Source: The Sydney Morning Herald
The Morrison government will open up new gas supplies and back the construction of a gas-fired power station in a mammoth new plan that aims to prevent an energy price spike for employers and households.
Prime Minister Scott Morrison will on Tuesday promise a "gas-led recovery" from the coronavirus recession by making sure Australian manufacturers can gain access to the energy they need to compete with overseas rivals.
In a sweeping intervention, the government will back the construction of a new gas-fired power station in the NSW Hunter Valley if energy giant AGL does not replace its Liddell coal-fired power station.
The policy statement canvasses Commonwealth support for five new gas fields and more pipelines to transport gas to Sydney, Melbourne and other major markets that risk running low on gas in coming winters.
Environmental groups have intensified their opposition to gas in recent years, arguing renewable energy is developing quickly enough to replace fossil fuels, but the government sees gas as the best way to transition away from coal.
Mr Morrison will unveil the plan with a promise to "deliver more Australian gas where it is needed at an internationally competitive price" for manufacturers and households.
"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," he says.
The government push for gas is founded in part on fears NSW will see the price spike that occurred in Victoria after the closure of the Hazelwood coal-fired power station, which sent wholesale prices soaring by 85 per cent at one point.
AGL intends to shut the Liddell coal-fired power station in April 2022 and has outlined plans to replace it with renewable energy and battery storage, but the government policy will back a plan to build a gas-fired power station nearby.
The government will set a "dispatchable capacity investment target" of 1000 megawatts of electricity in NSW by the end of April 2021, requiring this amount of additional energy to come online by the end of 2023.
"If the energy companies step up to deliver on the target, the government will step back," says one of the Commonwealth documents.
Snowy Hydro, which is wholly owned by the Commonwealth, is studying whether to build a new gas-fired power station at Kurri Kurri in the Hunter Valley.
A key objective is to guarantee electricity supply to the nearby Tomago smelter, which makes about 25 per cent of Australia's aluminium.
The energy statement canvasses changes to national energy laws so that Tomago and other large industrial loads can be "appropriately compensated" for the role they play in providing stability to the east-coast electricity grid.
Behind the wider gas plan is the concern that Australian customers are paying as much as 25 per cent more for gas than international customers, leading to soaring energy costs for manufacturers at the same time gas is pumped onto tankers for export.
The Australian Competition and Consumer Commission estimated last month that prices range from $8 to $10 per gigajoule for domestic customers, about $2 more than the LNG price.
A key part of the policy is the development of a National Gas Infrastructure Plan that will support a more active role for the government by forecasting future gas demand and identifying gaps that require intervention.
It warns that several Victorian gas fields including Bass Strait will decline over time and lead to supply gaps during peak winter demand from 2024 unless new supplies are found.
The government will negotiate new Heads of Agreement with the three major liquefied natural gas exporters in Queensland to insist they make more gas available to the domestic market.
In a significant intervention to name new gas supplies, the government will deliver five Strategic Basin Plans that will start with the Beetaloo Basin in the Northern Territory, followed by the North Bowen and Galilee fields in Queensland.
The North Bowen and Galilee basins are seen as "priority" developments but the new policy also names the Cooper Basin in Queensland, the Gunnedah Basin in NSW and the Perth Basin in Western Australia as targets for strategic plans.
It will consider a "potential gas reservation" regime to set some of the future gas aside for the Australian market, learning the lessons of the past decade when new fields were developed for export and the boost in supplies failed to lead to lower domestic prices.
But the priority is expected to be the Narrabri gas field in northern NSW, which is being developed by Santos and is awaiting a state regulatory decision by the end of this month, after which it will require federal environmental approval.
The alternative to the Santos project is a plan to build an import terminal on the east coast.
If private sector investment in the priority projects does not occur, the government will raise the option of streamlining approvals, underwriting projects or supporting "special purpose vehicles" to ensure they go ahead.
One source said the government's message to industry was: "If you don't fix it, we will."
Throwing the full weight of the Commonwealth behind more gas exploration and extraction, the plan will even specify the best way to set a transparent price for the domestic market by using a gas hub at Wallumbilla, near the Queensland town of Roma.
The location is significant because Wallumbilla is regarded as a key point in a potential gas pipeline south to NSW and on to Victoria, bringing more supply to the southern states.
While private companies are considering whether to build the new pipelines to carry more gas supplies to Sydney and Melbourne, the government is open to underwriting the pipelines.
This acts on a proposal from the chair of the federal government's COVID-19 Commission Advisory Board, business executive Nev Power, who aired the idea of an underwriting approach last month.
Labor energy spokesman Mark Butler has questioned the need for underwriting new gas projects but the opposition's resources spokesman, Joel Fitzgibbon, has lent provisional support to the concept.
The Greens and the environmental movement have slammed the idea of expanding the use of fossil fuels rather than renewable energy supplies, but the government is arguing Australia's emissions will fall by using gas to shift away from coal.
The government cites International Energy Agency analysis showing that switching from coal to gas has saved 500 million tonnes of carbon emissions since 2010.
The government claims it is ahead of its 2030 emissions target by 16 million tonnes.