Friday, November 27, 2020

Gas won’t fuel Australia’s recovery or reduce emissions. It’s a mirage | Greg Jericho | Business


A new report by the Grattan Institute demolishes the government’s argument that Australia needs a “gas-led recovery”. Not only does gas add to our emissions, the report finds that far from being cheap, gas is set to become “an increasingly expensive energy source”.

Let us just pause a moment to note that the first 10 months of this year recorded the highest average global surface temperature, which means, depending on the temperatures for November and December, 2020 will either be the hottest year on record or the second hottest.

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What makes this worse is that the current hottest year, 2016, occurred during an El Niño event; this year we are experiencing La Niña. When you’re still breaking records while La Niña is occurring, that is a sign that the climate is massively out of whack.

And, of course, it is out of whack because of greenhouse gas emissions.

Which brings us to gas.

It is now more than six years since I first wrote about gas. Back in 2014, I noted that mining more gas was not going to lead to lower gas prices, and so it came to pass.

The Grattan Institute report, Flame Out: the future of natural gas, released on Monday, shows that while the energy recovered from Victoria’s oil and gasfield has overwhelmingly shifted towards gas (up from 30% in 2000 to 75% in 2018), the price of gas has also climbed:

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The reason is that, while gas production soared, the supply to Australian consumers did not – because the increased production was all about exports once the Gladstone LNG port facility opened in 2015:

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And yet still the government would have us believe cheap gas in on the way, and also necessary for our economy.

It is not.

The energy minister, Angus Taylor, in parliament in August argued that “the truth of the matter is that, if you want jobs in manufacturing in this country, you need reliable, affordable gas and electricity. That is the key. We know that there’s enormous opportunity for creating jobs in manufacturing in this country, but gas is one of the crucial feedstocks to do that.”

That might be the matter but it is not the truth.

The Grattan Institute report notes that, over the whole manufacturing industry, gas accounts for just 1% of total input costs and for more than half of the sector it accounts for less than 0.2%:

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The reality is that for some highly gas-intensive industries such as plastics, fertiliser and alumina manufacturing, gas is important. And yet those industries account for just 2.4% of all manufacturing activity (just 0.1% of Australia’s GDP) and a mere 1.3% of all manufacturing employment.

The report notes that even if the east coast market were “operating perfectly, it would not reduce gas prices enough to deliver a meaningful boost to manufacturing” and that the benefits of any government policies such as underwriting new gas pipelines or gas production would “be very narrow, and too small to materially help the economy recover after the Covid recession”.

We have long known that renewables are cheaper than both coal and gas and the Grattan report finds that over the past year the reason for a fall in energy prices has not been due to an increase in gas but a shift from brown to black coal and, importantly, to renewables:

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Gas will of course continue to play a role, but it will be a shrinking one. As the report notes, gas will have a role “supporting reliability and moderating price spikes, but it cannot materially drive prices down” because it actually costs too much to generate energy.

OK, so forget about the economy. What about the environment?

The prime minister, Scott Morrison, in August told parliament that “what we know is this: gas is the important transition fuel for the changes in our energy needs for this country for the future.”

Once again, this is wrong.

The report finds that, in South Australia, New South Wales and Queensland, choosing to install gas rather than electric heating and cooking in a new house will increase your emissions because the electricity generation in those states overall is already less emissions-intensive.

Even in Victoria, which overly relies on dirtier brown coal for its electricity, it will be better to shift from gas use by the middle of the next decade.

And the report also finds that any new gas-fired power station would become dirtier than the average energy produced for the national energy network within 15 years – well before its end of use:

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The reality is that gas is neither a driver of great economic growth nor of emissions reduction. For nearly a decade now such reports have made this clear.

For too long gas has been used by climate change deniers as a fudge against committing to any real action. But now, not only are the environmental justifications totally bogus, so too, as the Grattan Institute has shown, are the economic ones.

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