AEMO chief backs gas as ‘ultimate backstop’ in Australia’s renewable energy transition
Australian Energy Market Operator (AEMO) chief executive officer Daniel Westerman has told a major event that gas must be part of the energy mix.
A keynote speaker at the CEDA Climate and Energy Summit in Melbourne, Mr Westerman said that, while the role of gas can sometimes be controversial, it is an important ingredient in supporting renewable energy and its role in future power plans.
“Let me be clear, flexible gas-powered generation will remain the ultimate backstop in a high-renewable power system,” he said.
Higher renewable contributions
Mr Westerman expressed his belief that gas, alongside batteries and pumped hydro, would enable higher renewable contributions and support reliability as coal-fired power stations retire.
“Importantly, new gas-fired power stations can play an active role in system security even when no gas is being consumed […] because their heavy spinning generators – like those of coal and hydro – have benefits beyond generation,” he added.
“If designed and built with this functionality in mind, they can spin freely to keep the main power grid secure and resilient without burning fuel.”
“So, while they may only burn fuel 5% of the time, they can help keep our grid stable 100% of the time.”
East coast gas concerns
The AEMO boss’s support for gas comes at a time of increasing concerns over mid-term supplies to Australia’s east coast.
In its latest annual Gas Statement of Opportunities report, AEMO reinforced the need for new investment in Australia’s central and east coast gas markets to address forecast supply shortfalls in the southern states.
Mr Westerman said that report was consistent with previous calls for new investment in gas as supply from the gas fields in Bass Strait depletes.
Longford shortfall
He noted that production from the Longford gas plant, which has historically supplied two-thirds of the gas used in the east coast gas market, is set to reduce its output before retiring at the end of 2033.
“This year’s gas adequacy report again highlights the structural changes in the east coast gas market, particularly that production is falling faster than demand in the southern states, reinforcing the need for investment in new gas supply,” he said.
A decline in gas consumption across most sectors on the back of higher retail prices, mild winters and increased electrification, along with changes in electricity generation outlooks, has improved short-term gas availability.
AEMO is forecasting residential and commercial consumption to decline further in the longer term, with industrial consumption expected to remain fairly stable.
Peak-day shortfalls
The AEMO report also predicted the risk of peak-day shortfalls and seasonal supply gaps in the southern states from 2028, with annual supply gaps emerging from 2029.
It is forecasting production from existing, committed and anticipated projects in the southern states is forecast to fall 32% from that point, requiring new supply investments.
“Various industry-led solutions are being considered to address shortfall risks, beyond the advanced developments already included in the GSOO,” Mr Westerman said.
And yet, at the same time as industry and government bodies are calling out for new production, politicians are pulling the pin on potentially significant gas opportunities such as the PEL 11 permit off the NSW coast.