The final report of the Finkel Review into the stability and security of the National Electricity Market has confirmed what the gas industry has been saying for years, and in doing say has punctured the indignant and increasingly shrill claims of activist groups.
While debate in coming weeks will inevitably focus on which technologies should qualify for inclusion in the proposed Clean Energy Target mechanism (hint: gas needs to be there), it’s worth taking a closer look at what the Review says about gas.
Straight off the bat, the review panel confirmed a basic tenet which seems to continually escape the view of industry critics – the fact that gas and electricity markets are closely connected. As ageing coal-fired generation retires, gas-fired generation can provide a low emissions substitute for coal and can also complement variable renewable electricity generation.
The final Report also stated that:
- Efficient gas markets have a central role to play in maintaining energy security and reliability as Australia reduces its emissions in line with international commitments.
- Gas contributes to a secure and reliable electricity market through the ability of gas-fired power stations to provide quick start and synchronous generation capacity
- Gas contributes to emissions reduction because the best gas-fired generation is less than half as emissions intensive than even the most efficient coal-fired plant, including ultra-super-critical coal generation
The panel also made a number of observations about reforms that would improve the efficiency of gas markets:
- If gas is to play an increasing role in affordable electricity supply, gas markets will need to be highly efficient, as gas-fired generation often sets the spot price for the wholesale electricity market when Variable Renewable Electricity (VRE) generation is low
- For gas-fired generators to operate on a more flexible basis and contribute to a reliable and secure NEM, efficient gas supply and transportation markets that are able to dynamically respond to changing conditions are required
- For gas-fired generation to contribute to electricity supply now and in the future, gas supply certainty is required.
- Increasing gas supply will relieve supply tightness and assist in mitigating gas price rises. This will go some way to improving the economics of gas-fired generation. Without further and extensive investment in undeveloped gas reserves, there may be significant unfilled demand and continuing high prices on the east coast.
- Government and industry should prioritise the exploration and development of gas reserves to build long-term supply certainty, given the timeframe of five or more years to bring new supply to market
In a move that has already raised the ire of activist groups, the Report
“Considers that governments should avoid blanket restrictions and bans on gas projects and instead encourage the safe exploration and development of the industry. Evidence based regulatory regimes enable the risks of individual gas projects to be managed on a case-by-case basis.”
That’s a position that the industry as a whole has been advocating for several years.
We look forward to the responses from the Federal and State Governments to the Finkel recommendations – because as the Review says, gas has a central role to play in Australia’s energy markets, now and into the future.