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

The push to get Australia over the renewables line is faltering. Despite the best efforts of climate campaigners, and an expanding commercial renewables sector, we are not on track to meet our carbon targets.

Emissions are still rising. Overall carbon emissions rose by 0.8% in the 2022-23 financial year, an increase of 3.6 million tonnes. This doesn’t sit well with Australia’s agreed objective of a 43% reduction in 2005 emission levels by 2030.

The battle to phase out coal has largely been won, with even its proponents admitting defeat. AEMO’s 2024 Integrated System Plan shows all of Australia’s coal-fired power stations are set to close by 2038.

A growing number of voices call for the continued use of gas peaker stations over the next decade to plug the gap left by intermittent renewables. In this way, gas can support Australia’s clean energy transition, rather than hindering it.

In November last year, Australia’s prime minister Chris Bowen claimed gas will play an essential role in the move to cleaner, cheaper energy, as increasing amounts of coal leave the system.

Hydro-electric power, commercial scale battery storage and the holy grail of green hydrogen can’t be relied on to provide a large and stable enough supply of dispatchable renewable power in the near term, industry analysts say.

So, is gas needed to fill reliability gaps as coal generation retires? Are there viable alternatives? Can we convert gas peakers to green hydrogen plants down the track? And can renewables one day meet all our energy needs?

Is gas vital to fill the gaps?

We are still in the interim stage, where a firm source of power is needed to top up wind and solar generation.

David Byers, Principal Consultant at Inlet Advisory, suggests gas is a vital part of Australia’s power supply equation. He sees the federal government’s “all-in” bet on renewables and storage as risky.

“We are not building enough replacement dispatchable capacity as coal generation retires. Gas will be needed to deliver energy on demand at times when it is needed most.”

Sarah Ogilvie, EnergyAustralia Strategic Advisor, says gas plants will be needed to back up generation and smooth out electricity price peaks for the next ten to 15 years at least. The unplanned “chunky exit” of coal will only make things worse.

“While renewables provide the bulk of the daily energy, firming technologies like pumped hydro, batteries and gas powered generation are the only technologies able to smooth out price and reliability shocks. Pumped hydro and batteries are duration limited, so within this ten-year period, gas powered generation is the only technology that can confidently firm multi-day renewable droughts.”

Despite its supply-side issues, both Byers and Olgivie see gas as the only near-term replacement for coal generation.

How do climate targets impact gas peakers?

Byers blames energy policy driven by “focus group” mentality for an unrealistic approach to power generation.

“Together, federal and state governments are removing any other viable options for meeting energy supply and emissions reduction needs. A clash of ideology with engineering reality looms.”

Ogilvie believes that because the role of gas peakers can be viewed as complimentary to renewable generation, the impact on climate targets is more positive than negative.

Yet a stable gas supply requires long-term capital-intensive investment, she says. A gas shortage may push up electricity prices. She sees import terminals as the most practical way to support Australia’s gas requirements, sited in existing gas transmission areas.

Are there any viable alternatives?

Neither sees any workable, near-term alternative to gas peakers.

Ogilvie believes the government has to take a more proactive approach. Better policies are needed to boost uptake of residential batteries, “harnessing the value of virtual power plants… during peak demand times.”

EnergyAustralia’s Lake Lyell pumped hydro project won’t be ready until 2028 at the earliest, she says. Supportive policies are also needed to realise the potential of good pumped hydro projects.

Byers sees hydroelectricity as a limited option for Australia, with its high costs, water dependence and site limitations. We have an “abysmal” record on project delivery, with Snowy 2.0 still years away.

“Grid-scale batteries are far too expensive and don’t last long enough, a few hours at the most.”

Can gas plants convert to green hydrogen?

As Ogilvie says, EnergyAustralia’s Talla B could be the first Australian peaking power station to be fuelled by blending gas with green hydrogen. Time and money will be needed to develop and refine the technology, but it’s “arguably not impossible” to convert.

In Byers’ opinion, green hydrogen can’t compete on economics, being up to four times more expensive than hydrogen sourced from gas.

“There are many technical, economic and logistical barriers to hydrogen production, distribution and use (no matter how it is produced) that will confine hydrogen to niche domestic applications for the foreseeable future.”

When will there be enough renewable generation?

Both Byers and Ogilvie are pessimistic about a 100% renewables future.

Byers calls the idea a “chimera”, adding: “Australia should be investing across a broad range of low emissions technologies, including nuclear, rather than narrowing the available technology options to just one.”

Ogilvie also speculates on the vast amount of renewable GW needed to fully power Australia.

“I’m not sure it’s credible to say gap fillers are never going to be required. The best we can say is we might have a net-zero, affordable solution to them after 2035.”