The Federal Government’s Future Gas Strategy provides the energy sector with greater clarity on how it will approach the unfolding energy transition.
Australia’s renewable transition is well underway, with solar, wind and hydro accounting for an increasing share of the nation’s energy grid. Coal-fired power stations are retiring faster than expected. Since Munmorah ceased operations in 2012, ten major coal-fired generators have closed and retirements have been announced for all but one of the remaining fleet – with about half shutting down by 2035 and the rest by 2051.
However, when it comes to decarbonisation there’s no quick fix. Fossil fuels continue to play a role in powering homes and industries, and under the Federal Government’s Future Gas Strategy, gas will remain an important source of energy in Australia’s medium and long-term future, through to 2050 and beyond.
Pathway for gas
The Future Gas Strategy provides a framework for gas production and consumption moving forward, which revolves around six principles that will form the foundation of government policy on gas. These are:
- Australia is committed to supporting global emissions reductions to reduce the impacts of climate change and will reach net zero emissions by 2050
- Gas must remain affordable for Australian users throughout the transition to net zero
- New sources of gas supply are needed to meet demand during the economy-wide transition
- Reliable gas supply will gradually and inevitably support a shift towards higher-value and non-substitutable gas uses, households will continue to have a choice over how their energy needs are met
- Gas and electricity markets must adapt to remain fit for purpose throughout the energy transformation
- Australia is, and will remain, a reliable trading partner for energy, including LNG and low emission gases
In addition to the principles, the strategy also identifies actions to guide Australia forward. These include:
- Prevent gas shortfalls by working with industry and state and territory governments to encourage more timely development of existing gas discoveries in gas-producing regions
- Reduce gas related emissions by working with industry and regulators to minimise venting and flaring of methane from operations and consider further emissions reductions measures through the government’s six decarbonisation plans. The government will also adopt a technology-neutral approach to exploration data acquisition to minimise seismic surveying where possible
- Support households and businesses through the transition to net zero by working closely with the states and territories to manage pricing impacts and the Gas Market Code
- Promote geological storage of CO₂ and support the region’s transition to net zero by releasing acreage for offshore carbon capture and storage (CCS) and establish a new initiative on regional cooperation on transboundary CCS, which will provide options for energy security and carbon management solutions for regional partners
Transition support
According to the Federal Government’s analytic report, which serves to support the strategy, gas consumption is forecast to continue beyond 2050. This is due to its role as back up for peak loads and as firming in power generation. Looking past 2050, the government forecasts that gas will also be used where electrification, other renewable technologies and low emissions gases unavailable or too expensive.
As stated in the Future Gas Strategy, “Gas-powered generation GPG will underpin Australia’s electricity supply in the transition to a net zero economy. It is likely that gas will still play a role in electricity generation up to and beyond 2050.”
By providing more clarity around the role of gas in Australia’s future, the Future Gas Strategy helps address some of the challenges and uncertainties of the energy transition facing utilities.
The variability and unpredictability of renewable generation is one of the main challenges facing utilities during the energy transition. As more and more coal-fired power plants reach retirement, there are increasing concerns around maintaining grid security and stability. The Australian Energy Market Operator’s (AEMO) 2024 Integrated System Plan (ISP) noted that gas-powered generation is required during the energy transition. It posits that gas-powered generation will provide necessary back up with critical power supply when it is needed, both for ‘renewable droughts’ of ‘dark and still’ conditions, or to meet peaks in consumer demand.
According to the ISP, investment in gas, alongside batteries and other network investments, will also deliver essential power system services to maintain grid security and stability.
The latest instalment of the 2024 AEMO Gas Statement of Opportunities report (GSOO) found that gas consumption is expected to decline over the outlook period to 2043, however, gas production in southern Australia is expected to decline at a much faster rate, due to rapidly depleting gas fields in Victoria’s Gippsland region. According to the GSOO, new investment in gas is required to meet demand and mitigate the risk of shortfalls and supply gaps.
The Future Gas Strategy offers industry more certainty that the Federal Government will continue to support the use of gas to meet energy needs. It means utilities can continue to rely on gas-fired power plants as a bridge technology while renewable energy sources are integrated into the grid.
There are several other challenges facing utilities during the energy transition, including:
- The need for investment in new infrastructure and technologies to accommodate renewables
- Uncertainties around future regulatory and policy changes that can affect the long-term planning and strategies of utilities and the gas industry
- The management of future energy costs while ensuring affordability for consumers
With the Federal Government expecting gas to remain in use beyond 2050, the industry has a pathway for planning and investment in infrastructure. This also means there will continue to be policy and regulatory frameworks in place to support the continued use of gas in power generation, offering utilities a more predictable environment to operate in.
Set to change
With gas set to play a crucial role in balancing supply and demand, adequate storage near high demand areas will be necessary to ensure timely delivery during peak times, which means current gas infrastructure will need to be upgraded.
The strategy also notes that biomethane can be used in existing natural gas infrastructure. Infrastructure used to move gas across big distances to alleviate shortfalls may also be adaptable for low emissions gases in the future.
The Future Gas Strategy says that geological storage of CO2 has an important role in supporting the transition to net zero, with the government to continue to release offshore acreage for greenhouse gas storage as well as supporting carbon capture and storage.
Gas and net zero
Alongside the announcement of the strategy, Federal Minister for Resources and Northern Australia, Madeleine King, said, “Ensuring Australia continues to have adequate access to reasonably priced gas will be key to delivering an 82 per cent renewable energy grid by 2030, and to achieve our commitment to net zero emissions by 2050.”
“The strategy makes it clear that gas will remain an important source of energy through to 2050 and beyond, and its uses will change as we improve industrial energy efficiency, firm renewables, and reduce emissions.
“But it is clear we will need continued exploration, investment and development in the sector to support the path to net zero for Australia and for our export partners, and to avoid a shortfall in gas supplies.”
Ms King said that gas is crucial for Australia as it supports manufacturing, food processing and refining of critical minerals which will help to lower emissions. She also said that gas supplies 27 per cent of Australia’s energy needs and represents 14 per cent of Australia’s export income.
“Gas will play an important role in firming renewable power generation and is needed in hard-to-abate sectors like manufacturing and minerals processing until such time as alternatives are viable and can be deployed.”
When it comes to planning the future energy mix, the Future Gas Strategy makes clear the Federal Government is taking an integrated approach to ensuring energy security and affordability throughout the energy transition.
Image credit: Alex Cimbal/shutterstock.com.
