Pollution and Price: The Cost of Investing in Gas

Gas is not sufficiently less polluting than coal to garner any climate benefit. Furthermore, greater reliance on gas will drive higher power prices. While renewable energy can provide a secure, affordable alternative to new fossil fuels.

KEY FINDINGS

1. Australia’s electricity system is ageing, inefficient and polluting.

• As coal fired generators close new power plants must be built to provide clean, affordable, secure power.
• Tackling climate change and protecting Australians from worsening extreme weather requires our electricity system to produce zero emissions before 2050.
• Fossil fuels: coal, oil and gas all produce greenhouse gas emissions driving climate change. Limiting global temperature rise requires that they are all phased out.

2. Gas is not sufficiently less polluting than coal to garner any climate benefit.

• Greenhouse gas emissions are produced both from gas power stations and gas production (for instance, methane from gas leaks). Methane is 86 times more potent as a greenhouse gas than carbon dioxide over a 20-year period.
• Old gas plants in Australia, such as Torrens Island, are as polluting as coal fired power stations.
• New gas power plants are less polluting than coal, however, when the entire supply chain of gas production is considered, gas is not significantly less polluting than coal.
• Current levels of reliance on gas power in Australia must be reduced to play our role in limiting global temperature below 2°C. Expanding gas usage is inconsistent with tackling climate change as it locks in emissions for decades into the future.

3. Greater reliance on gas will drive higher power prices.

• Australia’s Liquefied Natural Gas (LNG) exports are pushing up the price of gas power as domestic gas prices are now inextricably linked to world market prices for oil. This will continue into the foreseeable future.
• The most economic and accessible reserves are now being exported. Further gas expansion will drive increased reliance on unconventional gas, which is expensive.
• Reliance on gas power is also driving power price spikes particularly in South Australia, Queensland and increasingly in New South Wales, due to lack of competition among gas power companies.

4. Investment in new gas plants is financially risky.

• The large increases in future gas prices and volatility resulting from LNG exports together with domestic gas prices controlled by relatively few producers, make investments in new power plants using gas very risky.
• New gas power plants would rely on ageing gas infrastructure (e.g. processing plants and high pressure pipelines) that is increasingly vulnerable to failure. Costs of updating this infrastructure and accounting for methane leakage must be factored into policy and investment decisions.
• New gas infrastructure locks in carbon emissions for decades. Future regulations may impose higher costs or stricter limits on emissions in the future, impacting on the economic viability of gas production and electricity generation, stranding investments.

5. Significant development of new gas plants is unfeasible without a massive expansion of unconventional gas, including thousands of new unconventional gas wells.

• The sheer volume of gas required, the cost, the lock in of long-term emissions, and community concerns makes this unrealistic.
• Currently the emissions from unconventional gas in Australia are unknown due to a lack of measurement and data. This presents a long-term carbon risk to investors as high emissions fossil fuel infrastructure faces the possibility of future regulation due to climate change.
• Development of new unconventional gas is entirely out of step with meeting the Federal Government’s climate change goals.

6. Renewable energy can provide a secure, affordable alternative to new fossil fuels.

• New renewable energy is cost competitive with new gas. The cost of renewable power and storage, particularly solar, wind and batteries, continues to fall and has no associated fuel costs. This contrasts with rising and volatile gas prices.
• Technologies such as solar thermal, hydro and biomass plants can meet demand for electricity at all times of the day as well as meeting technical requirements for grid stability. Combining these technologies with wind, solar PV, and large- scale energy storage, can meet electricity demand round-the-clock.
• Using existing gas-fired generators and supply infrastructure prudentially to complement wind and solar power while scaling up a range of renewable energy technologies, energy storage, and energy efficiency measures could deliver a limited benefit, provided the end goal is phasing out the use of all fossil fuels as quickly as possible.

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