Despite everything, gas is back on the agenda. The government is pushing for a gas-powered manufacturing boom and there are calls for the resource to be used as a “transition” fuel to 100 per cent renewable energy. But renewable energy experts say this is far from true. Intermittent supply can be met with a range of options including battery storage and demand management.

The debate on gas flared again this week with a new report from the Grattan Institute that, Australia’s National Electricity Market (NEM) could achieve net zero emissions within the next 20 years, but should be wary of a rush entirely to renewables. 

Four Corners also took a deep dive into Australia’s gas debate  in a program that aired on Monday and featured the views of Tony Wood, one of the authors on the report and director of Grattan’s Energy Program since 2011, and pitted them against energy minister Angus Taylor.

Energy minister Angus Taylor on Four Corners

It also featured Andrew Liveris, former special advisor to the federal government’s National COVID-19 Commision (NCC), a standing director at oil and gas giant, Saudi Aramco and a former chief executive and chairman of Dow Chemicals.

Prime Minister Scott Morrison and Angus Taylor have pushed for a gas-led recovery to the COVID-19 recession involving an increase in gas-powered manufacturing, a stand, reportedly backed by the findings of the NCC, which have not been made public. 

“That cheap gas that I’ve been talking about will never come back again. This is a geological statement, it’s an economic statement, it’s not an ideological statement. We have basically run out of cheap gas,”

Tony Wood, director of Grattan Institute Energy Program

The Prime Minister said the advice of Liveris, whose’ expertise in the manufacturing industry has been sought world wide, from US presidents to Saudi Arabian princes, is that “…to change manufacturing in this country..… you’ve got to do it with gas.”

But do you?

First you need a low price to be competitive. In the US that’s less $4 a gigajoule but in Australia the days of cheap gas are over.

Liveris told the television program that, “there’s no way you can get a $4 number here no matter what the cost of production is.” The lowest would be $6 he said. 

Former special advisor to the federal government’s National COVID-19 Commission Andrew Liveris on Four Corners

Kevin Gallagher, chief executive officer of Santos said, “we wouldn’t be developing new resources if $4 Australian was the price that we could get for that gas. As I say, I think somewhere.. between $6 and $9 is the range of prices I’ve publicly stated that I believe is a sustainable sort of range for gas prices on the east coast.

Taylor, asked how these figures would work with the plan for a gas led manufacturing recovery, said that he did not know what the price of gas would be: “I’m not in the business of forecasting prices.”

But it’s precisely what the manufacturers need to know.

“That cheap gas that I’ve been talking about will never come back again. This is a geological statement, it’s an economic statement, it’s not an ideological statement. We have basically run out of cheap gas,” Wood said on the program.

It was therefore unlikely that more gas projects would lead to more manufacturing.

“You heard Angus Taylor talking about how we need gas to balance the system, but you also had Andy Liveris talking about how we need gas for a manufacturing renaissance. One is at least partly true and the other one’s not true at all,” Wood later told The Fifth Estate.

Despite this he thinks the resource should play a short term role in keeping electricity cheap and reliable until better technologies come along.

Shadow minister for climate change and energy, Chris Bowen agrees. He told an online seminar hosted by The Australia Institute this week, “gas will continue to play a role in firming and peaking our grid as we transition to renewable energy.”

“We need to massively increase the storage in our grid through batteries, pumped hydro and hydrogen which are at various levels of development, but that’s going to take time.”

The approach of the Grattan report lies somewhere between that of gas companies and politicians pushing for major new projects, and those against using gas at all due to direct environmental impact or emissions concerns. 

What does Grattan propose? 

Grattan’s report claimed to debunk the “myth” that Australia is reliant on coal-fired power to keep energy affordable, and said offsetting gas-generated power could be a low-cost way of reaching net zero emissions.

“People used to use the word ‘transition’…meaning that gas would basically replace coal and then eventually would be replaced by renewables. I think what’s happened is that the world in which that might have been true has so fundamentally changed that it’s no longer the case,” Wood said. 

“What we’re seeing is renewables, because they’ve become so cheap so quickly, are replacing coal. So, the role of gas has changed from being a huge supplier of electricity to being the fundamental backstop to the system.” 

Co-authors, Wood and James Ha developed an economic model which showed a move to 70 per cent renewable energy was possible without materially increasing the cost of power — while closing roughly two-thirds of current coal-fired power plants and significantly reducing emissions.

They said a move to 90 per cent renewable energy and no coal could also be feasible, but would incur some additional costs towards generation, transmission and storage.

Under Grattan’s 70 per cent renewable plan, gas would make up 9.8 gigawatts (GW) of total installed capacity, while under the 90 per cent renewable model that role would jump to 14 GW to make up for abandoning coal.

In terms of cutting emissions Grattan’s modelling shows implementing 70 per cent renewables would cut emissions intensity by two-thirds to 0.24t/MWh. Under their 90 per cent renewable model, which included 14GW of gas generated energy, emissions were shown to be as low as 0.05t/MWh, or 10 million tonnes (Mt) per year on average.

“We should absolutely be aiming for 100 percent (renewable) if not more because there is obviously the potential for the export industry as well,”

CEC director of energy transformation, Lillian Patterson

Why not 100 per cent renewable energy?

