Australia's energy transition is increasingly being framed as a race between retiring coal-fired power stations and the ability of renewables, storage and transmission infrastructure to replace them. Against this background, a growing number of governments, utilities and energy developers are reaching a similar conclusion: while renewables will dominate the future grid, gas-fired generation remains essential to keep the lights on when renewable output is low. The question is not whether gas has a role, but how much Australia actually needs.
New gas-fired generation not being proposed as a replacement for coal, but as a reliability tool.
Naturally, the gas sector is enthusiastic about positioning itself as the reliable supporters of the energy transition.
Figure 1:LinkedIn post from Amplitude Energy
The Australian Energy Market Operator continues to describe the lowest-cost transition pathway as one built around renewable energy, supported by storage and transmission and backed up by gas when required. That view is increasingly shared by project developers across the country.
When announcing the 220 MW Kwinana Gas Power Generation 2 project in Western Australia, Damien Nicks, Managing Director and CEO of AGL, said the project represented “a major step forward” for the resilience, reliability and security of the South West Interconnected System and Western Australia's renewable energy transition.
Likewise, Ken Woolley, Executive Director of Merchant Energy at Alinta Energy, said the company's proposed 400 MW Cataby Power Station would “play a critical role in backing up renewables and maintaining grid stability” and would “bridge gaps in renewables production”.
“Gas is viewed not as a source of continuous generation, but as insurance.”
These comments reflect a broader industry shift. Gas is increasingly being viewed not as a source of continuous generation, but as insurance against periods when solar, wind, batteries and transmission alone cannot meet demand.
Nowhere is this debate more visible than in Western Australia.
The state has committed to retiring all state-owned coal-fired generation by 2030 while simultaneously pursuing significant investments in batteries, renewable generation and transmission infrastructure. Despite those investments, new gas-fired projects continue to emerge.
Alongside AGL’s Kwinana expansion and Alinta Energy’s Cataby proposal, Strike Energy is developing its South Erregulla peaking power station. According to Chief Executive Officer Shelley Robertson, the facility will help “firm renewables and support the State in this transition whilst underwriting the reliability of the State's primary grid”.
Perhaps most significantly, the Western Australian Government is now investigating a new state-owned gas-fired power station south of Perth.
“a clean energy transition involves renewable energy, backed by battery and firmed by gas”
Explaining the rationale, Premier Roger Cook said that “a clean energy transition involves renewable energy, backed by battery and firmed by gas”. He also stressed that the proposal forms part of the state's strategy to replace ageing generation assets as coal exits the system.
Taken together, these projects suggest that policymakers and investors are not yet convinced that batteries and renewable generation alone can provide all the reliability services currently delivered by coal-fired power stations.
Queensland is now facing the same question. Renewable Energy Partners’ proposed 850 MW Allawah Gas Power Generator (located in Central Queensland's Banana Shire) would form the first phase of the broader Allawah Energy Hub, with up to three heavy-duty open-cycle gas turbines designed for potential retrofit to combined-cycle or closed-cycle operation. The project has been positioned as dispatchable capacity to support regional reliability as coal exits and renewable penetration rises.
But the growing pipeline of projects does not mean all of them will succeed.
Gas peaking plants typically operate for relatively few hours each year. Their economics depend less on energy sales and more on the value markets place on reliability, capacity and flexibility.
This is particularly evident in the case of South Erregulla. Strike Energy has explicitly linked the project's economics to reforms in Western Australia's electricity market, which have improved utilisation forecasts and strengthened the business case for investment.
At the same time, new sources of demand could support future gas-fired generation. Brett Woods, Chief Executive Officer of Beach Energy, argues that the rapid growth of artificial intelligence and data centres is increasing demand for gas. He stated that “gas is one of the most important fuels of the future” and said he sees significant demand in gas supporting the modernisation of the Australian economy.
However, there are also reasons for caution. If battery deployment accelerates, transmission projects are delivered on time and consumer energy resources continue to expand, some gas projects may find themselves operating less frequently than originally expected. Assets designed around high utilisation assumptions could struggle to generate adequate returns.
The strongest evidence that building gas capacity and needing gas capacity are not necessarily the same thing may be found in NSW.
While developers and governments continue to announce new projects, Snowy Hydro's 660 MW Kurri Kurri gas power station demonstrates the challenges facing the sector.
According to the Australian Financial Review, the company is in no rush to bring the facility fully online despite gas commissioning having been completed. The project has experienced significant cost overruns and delays, and the market currently has limited need for additional generation from the plant.
Snowy Hydro Chief Executive Officer Dennis Barnes said the company was focused on maximising value for taxpayers while negotiating with contractor UGL regarding cost overruns and construction issues.
“Kurri Kurri serves as a potent reminder that capacity and consumption are different concepts”
Kurri Kurri serves as a potent reminder that capacity and consumption are different concepts. Australia may need more gas-fired capacity available to maintain reliability during extreme conditions, but that does not necessarily mean those assets will operate frequently.
Ultimately, the debate should not be framed as ‘more gas’ versus ‘no gas’. The real task is determining how much firming capacity is needed, where it is needed, and how often it will actually run.
The evidence from Western Australia, Queensland and NSW points to the same conclusion: Australia may need more gas-fired capacity than some transition narratives allow, but far less gas consumption than traditional forecasts assume.
New projects should therefore be disciplined: designed for peaking and backup roles, assessed against credible alternatives, and rewarded for reliability without locking in high emissions or long-term dependence.
Australia does not need a gas-led transition. It needs a renewables-led system with enough gas-fired insurance to manage coal retirements, connection delays, demand growth, extreme weather and multi-day renewable shortfalls.