Giles Parkinson. Morrison is dangerously wrong on gas, and needs to wake up to new technologies

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30 January 2020

It’s when prime minister Scott Morrison thinks he’s being really clever that he reveals the true level of his ignorance.

Remember how pleased Morrison was with himself when he brought in that lump of coal to parliament, thoughtfully provided (and lacquered) by the principal coal lobby, whose top two executives now serve as his key advisors? It made you wonder what, if anything, he understood about the science of climate change.

Remember how pleased Morrison was with himself when he compared the Tesla big battery in South Australia to the Big Banana and the Big Prawn? It made you wonder what, if anything, he understood about new technologies and the transition before us. Ditto with the pig ignorant dismissal of electric vehicles in the last election campaign, when he claimed they would destroy the Aussie weekend.

Now, the prime minister is at it again. Now less smug, and more defensive, ‘Scotty from Marketing’ is still pushing the barrow for the Minerals Council and its pet projects, the giant boondoggle of ‘carbon capture’ and its call to frack the nation in the pursuit of more gas.

“There is no credible energy transition plan for an economy like Australia in particular, that does not involve the greater use of gas as an important transition fuel,” Morrison told the National Press Club in a speech on Wednesday.

Wrong, completely wrong. And about as misguided as Morrison’s decision to bring that lump of coal into parliament, and as ill-informed as his remarks on big batteries and EVs.

One such plan has already been delivered to his government, and largely ignored. And to underline the point, just that morning, AGL – the utility that is defying the government by daring to close down its aging and clapped-out Liddell coal fired generator – signed up for what will be the country’s biggest unsubsidised battery storage installation.

It’s a significant move – batteries are still at a relatively early stage in Australia, but the country’s utilities are quickly catching up to developments in other countries, particularly in the US where major utilities are snubbing gas fired generators in favour of cheaper wind, solar and storage.

And in the US, unlike Australia, gas is cheap. Yet the likes of NextEra are saying the wind, solar and batteries will soon beat new and existing fossil fuel sources like coal, gas and nuclear. AGL has caught on. It doesn’t like spending its own money, but it has already contracted for five such big batteries and has more in the pipeline.

Alinta Energy is another big fan, seeing a sub 5-year payback for its unsubsidised big battery in W.A. So too, are Infigen and Nexif.

One authority that has recognised the possibilities of the new technology, and whom Morrison should be paying close attention to, is the Australian Energy Market Operator, whose job it is to keep the lights on.

To ensure this happens, at the lowest possible cost, AEMO has delivered a highly credible transition path to a low carbon grid in its Integrated System Plan, which provides a 20-year blueprint for what needs to be done to best manage “business as usual”, or even a “step change” scenario where policy makers finally get serious about climate change.

In each of the five scenarios that AEMO contemplates in its ISP, gas get to play some role – but it’s no greater than it does now and in most cases considerably less. It’s just the latest blow to the gas-marketing industry’s talking points of a “golden era” as a transition fuel. It’s just not going to happen.

In the “step change” scenario, which delivers a near 90 per cent share of renewables in two decades, and a similar reduction in emissions in the main grid, AEMO sees gas playing only a minor role, particularly if enough planning is done, and infrastructure built, to accommodate the wind and solar and storage that are both cheaper and cleaner than gas.

The first leg of that plan – a new $1.5 billion transmission link from South Australia to NSW – got regulatory approval this week from the Australian Energy Regulator. Its analysis was fascinating – new wind and solar will displace much of the “bulk energy” currently supplied by gas in South Australia, and the new link and various forms of storage will provide much of the grid security.

South Australia is currently the state most dependent on gas, where it supplies nearly half the electricity supply. But according to the AER and AEMO analyses, and the expectations of the state Liberal government which aims to reach “net 100 per cent” renewables by around 2030, the share of gas will plunge from near 50 per cent now to way less than 10 per cent in a decade.

That’s why the likes of AGL are replacing ageing “combined cycle” gas plants – which generate and burn gas much of the time – with “fast start” gas generators that will only be used sparingly.

That pattern is expected to be repeated in NSW, the state that is facing perhaps the biggest transition in the next two decades because of the need to replace its ageing coal generators. AEMO’s “step change” scenario envisages a very small role for gas by 2040. Try spotting the share of gas in any of the states in the AEMO scenarios above.

“Planning for a more strongly interconnected system ahead of closures of coal-fired generation can avoid or delay substantial investment in more expensive alternatives to support reliability and security of supply,” AEMO writes.

Even in its “central scenario”, AEMO sees a declining role for gas generation in the national market. Black and brown coal are replaced by wind, solar, and storage.

AEMO does say in its ISP that more gas reserves will need to be found, particularly close to 2040, but most of this is because of the assumed gas needs for other parts of the economy – heating, industrial use and exports. And the chances are that renewable hydrogen, and other forms of renewable technologies, will be displacing much of that presumed gas demand by then.

Truth is, the fossil fuel industry doesn’t know what else to say right now. They’ve been holding out the promise of carbon capture for years without ever delivering, and have been pinning their hopes on the “golden age” of gas for more than a decade.

That idea has been dismissed for some time, and the Morrison government needs to catch up, and look beyond the narrow interests of the fossil fuel lobby.

The fossil fuel industry has been urging governments to ignore the experts on climate science for decades, now it is urging it to do the same on the renewables transition. And it doesn’t help matters that Morrison’s own team is so heavily infested with fossil fuel apologists, and his energy minister is no fan of renewables.

Bruce Robertson, an analyst for IEEFA, notes that according to AEMO data demand for gas powered generation has fallen 41 per cent since 2014, despite being touted as the transition fuel. Its problem is that it is expensive, very expensive, and also heavily polluting, particularly with fracking and the release of harmful methane emissions.

“Gas has become an uncompetitive fuel source for power generation in Australia,” he writes. The pipeline of projects show that it is dominated by unsubsidised renewables. (See table below, dark blue is committed, light blue is proposed)

“All committed investment monies are in unsubsidised renewable energies, as is the vast bulk of proposed developments,” Robertson says. And now can be added unsubsidised battery storage, following the announcement by Vena Energy and AGL for that 100MW/150MWh stand alone battery in Queensland.

“The gas supply on the east coast of Australia has tripled since 2014 (primarily for export) and domestic gas prices have also tripled,” Robertson notes. “Producing yet more high cost gas is no panacea to the gas pricing problem faced in Australia of high domestic prices in a low priced gas world.”

And perhaps there is no better analogy for Morrison’s confusion than his approach to Tesla – both the big battery product he dismissed as essentially useless, and the EV he said would destroy the Aussie weekend.

A few hours after Morrison’s speech, Tesla shares went into orbit, adding $20 billion to the value of a company that already outstrips the combined worth of General Motors and Ford.

Like Morrison and his advisors, GM and Ford had dismissed the new technology but now find themselves overtaken by a smarter, faster, cleaner and ultimately better valued product. That’s tough luck for those companies. But Australia can’t afford to be led by someone so blind to what’s going on around him.

Giles Parkinson is founder and editor of Renew Economy, and is also the founder of One Step Off The Grid, and founder/editor of The Driven. Giles has been a journalist for 35 years, and is a former business and deputy editor of the Australian Financial Review.
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