Once again, the Origin Energy-sponsored Grattan Institute is busy trying to divert every possible dollar into the East Coast gas export cartel.
Its latest willing victim? The always ready for vested interests AFR:
As a new Climate Change and Energy Minister, Chris Bowen was reluctant to embrace the notion that gas would still have a major role to play in the energy transition.
His apparent aversion to even mentioning the word eventually had to change as the delays and difficulties in shifting out of coal into renewables meant federal Labor had to accept energy industry reality. Gas supply and generation will be crucial in bridging the timing and capacity gap by helping back up renewable wind and solar generation as a “peaking” fuel.
But lingering ideology allows no room for gas in what is known as the Capacity Investment Scheme. This is a national scheme set up with the states and involves government auctions to underwrite private sector investment in renewables and in “dispatchable” energy such as batteries or pumped hydro to support solar and wind power.
The CIS is not ideological. It is designed to mitigate the technology cost curve, which can otherwise stall investment as capex costs fall each year and investors wait.
This is unsuitable for gas, which is going the other way, as the export cartel drives up the prices each year.
Underwriting gas investment in this scenario is amazingly stupid.
The gas cartel is already profiteering such that all governments are subsidising retail electricity bills.
Now we want to subsidise the cartel to produce artificially price-inflated gas power as well?
The AFR goes on:
Gas projects certainly aren’t cheap – compounded by constantly rising construction costs and the extreme volatility of prices affecting existing projects as well as further investment.
But Bowen’s assertion conveniently ignores the fact that real comparison is with firming or dispatchable power options such as pumped hydro and big battery projects.
Gas “peaking” plants have the advantage of being able to be turned on and off relatively quickly to meet surging or rapidly falling demand and can also provide power for long periods during extended wind droughts or persistently cloudy weather. But the fact that they wouldn’t operate for much of the time only makes the business case for building them now more difficult without some degree of certainty on pricing.
Pumped-hydro projects are also obviously expensive and difficult to build. Consider the saga of Snowy 2.0 – years behind schedule and with a price tag that’s risen from $2 billion to $12 billion and counting. Big batteries are becoming cheaper and more sophisticated, but the technology is not yet capable of providing power for more than a few hours at a time.
Tony Wood from the Grattan Institute agrees gas isn’t the long-term answer.
“But right now it’s the only technology that can provide what’s needed,” he says. “What’s the right policy mix to ensure it’s there? The capacity concept is one way of doing it.”
Gas projects are very cheap.
If we are talking peakers, they’re about $500m each and built in two years (by the competent!) If they are not being built, it is because there is not enough affordable gas owing to the ever-gouging gas export cartel.
If we are talking gas production, then it is already wildly profitable on monopoly margins, which is why gas peakers have not been built!
Using public subsidies to increase national reliance upon a gas export cartel with no scruples about profiteering in any circumstances is crazy.
Instead, break the cartel for free via domestic reservation or at a profit using export levies, and gas peakers will follow without subsidy as day follows night.
