Locking Australia in to an Expensive, High Emissions Gas Future

by Dan Cass and Mark Ogge

The Government has continued showering multi-billion gas companies with taxpayers’ money in this year’s budget.

Overall, the gas industry will receive over $300 million in direct subsidies, as well as the aforementioned subsidies for Hydrogen and Carbon Capture and Storage (CCS), much of which are likely to flow through to the gas industry.

Support includes $55 million to subsidise gas power stations and $56.8 million into gas infrastructure over four years to create a gas hub and further planning. There is also around $9 million to plan future subsidies for gas infrastructure, a clear sign that this is just the beginning. All in all, the government is trucking on with its gas-fired recovery – even if the funding falls short of the rhetoric.

The interim National Gas Infrastructure Plan (NGIP) released by the Government just before the budget on the 7th May provides the rationale for much of the spending. The plan appears to contradict crucial forecasts of gas demand by the Australian Energy Market Operator (AEMO). For instance, it seems to assume demand for gas used in electricity generation will remain constant, while AEMO projects it will drop dramatically. However, there is no way to know for certain what the assumptions are, as unlike AEMO’s modelling where the data and assumptions are published, this alternative modelling by the Government’s hand-picked consultants lacks transparency.

These policies risk locking us into gas for the long term with serious implications for our future energy system and climate. One of the Government’s main aims is to open up five vast new gas basins. If it succeeds it will be disastrous for our climate, as these basins contain massive amounts of carbon that will be pumped into the atmosphere when the gas leaks during the extraction and during transport and of course when it is ultimately consumed.

For Instance, the Northern Territory Fracking Inquiry estimated that the just one of these basins, Beetaloo Basin in the Northern Territory could add 40 million tonnes to Australia’s emissions, equivalent to a 7% increase on current levels, plus another 60 million tonnes when it is consumed overseas. This year’s budget includes $173 million to pay for roads for fracking trucks in the Beetaloo Basin. This follows $50 million in exploration subsidies in last year’s budget. The Beetaloo is just the first of five basins the Government wants to open, and another $15.7 million has been directed to open up the North Bowen and Galilee basins.

Subsidising gas infrastructure also increases our dependence on gas, locking us into this expensive and polluting fuel at the expense of renewable energy. Ironically, no matter how much of our money the government gives to these multi-billion dollar gas companies it won’t bring down prices. Gas prices have tripled over the last five years as production has tripled, and the new basins contain expensive and remote gas. You don’t need an economics degree to understand that adding new more expensive gas will not bring down gas prices. Even if the Government was prepared to spend vast amounts of taxpayers’ money paying the production and transport costs, the gas companies can simply pocket the subsidies and keep charging Australian companies high prices.

Nor will it create jobs. The gas industry is one of the least job intensive industries in Australia, employing just 0.4 workers per million dollars of output, compared to over 10 in health or education. Supporting virtually any other industry would create more jobs.

The Government’s decision to spend $55 million subsidising gas power stations highlights that gas power stations cannot compete against renewable energy. Otherwise, they would not need to. Gas powered generation is at a near record low, and the Australian Energy Market Operator expects it to fall even more dramatically. The CSIRO and AEMO have found that renewable energy is lower cost than gas even when the cost of energy storage and additional transmission is added. So artificially wedging these outdated gas power stations into the grid will displace lower cost renewable energy locking us into more expensive energy for decades to come.

Similarly, it is far cheaper to use electricity in our households for heating and cooking. By subsidising gas infrastructure, we will lock in higher energy bills for millions of Australians. The real way to avoid an energy shortage as gas runs out (mostly because we are exporting it) is to help households and businesses get off gas, allowing them to reduce their energy bills in the process.

> Back to Budget Wrap 2021

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