Sunday , July 12 2020
Home / Environment / Banking on gas will leave us stranded

Banking on gas will leave us stranded

Hypocritically, the Coalition’s direct action plan (and its more recent manifestations) clearly put an implicit price on carbon in paying polluters to reduce emissions. To sustain the semantics, the Morrison government has now embraced the slogan “technology not taxes”, which is supposed to ditch the use of market prices as a basis of their climate policy. Yet, surely, in the end, the commercial viability of any technology comes down to its “price”.

Loading

This exposes the weakness of the Morrison government’s support for natural gas rather than accelerating the rollout of renewables such as solar and wind, especially in electricity generation.

When I, and others, proposed gas as a transition fuel some 30 years ago, the price of solar was multiples of its current price, so gas was a quicker and more cost-effective means of achieving a reduction in emissions of some 40 to 60 per cent relative to coal.

However, as Chief Scientist Alan Finkel admitted in his recent address to the National Press Club, “the cost of producing electricity from wind and solar is now around $A50 per megawatt hour and [even with effective storage] the price … is lower than existing gas-fired electricity generation and similar to new-build, coal-fired electricity generation … and is set to drop even further”.

And with solar and wind technology proven, in the sense that financiers accept the risk without premium, why wouldn’t the government seek the development of grid-scale storage to achieve 100 per cent renewables? Clearly Morrison and his team have sold out to the likes of the Minerals Council and the fossil fuel lobby, whose influence is now conspicuous in the focus of the COVID recovery commission.

Loading

The suggestion of a pipeline linking large the gas fields off Western Australia to the east coast ignores the government’s own advice a few years ago that it would not be commercially viable. It brings back memories of Rex Connor, Khemlani, the loans scandal and the demise of the Whitlam government.

The proponents of gas also downplay the fact that methane leaks go hand in hand with the processes for extracting, storing, and burning natural gas. Methane can have more than 80 times the climate-warming impact of CO2 over the first 20 years after it is released. If methane leaks at a rate greater than 3 per cent, there would be no immediate climate benefits from retiring coal-fired power plants in favour of natural gas power plants. A recent US study published in the journal Science found American oil and gas operations were leaking 60 per cent more methane than the EPA had previously calculated, and Trump has recently eased restrictions further.

New gas generators here, when finally built, would soon become stranded assets as the rollout of renewables accelerates.

COVID has resulted in a significant drop in gas prices, but that will be reversed as our economy recovers. Pre-COVID gas prices were sitting some three to four times the level at which many of our gas-intensive industries had been built., And our gas producers have favoured export over domestic consumption.

Loading

While gas is playing, and will play, a limited transition role, it would be most unwise for the government to commit Australia and its taxpayers to massive investments in new gas exploration and generation given the risks involved.

Similarly, the Nationals obsession with building a new coal-fired power station in northern Queensland, where there is no net demand for additional electricity, where the banks won’t finance it, and insurers won’t insure it, and solar is cheaper, is another folly pursued for some perceived short-term, but unsustainable, political advantage.

John Hewson is a professor at the Crawford School of Public Policy, ANU, and a former Liberal opposition leader.

Most Viewed in Environment

Loading

About admin

Check Also

Calls to reverse ‘absurd’ rule on endangered species, boost koala aid

“The Liberal-National government’s ridiculous rules are standing in the way of our scientists exposing the …