Why the gas-led recovery is a load of hot air in more ways than one
A conversation with Bruce Robertson, Institute for Energy Economics & Financial Analysis (IEEFA)
As part of its promotion of the problematic “gas-led recovery” the Australian government has been claiming gas is a lower emissions fuel when compared to coal. However, according to Institute for Energy Economics and Financial Analysis (IEEFA) Energy Finance Analyst Gas/LNG Bruce Robertson, this is not the case.
Claims gas has a 50 percent lower emissions footprint than coal are highly misleading, he explains.
The source of the figure should ring some alarm bells. It comes from GISERA, which while it is a division of CSIRO is gas industry funded and controlled by gas industry executives.
In addition to the source of the data being questionable in terms of objectivity, the figure is based on combined cycle gas turbine (CCGT) plants. But, according to Robertson, we do not use those type of baseload gas plants in Australia because they are expensive.
“In Australia, CCGT are not a large part of the national electricity system for one very simple reason – they are very expensive to run. Gas prices in Australia are simply too high and it is not economic to run the plants when there are cheaper sources of power. In the U.S. there are a large fleet of CCGT gas power stations as gas prices are at a decade low.”
The Australian energy generation mix uses gas peakers (Open Cycle Gas Turbine or OCGT plants), which are useful for when the supply of electricity from other sources such as renewables is low. These plants are only 31 percent better than coal in terms of emissions.
Robertson points out the 50 percent figure also assumes no upstream (production and supply) gas leakages, but again, the data hides the reality. Robertson explains that in a 20-year time frame, a gas plant would only need to have two percent annual upstream leakage to be worse than coal, and on a 100-year timeframe, three percent.
But data from BP states that the broader industry has a 3.2% annual leakage rate.
“These are all gas industry figures,” Robertson says.
And what they indicate is gas is actually worse than coal in terms of operational greenhouse gas emissions.
He says one of the reasons gas can be considered cleaner is it has lower particulate pollution and sulphur emissions. In South east Asia where this kind of pollution has been a major health concern, this has made gas a preferred option for new plants.
“But if you are just talking about climate (change), this is not an advantage,” Robertson says.
In terms of the federal government’s plan to subsidies gas technologies as part of its technology roadmap, Robertson says there is an “inherent contradiction” in the messaging. There are no plans to subsidise solar and wind, as they are deemed “mature” technologies, yet they want to subsidise gas, which is also a mature technology.
Ultimately, the “gas-fired recovery” is not going to happen because the economics don’t stack up either.
‘The gas industry is running,” Robertson says.
It is pulling back from new projects due to low prices globally for gas.
“There is a massive (liquid natural gas) surplus, and there have been huge falls in production (as a result).
The number of drill rigs in the USA has fallen by 70 percent, and Robertson believes there will be a crash in US production within the next 12-18 months.
Chevron has laid off 470 people in Australia – that is 25 percent of the local workforce. The Darwin Ichthys plant is also looking at layoffs and planned investments into new Australian offshore projects such as the North West Shelf are looking unlikely to go ahead.
Santos’ Barossa Field is another new project Robertson says is unlikely to proceed.
“The industry is pulling back on investment – you can’t have a gas-led recovery if the industry itself is not investing.
“You can’t stimulate an economy with an industry that is losing buckets of money.”
Following years of “over-investment”, the write-offs have already begun – in Australia in the first six months of 2020, the gas industry wrote off around $25 billion in project assets.
“These factors were in place well before COVID,” Robertson says.
“The economics of the industry don’t stack up.”
Visit the IEEFA webpage for more insights.
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