According to Wood, the problem of achieving 100 per cent renewable energy with currently available technology lies largely with the issue of wind and solar being intermittent.

The often repeated line about renewable energy being subject to the weather, Wood said is unfortunately true — meaning that while Australia’s NEM can go most of the way to running off renewables, it would still require a back-up for rare periods when solar and wind capacity drops below demand. 

Wood makes clear that achieving 100 per cent renewable energy would likely be possible down the track but said it was not necessary to solve that problem immediately, only to plan and prepare for when the solutions become available. 

Not everyone agrees

Renewable energy experts say that the solution is already here and ready to accommodate a 100 per cent renewable energy future when we are willing to take the step.

“We should absolutely be aiming for 100 percent (renewable) if not more because there is obviously the potential for the export industry as well,” director of energy transformation at the Clean Energy Council (CEC) Lillian Patterson told The Fifth Estate.

Patterson explained that the issue of weather-related dips in renewable output are valid, but also manageable through the use of storage solutions such as batteries, and better transmission of energy between states.

“It’s all about diversity in the system. We’ll have renewables all over the country, so while it might not be sunny in one part of the country, it will be sunny in other parts,” Patterson said. 

“Except obviously at night time. So that’s why in our view we need a diversity of things. We need renewables and we need different types of storages. We need those that are shorter duration such as batteries and we need those that are longer, pumped hydro for example.” 

As far as why some people in Australia are still resistant to a 100 per cent renewable future Patterson said it may be a matter of trying to hold on to something familiar in the face of an unknown future. 

“In Australia we know coal and we know gas. Maybe it’s just an uncertainty around technology and what it can do and the advancements it can make,” Patterson said.

“I’m not saying that’s Grattan’s view, but that’s some of the sentiment that we get more broadly throughout the market place.” 

What about going off grid? 

Many Australians are already choosing not to rely on power supplied by the coal-reliant NEM, opting for roof mounted solar panels to provide their electricity. Roughly 3GW was installed in 2020, and a further 3GW is expected on average for each of the subsequent four years.

According to Grattan’s report, this is already significantly cutting demand on the NEM during the day, and by the end of the decade it is “very likely that in some states on some days there won’t be any demand at all for hours at a time, because rooftop solar will supply more energy than the state needs.”

However, similar to the larger scale renewable projects they say this comes with the potential for a gap in supply if weather conditions are not suitable for producing electricity.

“Over winter, rooftop solar output falls just as utility solar output does. That means less energy available for the (behind-the-meter) batteries, and more demand for the wholesale market to satisfy,” the report said. 

Patterson cites the potential of household and even community batteries which can reduce the need for grid-reliance, which already are becoming much better at long term storage and capable of reducing grid reliance  — even when the sun doesn’t shine.

-With Tina Perinotto

5 replies on “Grattan Institute spruiks middle-ground in Australia’s gas debate”

  1. I have just read, quickly, the Grattan Institute report, I am not qualified to comment on all of it. It seems to me to present a logical path to change and to reduce emissions.
    The states are responsible for providing electricity to the people. All states except WA have sold some or all of their generation capacity to private enterprise, so it will be the task of private enterprise to implement the changes that have been suggested. This means that any change will be partly or wholly down to the decisions of private enterprise, their objective, as always is to maximise the return any investments they make for their shareholders.
    This means that the consumer will have to pay sufficient for their power to show an acceptable dividend for those who invest.
    What the report does not indicate, as far as I can see, is what the capital cost will be and over what period of time that cost will be spread to achieve each of the 3 alternatives and whether private enterprise has agreed to meet one or any of the alternatives.
    If Australia is to reenter world trade through manufacturing it has already been stated that we will need, we must have, world competitive electricity prices. Are we assured in the report that this will be the case?
    Lastly it may be there but I can’t find it, has the replacement cost of wind turbines and PV panels been considered? I see that the estimates for the life of wind turbines is anywhere between 10 and 20 years and panels as we all know lose power every year, many are now due for replacement. Both of these sources have been subsidised by the Federal Government. Will that subsidy continue to the next generation?

  2. It’s very simple. All the proponents of renewables being the answer to take Australia to a carbon free country at some time in the future, they can pick a time, all they have to do is tell us all what it will cost. If they are sure, that surely cannot be too difficult because they already have done the calculations, haven’t they? What is the effect on GDP, what percentage of GDP will be needed?

    1. So, how would you like us to price death, of the planet and its people? Though of course, the planet will survive in some form, probably with cockroaches and possibly quite a few other rampant resilient species who aren’t too fussed about nature, beauty, heat or wild weather. Not sure how we even run an economy under BAU.

      1. Is that a reply? I have not said that I am against change, but all you can do is be offensive. Obviously you don’t know the answer to my question so you resort to fear, which has been used for centuries to get people to comply. Easy, frighten the children. Also, if I may say, it is very poor journalism.

        1. not journalism at all Roger, just sheer frustration (allowed in the comments section) at the constant question of whether we can afford climate action or reduction of emissions. what does it matter how much it will cost? It costs whatever it costs. like saving us from Covid like the cost of stopping the bushfires or the cost of the floods.. the war… “whatever it takes” I’m sure you understand.

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