Just how long can the Australian government and the gas industry continue the charade that there might be a solution to the surge in domestic gas prices? And what will it take before big business consumers follow the lead of households and smaller commercial and industrial customers and invest in their own cheaper and cleaner alternatives?
In Canberra on Thursday, as yet another “gas summit” hosted by prime minister Malcolm Turnbull ended without a “fix” to soaring gas prices, the Energy Users Group was complaining that one industrial customer in Queensland was being hit with a new gas supply contract at the usurious price of $23/gigajoule.
Frankly, it beggars belief that Australian industry is even bothering to ask for cheaper gas prices, when there are obviously cheaper alternatives available – for both electricity and for industrial gas users.
An Australian Renewable Energy Agency report last year identified how biogas, geothermal and solar thermal alternatives could provide industrial heat at the equivalent of $5/gigajoule – less than one-quarter of the price being asked for gas now. Why aren’t they embracing these patently cheaper and cleaner alternatives?
Part of the answer is the ingrained fossil fuel mentality in Australia. For so long, the true cost of fossil fuels has been hidden by massive cross-subsidies – to electricity users in remote and regional areas, and to big industrial customers.
This mentality, and failure to imagine alternatives, has been infused from the top: Since 2001, Australia’s energy ministers have been in lock-step with the fossil fuel industry. Ian Macfarlane and Martin Ferguson both left their political careers to take up positions as gas industry lobbyists. Gary Gray’s full-time job before being entering politics was with gas company Woodside, and he is now back in the mining industry with Mineral Resources.
This failure to imagine an alternative to fossil fuels has been shared by regulators, captured in their entirety by the powerful oligopoly that runs the energy industry in Australia.
It is laughable that organisations such as the AEMC and the ACCC should be asked to “investigate” rising prices in the electricity and gas industry. What have they been doing for the last few years?
There is no doubt, however, that Australian industrials are being screwed by the LNG industry, who contracted to sell more gas to overseas producers than they can produce.
It’s high time that energy consumers started to take matters into the own hands – big and small.
Australia’s gas market will never by pulled from the grasp of the current oligopoly. No amount of permits to extract coal seam gas from land owned by reluctant farmers will change the pricing equation. Domestic gas reservations won’t work either. It’s past time to look at other options.
As the Climate Council reports today, investing in gas for electricity as the “transition fuel” will lock in huge profits for the big fossil fuel oligopoly, as they have been accused of doing in the past few years. And it will lock in high pollution levels, even without accounting for unmeasured methane emissions.
In the electricity sector, there are already obvious alternatives to gas-fired generation. While some hysterical commentators, such as The Australian’s Robert Gottliebsen, warn of 10-15 days of blackouts next summer, the reality is quite different, and so are the short, medium and longer-term options.
The cost of solar PV and wind energy has plunged, and both are now well below the cost of new gas plants, and even the short run marginal cost of existing gas plants at current prices.
Even more spectacularly, the former boss of the Hazelwood power station, Tony Concannon, says that the combination of large scale solar PV and storage is already cheaper than gas, and another coal and gas industry veteran, Scott Armstrong, agrees, saying solar and storage are a more dependable and cheaper option than peaking gas generators.
Concannon’s Reach Solar has begun construction of a 220MW solar plant that could expand to 300MW and include storage in South Australia. Armstrong’s SolarQ is seeking approvals for a 350MW solar farm, expanding to 800MW and a lot of storage, in south-east Queensland.
But business does not need to wait for others to feed cheaper power into the grid. They could follow the example of Queensland zinc refiner Sun Metals, which is building its own 116MW solar farm to reduce the soaring cost of that state’s fossil fuel dominated grid, and to give it pricing certainty.
Or they could follow the example of the ACT government: By contracting to deliver 100 per cent of its electricity needs by 2020, the ACT has locked in fixed prices for wholesale power for the next 20 years. And most of it, apart from its initial solar contracts, are well below the current wholesale price of electricity.
Better than that, the contracts have been structured so that if the wholesale prices are higher than the fixed contracts, then the excess goes back to ACT consumers, not the owners of the wind and solar farms. That means they pay well below consumers in other states, and go clean and green at the same time.
Gas, of course, is not just needed for electricity, but for other manufacturing purposes, particularly heat. But here, too, there are cheaper and cleaner options, as an Australian Renewable Energy Agency report delivered in 2016 made clear.
“There are opportunities for renewable energy to replace gas for industrial gas users today,” the report concluded, citing the potential of solar thermal, geothermal and biomass technologies.
Most were already cheaper than gas even at $5/gigajoule, although this depended on the amount of gas needed for those industrial processes. But with Australian industrial consumers being hit with contracts of four times that price, it is surprising that they are not already pursuing cheaper and cleaner alternatives
The ARENA report said solar thermal technologies to generate heat are viable for temperatures up to 150°C and worth consideration up to 250°C. Temperatures above that are economically more challenging depending on gas price assumptions.
The economics of biomass or biogas was even more compelling, particularly for those industries, such as paper, agriculture, food, beverage, and wood that get their biomass for free as a result of their manufacturing processes.
This graph below shows that for businesses needing 50,000GJ or more a year, geothermal was also a compelling option, even at prices of $5/GJ, which consumers in Australia are never likely to see again for gas.
“The attractiveness of these opportunities will grow as gas prices increase and renewable energy technologies mature,” it says.
So, why aren’t they picking up these opportunities. Some solar investors say they are conducting talks, but little action has been seen – in contrast to the US and other countries where the likes of Facebook, Google, Amazon and Apple are aiming for 100 per cent renewables, and even the likes of Dow Chemical are investing heavily in wind and solar.
Andrew Richards, from the Energy Users Association, says it is because of the complexity, and the fact that renewable options require up-front investments, rather than paying-as-you-go commodity fuels. But he thinks that business is slowly getting their mind around the alternatives and looking carefully at the technology options.
Some, like the South Australian greenhouse tomato grower Sundrop, are using solar thermal technologies, and the Clean Energy Finance Corporation has backed other businesses looking to exploit biogas as an alternative to natural gas.
And more technology options will be on their way: Those outlined by the ARENA report include:
- High temperature solar concentrator driven processes to convert biomass, water, gas or other fossil fuels into chemical feedstocks or new solar fuels.
- Electrolysis of water to produce hydrogen as a feedstock or fuel.
- High temperature solar thermal approaches to direct driving minerals processing and other thermal processes.
- New advanced biomass gasification systems.
- Innovative systems for purifying gas streams from gasifiers or digesters for use in sensitive direct combustion processes (ovens etc) or for injection to existing gas pipeline infrastructure.
- New advanced biomass production or collection systems.
- Targeted innovations to improve existing renewable energy technologies.