Publicly listed gas infrastructure company and power producer APA Group has – in just a few hours of presentations to analysts – highlighted the impossible dilemma facing the Australian gas industry: how to do well for the future. while his own research shows his current strategy is stuffed if the world takes climate action seriously.
APA made a double announcement on Wednesday, releasing its annual results and its new climate plan, which outlined how it was heading towards “net zero” by 2050, and that it intended to buy only 100% renewable energy from 2023.
The thrust of his argument was this: gas has a vital role to play in Australia’s transition to renewable energy. But his detailed assessment of what a 1.5C climate scenario looked like painted a completely different picture. Gas, at best, is a short-term option, which must surely challenge its plan to invest billions in new infrastructure.
Rob Wheals, the CEO who announced his resignation earlier this week, described gas as the “ally” and “companion” of renewables.
“Gas is the ally of renewables and will support the addition of all intermittent power sources,” he said in a briefing to analysts. “Put simply, gas production is the key ingredient to helping Australia accelerate the energy transition.”
Wheals says this supports the push for more gas production in huge “boundary basins” in northern Australia and the infrastructure to connect it.
APA is already investing in many gas pipeline additions and extensions to the current gas network in NSW and Victoria, but its own climate report, which boasts of a targeted 30% reduction in emissions by 2030 as part of of its efforts to limit global warming, questions the wisdom of this.
First, there is the question of how much gas will be needed in the mainline. Wheals noted that AEMO’s integrated system plan assumes a nine-fold increase in utility-scale renewables and a three-fold increase in storage, but only a 20% increase in gas capacity.
And it’s important to note that this is gas capacity, not production. The amount of gas flared is likely to be considerably less as gas production will only be used as a peaking plant to fill gaps, even at the Diamantina gas generator in Mt Isa, where the company is also building the 88 MW Mica Creek solar farm. . .
As APA notes elsewhere, it all depends on the climatic outcome. In a 1.5° scenario, he indicates in his presentation, “base load must be provided by renewables (solar, wind), supported by storage technologies with a limited role for gas firming”.
As for gas demand itself, he notes: “Domestic gas demand will fall rapidly (down about 40% by 2040), driven by falling residential and commercial demand, with GPG declining in reason for switching to renewable energy”.
And it’s not much better on the global front in the 1.5°C scenario: “LNG prices are stifled due to weak global demand,” he says. “Lower LNG export volumes from 2030.”
This is in APA’s own words, hardly a ringing endorsement to invest billions in assets that are expected to have decades-long lifespans, but it continues to drive gas infrastructure investment forward because, according to Wheals, they cannot know where the climate outcome is going. to finish.
If the gas industry is successful, it certainly won’t be 1.5°C.
Here are some other interesting graphs from the APA’s Climate Report.
The first comes from their own climate commitments.
The commitment to 100% renewable electricity sounds grand, but is limited to business needs, so it won’t be much in practice and only represents 10% of their 30% emissions reduction target for 2030 .
Another 10-20% comes from electricity used to compress gas for pipelines, and another 30-40% from detecting and managing methane leaks. You might have thought they already did.
The remaining 35-45% comes from “opportunities yet to be assessed” – which seems a bit low for a detailed climate study and a modest goal, and the inevitable “offsets”.
Due to its mix of gas generation and 460MW of renewables (it owns the Darling Downs solar farm in Queensland and the Emu Downs and Badingarra wind and solar farms in Western Australia), it has an emissions intensity relatively low (see table above).
This seems to suggest he won’t be able to do much more. The graph above right shows the global grid catching up to it by 2030. ABS emissions decline from there, but it would have been interesting to extend the AEMO gradual change scenario until 2030.
Wheals conceded later in the presentation that the company would need about six more solar farms at Mica Creek (the 88 MW facility it is building in the Mt Isa grid), to reduce its emissions. But it wasn’t clear if it was a blueprint or just a description of the task at hand.
As for the future health of some of its assets, it is clear that they look better in a 2°C scenario than in a 1.5°C scenario.
This graph shows that the Diamantina gas generator is experiencing problems by 2030 and that clouds are starting to form over the main Moomba Sydney pipeline around this time as well.
And, given the growing push for electrification and increased monitoring of methane leaks, it seems less clear that the future of gas infrastructure is as big as the industry claims – unless, of course. , that they are protected by a regulatory decree, in which the consumer and the taxpayer can foot the bill.
Giles Parkinson is the founder and editor of Renew Economy, as well as the founder of One Step Off The Grid and the founder/editor of The Driven, focused on electric vehicles. Giles has been a journalist for 40 years and is a former economics editor and associate editor of the Australian Financial Review.