7 reasons why the government’s gas-fired power station is foolish

The Australian Government has announced it will finance a $600 million gas-fired power station in the Hunter Valley. Almost all experts agree this is foolish, unless it was part of an effective sustainable energy policy and strong commitments to achieve new zero emissions quickly (neither of which we have).

Our government isn’t acting in our nation’s best interests, and the reasons seem very self serving.

The proposal

The government’s argument is that, when the ageing Liddell power station is closed in 2023, there will be a shortfall in energy supply. The proposed 660 MW station will be constructed by the government-owned Snowy Hydro. It will be a “peaking” plant supplying “dispatchable power”, that is, only switched on when there is a spike in demand that the electricity grid is unable to supply. It will be a open cycle gas-turbine (OCGT) plant, which can be quickly started up, but is lower efficiency than other gas-fired plants.

7 reasons why not

Most of the reasons given by the government are contradicted by experts.

1. It will increase global warming

While gas-fired stations release less greenhouse gases than coal-fired, they are far more polluting than available renewable sources. An International Energy Agency (IEA) report released just prior to the government’s announcement said that to reach the goal of net zero carbon emissions by 2050, there should be no more investment in new oil, gas and coal projects. Wealthy developed countries such as Australia should be moving to net zero emissions first.

“This gap between rhetoric and action needs to close if we are to have a fighting chance of reaching net zero by 2050 and limiting the rise in global temperatures to 1.5C” (IEA executive director Fatih Birol).

While it is expected to operate less than 2% of the time, less polluting options are readily available. The only way this development could be turned into a positive is if it is part of a plan to close a greater capacity of more polluting coal-fired stations. But even then, other options contribute significantly less to global warming.

2. It isn’t necessary

Experts say that the government has overstated the need for additional power.

  • The Australian Energy Market Operator forecasts a 150MWt shortfall in 2023, but this can be met by existing proposals and existing technology (including batteries, pumped hydro and demand management).
  • Tony Wood, energy program director with the Grattan Institute, said the Kurri Kurri plant was “just not necessary”.
  • Dylan McConnell, an energy expert at the University of Melbourne, says the federal government’s proposal is unnecessary.
  • The Clean Energy Council said cheaper alternatives such as batteries and pumped storage are already available.
  • Greg Bourne, Climate Council spokesman and former President of BP Australasia said “the Australian Energy Market Operator and Energy Security Board have already indicated that New South Wales does not need new gas projects to meet its future energy needs”.

Experts mostly say that Scott Morrison and Angus Taylor are not fairly stating the needs. A taskforce advising governments about the impact of the Liddell closure did not back Scott Morrison and Angus Taylor’s insistence that 1,000MW of additional dispatchable electricity would be needed to replace Liddell.

If the government provided incentives for renewable energy development (even a fraction of the subsidies given to fossil fuels), renewable energy and battery storage could easily provide what is required.

3. It compromises the free market

Electricity generation used to be the responsibility of the states, but the assets (power stations and delivery networks) have been substantially privatised over the last few decades. The east coast state electricity grids have been connected, so that the generating companies compete with each other to supply electricity, and consumers can choose their supplier.

This more or less free market was supposed to provide reliable and cheaper power. Generators would choose the form of generation that was most efficient. But for this to occur, the playing field had to be level, and the rules had to be clear and consistent to allow investors to make good decisions.

The government has made the task of power generators more difficult by not providing a clear forward plan over the past decade. This gas power station proposal further distorts the market and destroys the level playing field. And so it discourages further investment, as generators are not completing with the government on equal terms.

AGL chief executive Graeme Hunt said government intervention deterred investment. “Anything that disturbs natural markets makes it hard for to feel confident in assumptions about the future”.

The government has said it is taking this step because the private companies were failing to ensure reliable supply, but it is the government’s failures that have created this situation.

The Financial Review: “What the proposed plant will do is displace some private sector investments; disrupt emerging market and technological solutions; and expose taxpayers to risks in a market that governments (sensibly) have moved out of over the past 25 years.”

