Snowy to store gas at the Iona facility and play backstop to grid
Snowy Hydro has struck a 25-year deal to store gas in Victoria, in a move that will expand one of Australia’s most critical pieces of infrastructure.
Snowy Hydro, the publicly owned energy generator and retailer, has struck a 25-year deal with Lochard to store gas in Victoria, in a move that will see an expansion of one of Australia’s most critical pieces of infrastructure.
Gas is widely seen as crucial in supporting renewable energy, and the deal will allow Snowy to store gas at the Iona facility. Gas is used as a so-called peaker, with gas power stations fired up when there is excess demand or little renewable energy, as witnessed recently when the country recorded unusually low wind.
In a deal that positions Snowy to play a backstop to the grid, the commonwealth-backed entity said it would store gas at Iona for 25 years from 2028.
Snowy Hydro chief executive Dennis Barnes said reliability and security of supply were central to the way Snowy Hydro operated.
“Snowy Hydro’s generating portfolio of hydro, pumping and gas-fired power stations continues to support further deployment of renewables into the grid by firming intermittent generation sources into reliable power. The gas storage agreement with Lochard Energy will support the operation of our gas-fired power stations in Victoria,” Mr Barnes said.
Tim Jessen, chief executive of Lochard Energy, said the deal would be a catalyst for its underground storage project.
“This important agreement will underpin Lochard’s Heytesbury Underground Gas Storage project through which we will further expand the Iona gas storage facility to continue to provide critical energy storage services in Victoria.”
While the deal will allow for an expansion of the gas storage, it is unclear where sufficient supplies of the fuel source are expected to come from.
Australia’s east coast is facing a looming gas shortfall as traditional sources run dry and new proposed developments struggle to secure government approvals amid pockets of opposition.
By 2028, ExxonMobil’s Longford facility – which supplies the majority of Australia’s east coast – is expected to be depleted.
Unless new sources of gas can be unlocked, Australia’s east coast may have to import LNG to meet needs, which many within the industry say will be more expensive.
Higher gas prices would be difficult for heavy users such as manufacturers, who insist they cannot switch to renewables, while higher prices would also eventually flow through to household and business electricity bills.
Many in Australia’s gas industry have implored the federal Labor government to hasten approvals for new developments and privately accused Canberra of demonstrating tepid support through its failure to expedite applications.
The federal government insists it is moving as quickly as it can without sacrificing due diligence, and highlights its recent policy statement on gas – which it described as vital.
But few public developments are evident and the country’s energy market operator earlier this year warned a supply shortfall could emerge as soon as next year if there was heightened demand, a pattern observed last month when the operator convened an emergency meeting.
The Australian Energy Market Operator has since tempered concerns about supplies this winter, though many within the industry remain on edge.
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