Extract from The Guardian
EnergyAustralia says it will build a gas-fired generator in NSW, but only after the government pledged $83m. Is it money well spent? And what are the alternatives?
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Last modified on Sat 8 May 2021 06.02 AEST
A new gas-fired power plant will be built in New South Wales with significant funding from taxpayers. The plant will blend some green hydrogen in with the gas, prompting some to describe it as “Australia’s first net-zero hybrid power station”.
Is this a breakthrough that signals the future of the electricity grid, a greenwashing of public spending on fossil fuels or something else? Here’s what you need to know.
What’s the deal?
EnergyAustralia, one of the country’s biggest electricity generators, says it will build a gas-fired power plant south of Wollongong – but only after it was promised up to $83m in government grants.
The 316MW Tallawarra B generator is a “peaking plant”, designed to be called on when needed to help back up what will increasingly become a mostly solar and wind power grid.
The announcement follows pressure on the energy industry from the Morrison government, which demanded it commit to building 1000MW of new gas-fired power in NSW by 2023 to replace the closing Liddell coal-fired station. Scott Morrison and the energy and emissions reduction minister, Angus Taylor, have claimed since September that the government will build a gas plant itself if the private sector doesn’t.
Seven months on we have confirmation a plant will be built, but two governments had to pull out their cheque books to get it over the line. Most of the public support – up to $78m – will come from NSW. Canberra is kicking in $5m to make the project “hydrogen-ready”.
As experts such as the University of Melbourne’s Dylan McConnell have pointed out, there is no technology breakthrough here – the ability to use hydrogen at this level in a gas plant already exists. The challenge will be getting affordable hydrogen made with renewable energy.
There have been suggestions in some media reports that Tallawarra B could blend in much higher concentrations of hydrogen – perhaps up to 60% – but the company’s public commitment at this stage is just to support engineering studies into what’s possible.
EnergyAustralia also says it will offset all greenhouse gases from the plant, making it “net zero”.
Will more gas plants be built in NSW?
It’s unclear. The government is yet to say whether it will pay for Snowy Hydro Ltd to build a gas generator at Kurri Kurri, but the Australian Financial Review has reported $600m will be set aside for it in the federal budget.
AGL has dropped its support for a gas plant in the state, but the iron ore billionaire Andrew “Twiggy” Forrest plans a 635MW gas station at Port Kembla that he says could use green hydrogen once it becomes affordable. His proposal is at an early stage and yet to be approved.
Do we need more gas plants?
Let’s start with the situation as it stands now. The Morrison government says yes – that 1000MW of new “firm” or “dispatchable” generation that can be called on when needed after Liddell shuts in two years is needed.
This doesn’t stand up from a grid reliability perspective. The Australian Energy Market Operator (Aemo) found only an additional 154MW would be needed to fill the gap left by Liddell and more than that has already been announced.
But Morrison and Taylor say that amount of new gas is needed to keep electricity prices down.
While it is true that increased competition should limit power price rises, the government’s 1000MW figure appears arbitrary (at one point Morrison told the ABC the amount of new generation needed was just 250MW). And it has not explained why the new dispatchable generation has to come from gas power, which is more expensive than other options and releases significant greenhouse gas emissions.
The head of the government’s Energy Security Board, Kerry Schott, is among those who have said the government building a new gas plant in the Hunter Valley “doesn’t stack up”.
What about in the longer term?
This is trickier. Australia’s electricity grid still mostly runs on coal but many ageing coal plants are going to shut over the next 10 to 15 years. Some forecasts suggest the closures could come years earlier than scheduled as an influx of cheap solar and wind energy makes keeping coal plants unviable.
The country will need plenty of dispatchable support to back up a majority renewable energy grid. In its assessment of what an optimal future grid would look like, Aemo estimated it as between 6GW and 19GW of additional capacity over the next 20 years – equivalent to about 60 new Tallawarra B’s at the upper end.
