Gas generation has been stagnant for a decade – and the future trajectory is down

There are two big problems with gas: it is very polluting and prices are very volatile. As Australia moves to higher levels of renewables, the role of gas will shrink – not grow.

Over the last couple of weeks, the Federal Government and its COVID-19 Commission appear to have pinned their hopes for Australia’s economic recovery from COVID-19 on massive taxpayer-funded gas projects. Part of the logic seems to be that as Australia phases out coal, the need for gas will increase. To put it mildly, this logic is misguided on a number of fronts.

There are two huge problems with gas as an energy source.

Firstly, it is very polluting. Burning gas in a power station produces carbon dioxide but more importantly, when gas is extracted from the ground large amounts of methane emissions are released – and methane is a powerful greenhouse gas that drives climate change. 

It has long been suspected that methane emissions from gas extraction are under-reported and recent studies have indicated that gas may actually be more polluting than coal (even though gas burns cleaner in a power station). You can read more about this in Carbon Brief’s analysis.

Secondly, gas prices are extremely volatile. The Australian gas price is linked to the international price of gas, which is in turn linked to the international price of oil. Over the last few months, gas prices have collapsed due to the “oil price war” between Saudi Arabia and Russia. But let’s not forget that until late last year, the high cost of gas had been crippling Australian industry – remember all those articles about a gas shortage?

By continuing to rely on gas to power our industry, Australia’s major employers are placed in a vulnerable position of having their economic viability determined by wild fluctuations in the global oil and gas market and the policy decisions of the international oil cartel. It is especially reckless policy for the Australian Government to encourage an increase in our reliance on gas when Australia has an abundantly available and affordable energy supply in the form of wind and solar.

But even if gas were less polluting (it isn’t) and gas prices were reliably low (they aren’t), Australia would not need any new gas power stations anyway.

Australia already has plenty of gas power stations and most of these do not do very much work at all, sitting idle for much of the time. The manager of the electricity grid, AEMO, forecast that gas power station capacity will be flat until the mid-2020’s and then decline every year thereafter to 2040, according to the neutral scenario in AEMO’s 2018 electricity grid plan*. Battery capacity, in contrast, is expected to increase significantly. With so much spare capacity at existing gas power stations and more batteries, there is little room at all for new gas capacity.

The amount of electricity generated at gas power stations has varied from year to year but the overall trend is one of stagnation. Between 2012-13 and 2017-18**, Australia’s proportion of renewable energy generation increased by 3.7% to reach 17%. In the same period, gas generation increased by just 0.1% to 20.6%. Even this number is flattering to the gas industry as it includes the gas-heavy states of Western Australia and Northern Territory.

If both those states are excluded, renewable energy generation increased by 4.4% to 19%, while gas generation actually decreased by 2.7% to 12%. As more wind and solar has been built, the role of gas has actually shrunk.

And we don’t need to speculate how much new gas is required in an electricity grid with lots of wind and solar – South Australia is already a high-renewables grid and has completely phased out coal.

In 2008-9, South Australia sourced just 14.4% of its electricity from renewables; in 2017-18 this had risen more than three-fold to 46.6%. Today South Australia routinely gets over half its electricity from renewables and at times it is fully powered by clean energy. To take just one recent example: from 10:00am to 4:30pm on May 19, renewables supplied over 100% of the entire state’s electricity demand (South Australia exported its excess electricity to Victoria).

If gas is so important to “balancing out” wind and solar, surely as wind and solar generation increased and coal shut down in South Australia over the last decade, we would also have seen a significant rise in the proportion of gas generation? 

But no. In the same ten-year period, gas generation barely increased at all. It stood at 49.8% ten years ago. Today it is 52.4%, a meagre 2.6% increase. 

Between 2012-3 and 2017-8, the picture is even more stark. Renewable energy as a proportion of total generation increased by 17.1%, while the role of gas actually decreased slightly by 0.3%. This is all the more impressive considering South Australia generated 19.8% of its electricity from coal as recently as 2016.

The role of gas in South Australia is likely to shrink even further in the years to come as they are increasingly outcompeted by big batteries

Increasing gas use is a recipe for higher and more volatile electricity prices and worsening climate change. And the silliest thing is we don’t even need it. Australia is already moving to high levels of renewables and even on the most optimistic reading, gas is but a bit player.

Data on historical electricity generation was directly sourced/calculated from the Federal Government’s Australian Energy Statistics 2019, Table O. The 2020 edition has not yet been released.

If you would like to read more about the problem with gas and how Australia’s economy can recover from COVID-19 with renewable energy, check out the Climate Council’s latest report.

* An updated version of AEMO’s Integrated System Plan will be released later this year.

** I really wish I had access to more recent Federal Government data than 2017-18 but the department is sitting on annual electricity generation data for 2018-19. It is usually publicly released in March or April. Until its release, I’ll have to make do with 2017-18 data.

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