Australia is on track to become the world’s largest exporter of Liquefied Natural Gas (LNG), while households and businesses here are rapidly coming to grips with the cost consequences of this expansion for power bills and gas contracts. A gas crisis is barrelling towards us with the potential to wreak havoc on the Australian economy, jobs and cost of living.
The impending gas crisis is the inevitable fallout from the unprecedented expansion in LNG export infrastructure. Billions have been spent on six massive LNG trains in Gladstone, Queensland – facilities that process gas for export. Along with this infrastructure, gas companies locked in long-term contracts to ship huge quantities of Australian gas offshore, and campaigned for more gas exploration across the country.
Exporting the majority of Australian gas has driven huge cost increases at home for three reasons. First, gas prices here are now linked to the ups and downs of world market prices. Second, there is increased demand for gas to meet export contracts and domestic needs, and greater need for – and reliance on – more expensive sources of gas. Third, market power and lack of competition has enabled gas companies to drive electricity price spikes, particularly in South Australia and Queensland. These factors are putting enormous pressure on domestic gas prices.
Higher gas prices are already feeding into higher electricity prices for households and businesses. Expensive gas means expensive gas power. Some manufacturers are facing a double-whammy from higher gas prices and short-term contracts together with increased electricity bills. As the saying goes, in every crisis there is opportunity.
In the electricity sector, it's time to challenge the gas industry’s outdated orthodoxy that gas has “a pivotal role in the transition to a low carbon economy”. The world has moved on. We no longer need gas for a secure, low cost, low emissions system.
Gas is an expensive way to generate electricity compared to renewable energy technologies. While gas power prices continue to escalate in response to rising fuel prices, the cost of wind and solar and battery storage has been falling, and fast. New wind and solar projects being built in Australia are already cheaper than new gas power plants.
Solar thermal, biomass and existing hydro power can deliver electricity on-demand at all times of the day, as well as providing grid stability characteristics. So too can wind and solar paired with energy storage like batteries and pumped hydro.
A power grid with more diverse power sources, spread geographically, brings additional benefits. This type of system is more resilient to extreme weather events like bushfires, heatwaves and storms than those reliant on single massive sources of power transported over long distances. Additionally, ageing fossil-fuelled generators don't bear up well in the heat, as evidenced in the February heatwave which hit New South Wales, when 3000MW of gas and coal fired generation in NSW wasn’t available: tripped off; couldn’t start; produced below maximum output; or was out for maintenance.
There is an opportunity in this gas crisis for Australia's electricity system. We can move directly to a modern electricity grid powered by renewable energy and storage technologies, with scaled up energy efficiency, instead of being drawn into a long and costly dependence on gas.
The real question for our politicians and regulators is, faced with this crisis, will they embrace the opportunity in front of them?
Petra Stock is a climate and energy solutions analyst with the Climate Council.