IEEFA Australia: PM is locking Australians into high gas prices and a carbonised future
31 January 2020 (IEEFA Australia) ‒ Prime Minister Scott Morrison’s announcement this morning of opening up more gas will lock in 30 years of gas/LNG infrastructure and supply and hence, a very uncertain future.
Bruce Robertson, gas/LNG analyst with the Institute for Energy Economics and Financial Analysis (IEEFA) says there is a high risk these proposed investments will not see the end of their proposed lives. They will likely be left non-performing and stranded due to Australia’s Paris Agreement commitments – at a huge cost to local Australians.
Morrison’s deal with the New South Wales government will see more than $2 billion invested in substantially increasing gas use.
“The deal is a deliberate strategy to lock Australians into another fossil fuel – this time gas,” says Robertson. “And despite what the Prime Minister asserts, more gas production will not solve the gas price problem.
The only proposed gas field in NSW at present, the Santos Narrabri gas project, has costs well above the average field in Australia and well above the current price for LNG in Asia, according to Robertson.
Gas supply on the east coast has tripled since 2014 and domestic gas prices have also tripled
“The PM must be oblivious to the fact that gas supply on the east coast of Australia has tripled since 2014 – primarily for export – and domestic gas prices have also tripled,” he said. “Producing yet more high-cost gas is no panacea to Australia’s problem of high domestic prices in a low-priced gas world currently suffering a supply glut.
The Australian Competition and Consumer Commission (ACCC) has clearly shown that price fixing by gas producers has been occurring over recent years, Robertson says. The cartel of gas producers will ensure prices stay well above international prices.
“The Australian consumer of gas is paying more for Australian-produced gas than our customers in Asia. This is an unacceptable situation and the PM’s announcement this morning does nothing to fix it.”
Robertson says gas is not a transition fuel for Australia.
Local demand for gas-powered generation has fallen 41% since 2014, according to the Australian Energy Market Operator (AEMO).
“The Australian consumer – and developers – have moved away from gas due to its high expense and its high emissions,” says Robertson.
There are currently no committed new investments in gas-fired power generation in Australia
“There is currently no committed new investment into gas-fired power generation in Australia, and only a handful of proposed investments. All committed investment monies are in unsubsidised renewable energies, as is the vast bulk of proposed developments.”
Due to massive technological breakthroughs in battery storage, almost every project proposed now has a battery attached to it. Storage problems have been solved due to increased investment in batteries and pumped hydro.
Renewables are continually coming down in price, making gas uncompetitive – now and into the future.
“The Prime Minister is playing the same game with gas as he has played with coal, making sweet deals with fossil fuel companies to the detriment of people in Australia,” says Robertson.
“We can expect more bushfires, more uncertain food supplies, more weather emergencies, and more expensive gas and electricity prices.”
Both the proposed Narrabri project and the two proposed LNG import terminals in NSW lock in 30 years of gas supply.
Australians, exhausted from 2 months of deadly fires are left with an uncertain future
“Morrison is encouraging the development of fossil fuels and adding further to carbon emissions,” says Robertson. “The PM is leaving Australians, already exhausted and anxious from two months of a deadly summer, with an uncertain future, both for our climate and our energy prices.”
“As the PM knows, there are cheaper, cleaner sustainable energy alternatives available.”
“Renewables are the way forward, not high-emitting, more expensive gas.”
See Bruce Robertson’s 30 January commentary: Gas is not a transition fuel, Prime Minister
Media Contact: Kate Finlayson ([email protected]) +61 418 254 237
Author Contact: Bruce Robertson ([email protected]) is an IEEFA energy finance and gas/LNG analyst.
About IEEFA: The Institute for Energy Economics and Financial Analysis (IEEFA) conducts research and analyses on financial and economic issues related to energy and the environment. The Institute’s mission is to accelerate the transition to a diverse, sustainable and profitable energy economy.
