No Case for More Gas: National Energy Emission Audit

New research shows there is no strong case for building more gas generation in the National Electricity Market (NEM), as the existing fleet of gas power stations are operating below capacity and planning by the Energy Market Operator shows gas generation is likely to decline in coming years.

The Australia Institute Climate & Energy Program has released their latest National Energy Emissions Audit, analysing the electricity sector over the previous month.

Key Findings:

  • Currently, there is 4.4 GW of combined cycle gas generators and 7.0 GW of open cycle (peaking) gas generators in the NEM, both currently used well below their capacity.
  • If the NEM needs more gas generation over the next couple of years, the existing fleet of gas power stations should be technically capable of supplying it (to the equivalency of around 7% of NEM generation).
  • Total annual gas generation in the NEM doubled between 2006 and 2011, driven by unrealised assumptions that wholesale gas prices would fall, gas is a transitional fuel and electricity demand would continue to increase.
  • Under every scenario in Australian Energy Market Operator’s latest Integrated System Plan, gas generation declines.

“If the Federal Government is serious about reducing emissions and electricity prices, underwriting additional gas generation on the NEM is not a viable, affordable nor sustainable solution,” said Dr Hugh Saddler, Author of The Australia Institute’s National Energy Emissions Audit.

“The existing fleet of gas power stations are already operating well below capacity, unable to compete with cheaper renewables. The current gas fleet is technically capable meeting Australia’s needs, so it is unusual that the Federal Government is requesting that the Clean Energy Finance Corporation underwrite new gas generators.”

“Gas supporters were banking that wholesale gas prices would fall to very low levels, that gas would serve as an important transitional fuel in a carbon-constrained economy, and that electricity demand would continue to increase. On all fronts they were wrong—it would be unwise for the Government to repeat those same mistakes,” said Richie Merzian, Director of The Australia Institute’s Climate & Energy Program.

“The NSW-Commonwealth gas deal sets a dangerous precedent of pushing the states to extract more gas, when gas supply on the East Coast has already tripled over the last six years without resulting in more affordable gas generation, in fact the opposite has been true.”

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