The National Bureau of Economic Research agrees with Joe Collins’ view of gas being the better option

International research backs gas ahead of COAG

Thursday, 18 August 2016

Anthony Barich, ENP

AUSTRALIA’S upstream industry’s claim that gas is the “clear choice” for gas to save Victoria’s energy security ahead of tomorrow’s Council of Australian Governments Energy Council meeting has been supported by new European and US research that shows gas best complements the rise in renewables due to its “fast reacting” nature.

The research, by the National Bureau of Economic Research, the US’ largest economics research organisation, comes as The Australian reported this morning that tomorrow’s COAG meeting will propose for CSG bans to be relaxed and a “use it or lose it” threat would prompt pipeline operators to keep gas flowing under a national plan.

This is aimed at ensuring the widely predicted east coast gas shortage doesn’t send prices soaring.

The NBER’s new research – conducted by Elena Verdolini of the Euro-Mediterranean Centre on Climate Change and the Fondazione Eni Enrico Mattei in Italy, along with colleagues from Syracuse University and the French Economic Observatory – was also picked up by The Washington Post.

The researchers assessed the erection of wind, solar and other renewable energy plants – but excluded large hydropower and biomass projects – across 26 Organisation for Economic Cooperation and Development countries between 1990 and 2013.

They found that a 1% increase in the electrical generation share of “fast reacting fossil technologies” – like natural gas – is associated with a 0.88% increase in renewable generation capacity in the long term.

In other words, renewable electricity generation has grown at roughly the same rate as gas-fired generation over the past 25 years, thereby appearing to dispel the myth that natural gas is the renewable energy industry’s mortal enemy.

“When people assume that we can switch from fossil fuels to renewables they assume we can completely switch out of one path, to another path,” Verdolini said, adding that her study suggested otherwise.

“Our paper calls attention to the fact that renewables and fast-reacting fossil technologies appear as highly complementary and that they should be jointly installed to meet the goals of cutting emissions and ensuring a stable supply.”

One such working example is a natural gas plant General Electric and EDF Energy operate in France that is capable of reaching full power in less than 30 minutes, adding more than 600MW of electricity to the grid.

GE and EDF said this allowed them to respond quickly to grid demand fluctuations, integrating renewables as necessary.

Importantly, however, Verdolini stressed that the trend her team observed merely described the past and not necessarily the future, which is an important distinction as the study also noted that should fast-responding energy storage rise quickly then gas may lose its role.

This is where the development large-scale grid batteries comes in, however, RISC Advisory recently told Energy News that the cost of battery technology was still far too high compared to having a gas-fired generator as a reserve at the same capacity.

RISC believes the roll-out of large-scale battery storage is about 10 years away from being competitive.

The results also echo a RISC report recently obtained by Energy News that said gas-fired generation was “far more complementary” to renewables than coal-fired generation due to its greater responsiveness and faster start-up time.

RISC’s analysis found that greenhouse gas emissions are reduced by over 50% when a unit of renewable energy replaces coal-fired generation, and that renewables should not replace gas-fired generation where coal can be removed from the market.

In Western Australia, where the share of gas as a fuel is dropping faster than coal, coal-fired power stations produce roughly 1-1.5 tonnes of CO2/megawatt hour, whereas gas-fired power stations produce about half a tonne of CO2/MWh.

Victorian option

As the evidence piles up for the gas sector, at least in the medium-term, the Australian Petroleum Production and Exploration Association is mounting pressure on Victoria’s government to lift its moratorium in drilling.

The state is currently considering whether to extend the ban or make it permanent, neither of which option will save Victoria’s energy crisis, APPEA says.

Wood Mackenzie’s lead analyst for Australasia Saul Kavonic tweeted on Monday that for Victoria, it would be “too late to lift moratoriums once [the] brownouts start, due to lead times”, and called for a long-term energy mix strategy.

While Victoria relies on natural gas more than any other Australian state, with nearly 80% of homes using it, APPEA CEO Dr Malcolm Roberts also said that 27% of gas consumed by industry was also used as feedstock to make essential products like glass, bricks and fertilisers – and there is no substitute.

“Victoria relies on long-established offshore gas fields that are depleting. Independent forecasts indicate that production from the Gippsland and Otway basins will start falling next year,” Dr Roberts said.

The Australian Competition and Consumer Commission recently rejected the economic case for moratoriums, warning that more gas and more gas suppliers were needed to ensure supply and keep downward pressure on prices.

The ACCC said reforms to increase supply and competition could see customers in Victoria paying up to $4/gigajoule less for their gas, equivalent to a third of the delivered price.

“Political decisions to prevent safe exploration and development can only lead to higher gas prices that will strain family budgets and make local industry less competitive,” Dr Roberts said.

He also noted that COAG’s last meeting stressed the need to develop more supply for the east coast market.

“Victoria should accept that it needs to be part of the solution,” Dr Roberts said.


Of course, Lock the Gate has bailed up a few farmers and traditional owners in a release put out through a PR agency this morning to call for COAG to “protect land and water resources” by focusing on renewables not gas.

“The federal government needs to drop its flimsy scare campaign claiming community opposition to unconventional gas has driven up gas prices and reduced supply,” LTG’s Phil Laird said.


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