Canberra must act to secure gas supply and reliable power - 29th March 2017

The Pelican Point private gas-fired power station in South

Canberra must act to secure our gas supply for reliable power

THEO THEOPHANOUS, Herald Sun

March 29, 2017 12:00am

Subscriber only

FIFTEEN years ago, as energy minister in the Bracks government, I enraged the Greens party by negotiating and signing the agreement that allowed Hazelwood power station to continue to operate, providing cheap and reliable power for Victoria. With Hazelwood shutting, Victoria will lose 22 per cent of its baseload power. Back then Victoria could not have maintained adequate supply without the power from Hazelwood.

Yet it was obvious that one day it would have to close and so my colleagues and I introduced a renewable energy scheme to increase supply and energy-efficiency programs to reduce energy consumption. Contrary to the doomsday predictions of some, Victoria can be confident Hazelwood can close with limited disruption to our energy supply. That’s not true of South Australia, which relies on daily shipments of baseload power from Victoria. That is why SA has decided to go it alone and build a government-owned gas-fired power station.

There are existing private gas-fired power stations in SA, such as Pelican Point, but they are partly mothballed because the price of gas is too high. SA will try to overcome that by incentivising new exploration to find more competitive sources of gas. But that will take time.

The Greens have bought into this debate with their own “alternative facts” claiming that renewable energy’s intermittency is not a problem for management of the grid. Senator Sarah Hanson-Young even says SA can fix its problem by installing more “cheaper forms of power like wind, solar and battery storage”. Never mind that SA needs more baseload power or that without subsidies wind and solar are about double the price of coal power.

The SA Government knows that even with a higher gas price it is cheaper to run a baseload gas power station rather than a battery-renewable combination.

Victoria does need to investigate ways of increasing our baseload power but Tony Abbott’s solution, spending a small fortune on resurrecting Hazelwood, is not the answer. Instead we should explore the construction of a new gas-fired power station on the Hazelwood site using existing substations and connections.

It would be an energy insurance policy for Victoria and SA and create jobs in the Latrobe Valley. But there is hardly any point in such solutions when gas prices are soaring. In Victoria, high gas prices came when we connected the pipeline at Wodonga with the NSW system. The initial idea was to get gas from the huge Moomba field to enhance Victoria’s supply.

Instead the pipeline has been reversed and is now feeding Victorian gas up to Queensland to be exported to Japan at locked-in prices below the world price. Meanwhile, Victorians are being asked to pay the world price with potential shortages as domestic supply is squeezed to satisfy overseas demand. Talk about being comprehensively done over.

Some time ago we also gave away the levers that allowed governments to pressure companies to keep gas and electricity prices down. I was fortunate as energy minister to have a residual power to set prices that, although never formally used, allowed the government to negotiate real reductions in energy prices from a position of strength.

We have come full circle from forcing companies to charge a price for gas that is related to production costs, to allowing them to charge inflated world prices irrespective of production costs.

The closure of Hazelwood will put even more upward pressure on prices and action is required to protect consumers. It’s sad to watch our Prime Minister trying to address these issues by going cap in hand to the big three energy companies to ask them to let us keep our own gas rather than export it to Japan.

Real solutions must come at a national level and should include a policy that reserves a big portion of our available gas for Australian’s use and export restrictions to ensure sufficient local supplies to put downward pressure on prices.

Tim Pallas is right to criticise the Prime Minister for trying to lay the blame for the current malaise on Victorian Labor for limiting gas exploration, a policy started under a Liberal government. I think the Andrews Government recognises that new gas supply is desirable, which is why it did not ban indefinitely gas exploration and production using conventional means as demanded by the Greens and Lock the Gate. Instead, there is a moratorium to allow the Lead Scientist to investigate onshore resources and establish that it is safe and viable to extract gas without fracking.

It is to be hoped the work of the Lead Scientist can be brought forward so that if she is satisfied there are new and potentially cheaper gas supplies, we can begin conventional extraction soon.

But we need immediate national action to secure gas supply and lower domestic and commercial gas and electricity prices. Neither Abbott nor Turnbull has proposed such action.

Theo Theophanous is a former energy minister and political commentator