Aemo said dispatchable generation could come from batteries, pumped hydro storage and demand management. It said new gas could also play a role, but was unlikely to under a rapid “step change” scenario that, as it turns out, imagined a slower grid transformation that that now under way.
Under any scenario, Aemo suggested gas was likely to be more expensive than alternatives. Under a least cost path, it found gas-fired power, which already provides less than 7% of national grid electricity, would decline.
Burning 'green hydrogen' produced using renewable energy is a highly inefficient way to generate electricity
Now, there is an argument that it will make sense to have more gas-fired capacity available if, as appears increasingly likely, coal closures come in a rush later this decade and into the 2030s. Under that scenario – which would be good for the climate, but could be problematic for a grid that is transforming in the absence of an overarching national policy to guide the change – gas plants would be used less often than cheaper batteries and pumped hydro storage, but could fill some vital gaps, particularly for longer stretches when back-up was needed.
But Aemo suggested this would not be the cheapest way to address the problem, and the extra gas capacity would be needed only if governments did not built stronger electricity connections between the states. If those connections are in place as promised, there will be much greater capacity to move supply across the eastern seaboard, and the need for back-up generation will be reduced.
Is the possibility of a rapid coal exit why the government is backing gas?
Possibly, but Morrison and Taylor have not made this argument. There is no evidence the government is attempting to drive a science-based rapid transition to a clean energy system.
The prime minister has shifted his position since brandishing a piece of coal and declaring it was “nothing to be afraid of” in parliament in early 2017. He now acknowledges coal-fired power is on the way out in the years ahead. But the government has indicated it would like coal plants to run as long as possible, and for Australia to extract and burn more fossil fuels as part of a “gas-fired recovery” from recession. Another $59m in federal funding was announced for gas expansion this week.
The government justifies its pro-gas position by citing the former chief scientist Alan Finkel, who has said the shift to renewable energy would be faster, cheaper and more reliable with gas available, as it can fill gaps when batteries and pumped hydro run short. Finkel has also said, in response to a letter from 25 scientists who criticised his support for gas on climate grounds, that the country should use as little gas as necessary to achieve this.
The government has adopted only part of Finkel’s message. It criticised and vetoed attempts by state governments and federal agencies to accelerate the spread of renewable energy, and rejected the need for an overarching energy policy to steer a clean transition. Meanwhile, it has appointed fossil fuel advocates to advise on energy policy and not acknowledged the role of gas in contributing to the climate crisis.
Does it make sense to build gas plants if they can eventually run on hydrogen?
There is local and global optimism about the role hydrogen could play in cutting emissions – tens of billions of dollars have been committed across the globe, and hundreds of millions in Australia, towards developing it – but it seems unlikely it will play a significant role in electricity generation in Australia.
But burning “green hydrogen” produced using renewable energy is a highly inefficient way to generate electricity, and Australia already has much cheaper clean power solutions. If it has a role, it would likely be small, as a back-up to other back-ups.
Perhaps a more persuasive argument for making gas plants hydrogen-ready is that it will guarantee there is demand for green hydrogen from 2025, and help bring forward its commercial development.
Creating a market for green hydrogen will, of course, be vital if it is to provide the climate solution some hope. But it is also a pretty convoluted justification to build a gas plant.
On Tallawarra B being ‘Australia’s first net-zero gas-hydrogen hybrid power station’ – is that as impressive as it sounds?
“Net-zero” targets are the language of the moment, so it is not surprising to see it adopted here. The company has promised to offset all emissions released from the plant.
While this is better than not offsetting, the implicit goal of the Paris deal is to eradicate emissions wherever possible and offset only those that are hardest to deal with – not build new fossil fuel infrastructure while planting some trees.
Climate science tells us the world will likely need negative emissions technology – drawing CO2 from the atmosphere – if it is to meet the objectives agreed in Paris six years ago. The emissions from the gas burned at the new plant will ultimately add to the CO2 in the atmosphere, and they are avoidable.
To borrow a phrase, you cannot offset your way to zero.
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