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Gas no longer needed as "transitional fuel": report

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Gas is no longer a necessary “transitional fuel” and Australia can leap directly to renewables, a new academic report claims, raising questions about the State Government’s energy plan.

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The report by chemical engineers Tim Forcey and Dylan McConnell, of the University of Melbourne, says: “While gas has often been considered a ‘transition fuel’, this pathway is not necessary, and is in fact a detour.”

They argue this is because the major functions of gas in the electricity system – to provide baseload power and manage energy supply/demand fluctuations – can now be provided at a cheaper cost by solar and wind power, and pumped hydro and batteries, respectively.

“The idea [that gas is required] … to meet our energy requirements is now somewhat questionable,” McConnell told InDaily.

The report cites a statement from energy generator AGL that “the National Electricity Market …. in Australia could transition directly from being dominated by coal-fired baseload to being dominated by storable renewables”.

“…the energy transition we have all been anticipating will skip big baseload gas as a major component of the NEM’s base-load generation and instead largely be a case of moving from big coal to big renewable.”

The Melbourne University report – which was “supported” by the Wilderness Society and Lock The Gate, a lobby group against coal seam gas extraction on agricultural land – also finds that the gas supply shortage the Australian Energy Market Operator (AEMO) warned about earlier this year “is very unlikely to occur”. It was this projected shortage that prompted Prime Minister Malcolm Turnbull’s announcement of a potential cap on gas exports.

“Our research finds that although a ‘gas-price crisis’ exists in eastern Australia, a gas-supply shortfall is very unlikely to occur,” the Melbourne University report says.

“Because the modelled supply gap is an annual imbalance, over the course of a modelled year, any extra gas supply or demand reduction acts to narrow or even completely close the gap…

“We find it necessary to challenge AEMO’s urgent warning of nearly- imminent gas shortfalls and AEMO’s limited array of ‘potential solutions’.

“We find that AEMO focussed attention on a very small, very unlikely, and ultimately short-lived gas-supply shortfall concern.”

McConnell said the lack of a significant supply shortfall raised questions about the State Government’s energy security target, which he said favoured gas generators by explicitly excluding battery storage, and about policies aimed at increasing gas supply.

As part of its $550 million energy plan, announced earlier this year, the State Government announced farmers would receive a share of royalties from coal seam gas extraction on their properties.

“The idea that expanding supply will necessarily reduce wholesale [electricity] prices is sort of a furphy,” said McConnell.

But Energy Minister Tom Koutsantonis told InDaily: “There is absolutely a shortage of affordable gas in Australia, created by gas exploration and development bans in Victoria, NSW and the Northern Territory, which is driving up power prices across the National Electricity Market.

“This shortage will be made worse if Steven Marshall and the Liberals implement their proposed gas ban in the South East.

“The South Australian Government is doing everything we can to promote gas development through exploration grants and our new royalty sharing scheme with landowners, designed to increase the supply of affordable gas to generators and put downward pressure on prices.”

He added that Turnbull’s “gas export policy rewards the bad behaviour of other states and does nothing to address the cause of the problem”.

“Instead, it punishes South Australia by directly targeting SANTOS projects, threatening South Australian jobs.”

The Australian Energy Market Operator told InDaily it stood by the findings of its March report, which warned of gas shortages.

“AEMO stands by its Gas Statement of Opportunities (GSOO) report, which was published in March based on data provided by industry participants,” a spokesperson said.

“Dynamic changes in the gas markets makes data quality and transparency a critical issue.

“Since the publication of the GSOO, AEMO has been working with the industry to develop measures that will provide greater transparency of gas information.

“AEMO will continue to advocate for improved data and information for the integrity of any modelled outcomes.”

The spokesperson said that after it published the GSOO, the operator “requested updated information from producers to ascertain the most up-to-date and accurate production information available and we recognise the move by the gas suppliers and pipeline operators to now change what they will make available to the market to help meet the gas shortfalls projected from the summer of 2018-19”.

“The Australian Energy Market Operator will use this new industry information to provide an update to the GSOO outlook for gas supplies, to be published in May.”

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