The federal Australian government's ultimatum to the power sector to decide on building a 1,000MW gas-fired power plant in New South Wales (NSW) by the end of April 2021, or it will use state-owned utility Snowy Hydro to build one, overlooks current supply and demand fundamentals and utility investment intentions.
The Liberal-National coalition government's decision on a new NSW plant is based on the perception that a new thermal plant is required to replace the 1,680MW coal-fired Liddell power station owned and operated by Australian utility AGL Energy. Liddell plans to fully close by 2023.
AGL last month said it is considering the development of a 250MW gas-fired power plant near Newcastle in NSW, as part of its plan to replace Liddell. It is also considering installing battery storage on the Liddell site, rather than a gas-fired power plant because of the lack of gas pipeline infrastructure in the area. The installation of battery storage at Liddell is part of AGL's plans to deploy 850MW of grid-scale battery storage by 2023-24 fiscal year to 30 June.
The size of AGL's proposed gas-fired power plant is a quarter of the size wanted by Canberra, but it is closer to the capacity required to meet any potential shortfall in electricity supplies in the next four years.
The Australian Energy Market Operator (Aemo), which oversees Australia's power and gas market, predicts NSW could face a potential shortfall of 154MW by the 2023-24 fiscal year to 30 June in its annual assessment of supply and demand scenarios over the next 20 years, the 2020 Electricity Statement of Opportunities report.
Aemo has also devised a blueprint to transition Australia's coal-dominant power generation to a low emissions network over the next two decades and has no reference for new gas-fired plants. Gas-fired generation and batteries serve the daily peaking role that will be needed as more electricity comes from variable renewable sources and less from coal-fired generation, Aemo said. Gas-fired power plants currently have a cost advantage over batteries at current gas and battery costs. But in the 2030s, when significant investment in new dispatchable capacity is needed, this advantage could shift to batteries, Aemo said in its 2020 Integrated System Plan.
Australia is on track to increase total renewable generation to 30pc by the end of 2020 and up from 25pc at the end of last year, according to a report released this week by federal government agency the Clean Energy Regulator. This means that gas- and coal-fired plants are competing for a smaller share of generation as renewables increase their proportion of the sector.
Gas accounted for 8pc of the fuel mix for power generation in east Australia in the past 12 months, which is less than what came from wind and solar over the same period. Gas is not expected to become the main source of electricity generation in Australia but it will provide firming power to the rising share of renewable energy. This is prompting plans to build new gas firming power plants.
Australian utility and gas group EnergyAustralia is assessing the development of 1,000MW of gas-fired power plants. It expects to make a decision later this year on the first of the proposed power plants, the 300MW Tallawarra B gas-fired power plant in NSW.
Canberra's gas-fired power plant ultimatum was part of a broader plan, called the National Gas Infrastructure Plan (NGIP). This also included funding studies for new gas pipelines and funding studies for the development of gas basins in Queensland and the Northern Territory (NT).
The NGIP is welcome because there are missing pipeline links that are needed to connect projects like Narrabri in NSW and new basins like the North Bowen, South Nicholson in Queensland and the NT's Beetaloo, said Australian independent Santos' chief executive Kevin Gallagher.
"Additional pipeline infrastructure and new supply sources will also obviously build the liquidity the government and customers are looking for at both the Wallumbilla and Moomba hubs," Gallagher said.
Canberra plans to use the NGIP to forecast future gas markets requirements and identify gaps, barriers and opportunities across the whole supply chain and it will signal to the market priority infrastructure investments. The NGIP will be led by the Department of Industry, Science, Energy and Resources, with a steering committee of representatives from Aemo, the Australian Energy Regulator and the Australian Energy Market Commission. The first interim NGIP will be released during January-March 2021 and will then be released on a two-yearly basis to reflect changing requirements of the domestic gas market.
