What is the future for gas-powered generation in Australia?

Australia’s federal government claims that natural gas has a strong role to play in the transition to renewable energy. 

This includes having a role in peaking power, firming power, smoothing the transition and guaranteeing energy security. 

So, in light of this, what is the future for gas-powered generation, and what is the potential for alternative fuels, such as renewable gases? 

This topic was discussed by a panel of industry experts at the Australian Domestic Gas Outlook 2023 conference in March. 

Here is a brief summary of the main points made by AEMC Chief Executive Ben Barr, AEMO Group Manager of Gas Markets Matthew Clemow, CS Energy Executive General Manager Future Energy Emma Roberts and Energy Australia Regulatory Affairs Manager Sarah Ogilvie. 

Does gas have a role to play, and how important is it?

According to the panel, gas will be necessary to fill the gaps during peak-demand times when there is a loss of solar or wind power. 

Barr considers gas to be a critical part of the Integrated System Plan (ISP) as it progresses towards 2050. Gas provides flexibility and the ability to kick in quickly to meet high peak demand, and it will smooth the retirement of coal-fired generation. And since gas will only be called upon when required emissions will be low – which aligns with Australia’s net zero objectives. 

According to Clemow, gas plays a particularly important role during the winter months in the southern states when the demand for heating is high. During winter, there can be periods of two to three weeks when there is low wind. At these times, it becomes difficult to charge solar batteries or for pumped hydro to meet demand. Gas can fill those supply gaps. 

Roberts agrees with Clemow – although being based in Queensland she says this is more the case in summer, when there is high demand for air conditioning for cooling. Roberts points out that CS Energy is 100% coal-fired at this point, which creates challenges for the shift to  solar, wind, battery and pumped hydro storage. Roberts says about 600-800MW of gas storage will still be needed to fill the gaps in generation for “renewable droughts”. 

Ogilvie says that gas will be “massively important” for stability, particularly to 2030 while we are also working on the many different options to decarbonise. .

What are the main challenges faced in the industry?

Roberts says there is a huge amount of work to be done in meeting 2030 objectives, and believes the biggest issue is ensuring adequate transmission lines – and that this should be prioritised to create investment certainty. 

Barr agrees with Roberts on the importance of new transmission lines. He considers the key issues to be social licence and affordability. And while protests occur over transmission infrastructure, Barr remains optimistic – making mention of the way governments are looking at other options such as offshore wind, and how there is a lot of capital waiting to be deployed.

Ogilvie on the other hand thinks that the transmission pipeline target is “too ambitious”, and that there has been too much reliance on getting social licence and transmission. 

“We may just need to go ahead and build a couple of extra gas-fired generators – as this will be a lot faster, while lowering emissions at the same time,” she says.  

Ogilvie also believes the biggest challenge is getting coal out. She says it tends to make governments nervous – in turn often triggering price interventions that the industry doesn’t want. 

Another challenge mentioned was that of severe gas shortages – especially given the decline in gas production in NSW and Victoria. This may mean having to draw more gas from Queensland. 

Clemow believes the key here is more storage. He points out that it will be very expensive to increase transmission pipelines for gas to the southern states when the extra gas might only be needed for two or three months of the year. We may also need to look at importing gas, he says, but this will require having price structures in place to keep the costs in check.. 

What about the potential for renewable gas?

Renewable gas alternatives to natural gas include biogas, biomethane, and hydrogen. 

According to Barr, while continued use of natural gas makes sense at this point, over time there might be technological improvements that will reduce the need for natural gas and allow for greater use of renewable gases or hydrogen. 

“The AEMC is also looking into renewable gases with the aim of blending them into the domestic gas pipelines,” he says. 

Clemow says there is potential for biogas and biomethane to generate electricity onsite for industry. For larger generation plants, hydrogen will likely be more feasible. 

Ogilvie mentioned the importance of hydrogen for export, and noted that EnergyAustralia is investigating hydrogen opportunities. 

Roberts says we need to “transition to hydrogen and other forms of co-firing and we are looking at where the best technology lies.”

CS Energy is conducting a feasibility study for a new gas-fired power generation facility in Queensland, which will be 30% hydrogen ready. The company’s location has the advantage of available land (making storage less of an issue) and solar potential. They are investigating how best to use these resources to create hydrogen for generation while feeding the excess into the export market. Roberts says they hope to complete their first hydrogen-ready peaker by 2026.

While there are different roads to 2050, the general consensus is that gas-fired generation will be crucial for stability for a considerable amount of time to come.”