4. It will increase prices

The government says this plant will make a profit and reduce prices but most experts disagree. It is well established that renewables are now the cheapest form of electrical power. In a competitive market, fossil fuel power stations struggle to compete most of the time.

  • The chair of Australia’s Energy Security Board, Kerry Schott, said gas was “expensive power”, and this proposal made very little commercial sense given the abundance of cheaper alternatives flooding the market.
  • The Australian Energy Market Operator agrees this proposal is likely to be more expensive than other options.
  • Bruce Robertson, an energy analyst with the Institute for Energy Economics and Financial Analysis said the proposal lacked a business case.
  • The Financial Review says: “It’s hard to see how the $600 million plant (though it’s very likely to cost 30 to 50 per cent more) will keep prices down other than possibly at some limited peak times.”
  • Climate Council spokesperson Nicki Hutley said gas “drives up electricity prices”. Climate Council’s Andrew Stock said: “Building a new gas power station in NSW will raise electricity prices for residents and businesses, not lower them”.

5. Its benefits are political

The announcement happened in the last week before a Hunter Valley by election that was crucial for the NSW LNP government. It seems to pander to the conservative wing of the LNP who support the fossil fuel industry. And I can’t help wondering if it is to cover up the government’s lack of an effective forward-looking energy policy. Or am I too cynical?

6. Benefits for the donors?

Crikey.com reports there are significant conflicts of interest with this project, where Liberal Party donors benefit.

  • The site of the proposed plant was purchased just last year by a major Liberal Party donor, Jeff McCloy, who stands to gain by selling the site to the government-owned Snowy Hydro.
  • Gas for the station will likely be delivered by the Hunter gas Pipeline, developed by major Liberal Party donors Hilton Grugeon and Graham Burns.
  • Gas will probably be supplied by the Santos Narrabri gas project, and Santos is, you guessed it, another major Liberal party donor.
  • The former Santos CEO, David Knox, was appointed by the government to be the Snowy Hydro chair.

7. It harms our international standing

Most first world countries are committing to net zero emissions by 2050 or thereabouts, and significant reductions by 2030, as shown in this table:

Country2030 emissions
reduction pledge
UK63%
EU51%
US50%
Japan44%
Canada40%
New Zealand30%
Australia26%
2030 minimum emissions reduction targets relative to 2005 levels (Guardian).

Even China is doing better than Australia.

Australia’s recalcitrance has been noticed and criticised overseas. Recent news reports have noted both Joe Biden and Boris Johnson looking to us to lift our game. The EU has voted to introduce a carbon levy on imports into the EU from countries with weaker emission rules.

This gas-fired power station is a small part of an overall harmful strategic direction by our government.

What can we make of this?

Tony Wood from the Grattan Institute said of this proposal: “It’s not necessary for reliability, it’s not necessary for prices, and it’s not necessary to bring down emissions, so it’s hard to see how it could be welcomed by an energy market that is already meeting the requirements of its customers.”

The Clean Energy Council has said it was disappointed by the government’s decision to co-fund a new fossil-fuelled generator, particularly as cheaper alternatives such as batteries and pumped storage are already on the market.

This power station might be justified if it was part of a national energy policy that:

  • would take us to net zero by 2050,
  • gave incentives to renewable energy rather than subsidies and tax relief to fossil fuels,
  • built a strong electricity market, and
  • retired coal-fired power stations early.

But it’s not. Not part of a strategic energy plan, and so not justified.

The Australian government is clearly not working in the long term best interest of our country. Most of its statements on this proposal are untrue or misleading, and contradicted by experts. So why has it chosen this course of action?

Greenpeace has documented how the fossil fuel industry, especially coal, has gained enormous influence over our government.

We cannot know what is going on, but it is hard not to think that harmful ideology, looking after rich donors, fear of the Murdoch media and an unwillingness to take steps that may be seen as unpopular, all play their part.

We need a responsible, truthful and forward-thinking government!

Photo: Gersteinwerk gas-fired power station in Germany (Wikimedia Commons).

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