Some of Australia’s most experienced independent energy economics analysts came to a similar conclusion this week: the East Coast needs more gas; and current policy settings federally and in NSW/Victoria are not going to solve the problem of gas supply and rising electricity prices.
The two biggest culprits are the large subsidies for renewable energy and the gas development blockers in NSW and Victoria.
Energy Quest ’s Graham Bethune, the Grattan Institute’s Tony Wood and the Institute of Public Affairs ’s Daniel Wild each identified these key points. And the Federal Government – and former Premier Jeff Kennett – have highlighted a third point, which is the way the State entitlements to GST distributions are calculated can act as a disincentive to resource development, as we have explained previously.
On the topic of prices, the Australian Consumer and Competition Commission has identified that renewables subsidies account for 16% of our total power bills.
To make matters worse, the natural gas development blockers in NSW and Victoria are adding $1 billion a year to the gas bills of people and businesses in those States – and threatening “wider economic damage” as a result, according to today’s Australian newspaper.
The Australian quotes ACCC chairman Rod Sims regarding both the cost estimate and the wider economic impact, describing it as the “minimum” likely impact.
Almost all of the $1b is derived from the cost of transporting gas from Queensland to NSW and Victoria, both of which have substantial natural gas resources but are failing to develop them because of fears of a green-vote retaliation. The further economic impact relates to the negative impact on jobs and investment which flows from increased costs.
But don’t expect the Greens to listen to any of this. Their solution is to keep available gas in the ground and to tap taxpayers for more subsidies – a further $2.2 billion, in their latest demand this week.
A $2.2b fund should be set up to pay for energy storage to prop up the already subsidised wind and solar power generators, Greens MPs Sarah Hanson-Young (South Australia) and Adam Bandt (Victoria) announced this week.
Their new fund would be used to pay for battery and other storage to help address the key weakness of wind and solar power – their unreliable and intermittent nature.
This continuing drain on the taxpayer while refusing to develop existing resources is exactly the policy approach which has led to rising prices and a possible gas shortage next year.
This was identified in the Finkel review of Australia’s energy future, which recommended that new wind and solar projects be required to make a better contribution to the energy mix by including their own storage capability, via batteries or other techniques.
Mr Bandt and other Greens continue to refuse to acknowledge the elephant in the room with wind and solar power – the fact that they do not work at night or when the sun is obscured by clouds and that wind farms don’t work when the wind is too light or too heavy.
As a result they are not capable of providing continuous ‘baseload’ power, 24/7, which is what is needed, particularly by industrial manufacturing plants.
“We don’t have a baseload problem, we have a peak load problem,” Mr Bandt said this week, doing his best to avoid the elephant.
“We need flexible generation and energy storage to manage the transition, not more coal.”
What Mr Bandt calls “flexible generation” is described in the industry as “dispatchable energy” – that which can be dispatched on demand. Coal fired power needs to be continuous; gas-fired power is the only current technology which provides on-demand flexibility.
Getting back to the expert opinion on the best way forward, Mr Wood wrote this week that the challenge for the Federal Government was to “craft a policy that excludes subsidies for renewables, does not exclude coal, yet still sets Australia on a path to achieve its international commitments to cut carbon emissions”. Gas power sits well in that set of criteria.
Mr Bethune said the “obvious way to solve the gas crisis is to produce more gas”.
“However, high hopes for the development of 2000 petajoules of coal-seam gas in NSW and potentially larger volumes of unconventional gas in Victoria have been dashed by anti-gas activism,” he said this week.
The environmentally and economically successful bipartisan approach to natural gas development evident across the nation for 100 years ended abruptly four years ago as the green political movement adopted gas ‘fracking’ as its new ‘big thing’, imported straight from the USA.
Ironically, the USA is now enjoying an economic renaissance on the back of natural gas extraction, including use of hydraulic fracturing (fracking), an extraction technique using water pressure to make tiny cracks in rock formations deep underground.
The same thing has been happening on a smaller scale in SA’s Cooper Basin since the 1960s, just outside Sydney for nigh on 20 years, and in south-west Queensland for a decade. There has been no environmental calamity here or in the US, Canada or Europe where fracking has been used for decades as well.
“In contrast to the mass hysteria in Australia, I have never seen anything like a Lock The Gate sign in my US travels,” Mr Bethune said.
“There are impediments (to producing more gas), but they are mostly of our own making and capable of being removed.”