Is Scott Morrison’s gas plan a good idea for Australia?

Prime Minister Scott Morrison has unveiled a new plan for Australia that critics say will waste millions of taxpayer dollars.

Prime Minister Scott Morrison is willing to put millions of dollars into gas, which he says is crucial for Australia’s recovery but environmentalists believe it will instead put the country’s future at risk.

Mr Morrison announced three big changes in the past week that could see more gas produced, a new gas plant built, and investment money being diverted away from solar and wind and put towards other more polluting technologies.

In particular, Mr Morrison says the federal government will begin the process to build a new gas fired power station in NSW if private companies don’t come up with an alternative plan to generate 1000MW of electricity by April.

The Climate Council says the PM’s plans “stink” and that millions of taxpayer dollars will be wasted propping up the polluting gas industry, rather than investing in a plan that will actually rebuild the economy and protect Australians from long term threats.

It points out that gas is still a fossil fuel, which means the PM’s plan could worsen climate change, and could lock Australia into longer, more dangerous bushfire seasons, severe heatwaves and increased coastal flooding.

However, Mr Morrison says that the policies are needed to ensure emissions will be reduced in areas outside of electricity generation. He believes they will create jobs and bring down electricity prices.

Energy Minister Angus Taylor has pointed out the electricity sector makes up only one third of Australia’s emissions and that the other two thirds come from industry, agriculture, transport and manufacturing.

It’s tougher to lower emissions in these energy-intensive areas as the costs are higher.

But does Australia really need such a huge investment in gas?

WHAT HAS BEEN ANNOUNCED?

There have been three main announcements including one made on Thursday that the government would change how it funds clean energy projects.

In the past the government has only funded renewables through the Australian Renewable Energy Agency (ARENA) and the Clean Energy Finance Corporation (CEFC).

All CEFC projects must be commercial and provide a return for taxpayers. At least 50 per cent of its funding must go towards renewable projects and over the years it has financed more than 3GW of solar and wind energy. This includes Victoria’s largest solar project, the Kiamal solar farm, as well as investment in Australia’s first large-scale battery storage project at Hornsdale Power Reserve in South Australia.

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Telsa supplied the batteries for the Hornsdale Power Reserve at Jamestown, South Australia. Picture: Neoen

ARENA has supported 543 projects with $1.58 billion in grant funding since it was established in 2012 to improve the competitiveness of renewable energy technologies and increase their supply.

However, the PM wants to shift the focus from “renewable” projects to “low emissions technologies” as he says renewable technology such as solar and wind no longer need incentives to help them.

“Solar panels and wind farms are now clearly commercially viable and have graduated from the need for government subsidies and the market has stepped up to invest,” Mr Morrison said in a statement.

The PM now plans to change the laws so the CEFC and ARENA will be able to support low emissions technologies like soil‑carbon sequestration, carbon capture and storage, production of green-steel, and industrial processes to reduce energy consumption.

The CEFC will still have an overall target rate of return to meet.

Mr Morrison announced $1.9 billion towards investments in low emissions technology and linked it to an extra 35,000 direct jobs as well as an additional 35,000 jobs.

However, the projects being funded by this investment have not yet been decided.

The new laws won’t stop more funding going to renewable projects but Mr Morrison told reporters they would need to be “new technology”.

He said the changes had been made in line with recommendations of the King review that suggested a technology neutral approach be adopted towards new technology that reduces emissions.

“We can’t have these funds constrained by what was put in place 10 years ago,” Mr Morrison said.

“We can’t have these artificial constrictions, a closed shop, an ideological … closed shop on how ARENA works.

“What matters is lowering emissions, what maters is lowering costs, what matters is creating jobs and the changes we’re seeking to make as a result of what we’re announcing today achieves all those three goals.”

FOCUS WILL BE ON GAS

The PM has made it clear that he thinks gas is crucial for Australia’s future and described gas as a “critical enabler” of the country’s economy.

“Our competitive advantage has always been based on affordable, reliable energy,” he said in a statement.

“As we turn to our economic recovery from COVID-19, affordable gas will play a central role in re-establishing the strong economy we need for jobs growth, funding government services and opportunities for all.”

However, Australia has struggled with high gas prices in the past few years and a number of companies have closed, blaming the high prices. One of the reasons why the prices are high is because Australia is sending a lot of its gas overseas. A small number of companies also control the supply and transport of gas around Australia so are able to set higher prices.

Mr Morrison is hoping to address some of these issues by opening up more gas supply, potentially building more pipelines and introducing other improvements to make it easier to transport gas around the country, as well as making gas prices more transparent so that customers can negotiate better prices.

The PM outlined these measures on Tuesday as part of his plan for Australia’s gas-led recovery. The federal government is even willing to build a new gas fired power plant in the NSW Hunter Valley if the no one else develops an alternative plan to deliver 1000MW of dispatchable energy to replace the Liddell power plant, which is closing.

Mr Morrison has given private companies until April to come up with a solution otherwise the government will move forward to build a new gas generator.

He said a task force had estimated that wholesale gas prices could jump by 30 per cent or $20 per megawatt hour, if Liddell’s capacity was not replaced before it shuts down.

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The Liddell power station in Muswellbrook, in the NSW Hunter Valley region is due to close. Picture: Dan Himbrechts

“We estimate that some 1000MW of new dispatchable generation is needed to keep prices down,” Mr Morrison said in a statement.

