

But this would require energy retailers, who know the addresses and usage of their customers, to actively identify and assist their high consumers to save. They will require incentives that make this profitable, or regulatory intervention.

Energy storage using batteries, EVs, thermal storage, and demand ‘flexing’ can play major roles in replacement of fossil gas-sourced electricity. They can interact with behind-meter generation.

As Amandine Dennis and I pointed out in a 2024 paper on Tasmania, hoarding stored water in existing hydro systems by upgrading efficiency of electricity use in buildings and other activities could deliver more hydro at key times. It could also allow ‘prudent storage’ levels to be reduced, freeing up more existing stored water capacity.

Pumped hydro is coming, if more slowly than originally proposed. It will be able to trickle charge smaller, distributed batteries over existing powerlines so they can contribute in multi-day low variable renewable periods.

Interstate transmission is being built. Existing powerlines can be rewired for higher capacity. Virtual transmission by trickle charging distributed batteries when transmission capacity has low utilisationcan be useful. Even transporting batteries by train, as proposed by US Lawrence Berkeley Laboratories, can be useful.

This leaves us to think about gas generation.

First, there are two main types of peak gas generation – turbines and reciprocating engines. Most commentary seems to assume we need gas turbines.

But both major generators and end consumers have, and seem to be planning to buy, a lot of reciprocating generators that can run on multiple fuels, not just fossil gas. Some of these fuels can be easily stored on-site, increasing resilience to electricity infrastructure failures.

As our demand profiles and generation options evolve, it seems likely that need for ‘gas’ generation will decline in volume. When utilisation is low, capital and maintenance costs increase their share of generation cost, leaving fuel cost as a less important factor.  

Reciprocating generators seem to be a bit more efficient than open cycle gas turbines, and they can offer faster response. Also, there seem to be long delays in delivery of new gas turbines, while increases in purchase prices must be factored in.

Reciprocating generators are already installed at many sites, but documentation of capacity is uncertain. Using them at times of high spot electricity prices can make financial sense when they also reduce reliance on grid reliability.

Interest in renewable gas options, particularly biomethane, which is a ‘drop-in’ alternative to fossil gas, is increasing. It can defer capital costs of replacement end use equipment. Landfill gas is already used for electricity generation, but is poorly utilised.

Old, inefficient landfill gas generators may be switched off when they can’t compete with cheap wholesale electricity, leading to flaring of potentially useful gas.

And they aren’t necessarily managed to focus on generation at times of peak demand. Replacing fossil gas with landfill gas for industrial heat could leave more fossil gas available for peak electricity generation. There is plenty of room to make better use of landfill and biogas.

Synthetic liquid fuel production also seems to be attracting more attention, and could run reciprocating generators.

If fossil gas used for generation paid a carbon price, zero or near zero emission alternatives would be more competitive.  

Many electricity consumers are already focusing more on cutting emissions, especially businesses in supply chains servicing major businesses. They are facing increasing requirements from APRA and the Australian Accounting Standards Board to report on and reduce scope 3 emissions, that is emissions from their supply chains.

Other businesses are cutting scope 1 emissions, including emissions from gas use and generation, under the Safeguard Mechanism, which is being expanded to a wider range of sites.

In southern Australia, there are emerging gas shortages and/or high prices in winter. Alternative solutions are most likely to be needed when solar generation is low. 

I will watch with interest how the gas generation situation plays out, especially as we face the lived experience of increasing climate driven disruption from extreme weather events driven by burning fossil fuels.