A leaked copy of the Liddell Taskforce study, obtained by the Sydney Morning Herald, suggested wholesale prices in NSW would increase from the low $60 per megawatt-hour in 2022, to between $75 and $80 in 2023-24 once Liddell closed. Prices would remain high if projects like Snowy 2.0 were delayed and investors were unwilling to build more capacity.

“The Commonwealth Government would prefer not to step in,” Mr Morrison said. “That is not our Plan A. But nor will we shy away from taking action to protect consumers and support jobs, including here in this region and so many like it.”

Energy Minister Angus Taylor told ABC’s Fran Kelly on Thursday the project did not have to be a gas power plant but “it’s just got to work 365 days a year, 24 hours a day”.

Atlassian co-founder and renewable energy supporter Mike Cannon-Brookes has already signalled he is interested in putting forward an option but needed more details, including how much funding the government was prepared to commit and whether it would be a subsidy or investment.

Greens leader Adam Bandt questioned the need for a 1000MW gas plant, but Mr Taylor said the 1000MW of dispatchable energy was aimed at keeping prices down and not necessarily about reliability.

However, he said reliability was important for businesses like the aluminium smelter Tomago.

“If it loses three hours of power, it will never start again so this must be dispatchable, affordable power,” Mr Taylor said.

Smelting pots usually operate at a temperature of around 1000°C and if the temperature drops too low for more than three hours the aluminium solidifies and is very hard to remove. It’s not possible to just restart it.

However, some have pointed out that Tomago is losing money and may not survive another five years unless new technology saves it.

IS GAS BETTER THAN RENEWABLES?

Solar and wind are already cheaper than gas but the key is making them available 24 hours a day.

Professor of Engineering Andrew Blakers of the Australian National University said there were many ways this could be done, including having wind and solar in lots of different areas so power from areas where the weather was good could be sent to areas where it wasn’t.

Batteries are also an option as well as pumped hydro such as Snowy Hydro 2.0.

Demand management, which involves asking industry or consumers not to use electricity during times of high demand, can also be used to stabilise the grid. This is already happening.

The Tomago smelter has previously assisted electricity operators by shutting down parts of its operations to reduce electricity during times of high demand.

Prof Blakers said a 1000MW gas power station in the Hunter Valley would be a “toy” compared to what was already happening with renewables.

“Australia is installing 6500MW of wind and solar each year,” he told ABC.

At the moment gas is only providing about 8 per cent of Australia’s electricity while renewables are contributing about 25 per cent.

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Prime Minister Scott Morrison has announced potential investment in gas. Picture: NCA NewsWire/Simon Bullard.

Prof Blakers acknowledged that gas would be needed for the next 10 to 20 years for the chemical industry that produces fertilisers, explosives, iron and steel.

But he said gas used for heating (rather than electricity) was already being displaced by heat pumps for low temperature air and water heating.

“By the mid 2020s the price of solar and wind is going to be undercutting gas for industrial high temperature heating,” he said.

Even if more gas is produced, making it cheaper, Prof Blakers believes there will be a time when renewables will be more cost effective.

“No one really knows (when this will happen) but it’s very clear what the direction is and that is, ever cheaper renewables and eventually undercutting of gas even for high temperature heating.”

Prof Blakers said gas would also increase Australia’s carbon emissions because most of the new gas would be exported.

“There’s a substantial amount of emissions involved in finding that gas and compressing it and getting ready for export — emissions go up if we export more gas.”

Prof Blakers said while emissions from the burning of gas for electricity were about 50 per cent of those from coal, this did not include emissions from the leakage of gas.

“It’s well known that there is leakage of natural gas in all steps of the process and leakage of about 3 or 4 per cent actually equalises gas and coal,” he said.

He said more research was needed to figure out how much leakage is actually occurring in Australia but there may not be much of difference between coal and gas when it comes to emissions.

GOVERNMENT’S GAS PLAN:

• Unlock gas basins starting with the Beetaloo Basin in the NT, and the North Bowen and Galilee Basin in Queensland, at a cost of $28.3 million for the plans;

• Negotiate new agreements with three gas exporters to avoid any shortfall in supply in Australia and explore whether a gas reservation scheme will help keep prices reasonable;

• Promote competition among pipeline operators and investigate infrastructure necessary to move gas around the country; and

• Gas hub to be established at Wallumbilla in Queensland to deliver an open, transparent and liquid gas trading system.

OTHER MEASURES:

• Work with state governments on $250 million program to accelerate three critical projects – the Marinus Link, Project Energy Connect and VNI West interconnectors. The government already supports HumeLink and the QNI Interconnector;

• $95.4 million co-investment fund to support businesses in the agriculture, manufacturing, industrial and transport sectors to adopt technologies that increase productivity and reduce emissions;

• $50 million investment in piloting carbon capture projects to cut emissions as part of the Carbon Capture Use and Storage Development Fund;

• $74.5 million to help businesses and regional communities take advantage of hydrogen, electric, and bio-fuelled vehicles;

• Set up a hydrogen export hub worth $70.2 million to scale-up demand;

• $67 million to back new microgrids in regional and remote communities;

• $52.2 million to increase the energy productivity of homes and businesses, including grant program for equipment and facilities upgrades in hotels;

• $24.6 million to reduce the time taken to develop new Emissions Reduction Fund methods from 24 months or more to less than 12 months; and

• $40.2 million to improve energy and emissions data and cybersecurity reporting, as well as developing an offshore clean energy project development framework.

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