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Green energy flag-bearer South Australia says gas must 'stand behind' renewable switch

ABC Business logo ABC Business 16/05/2023 By energy reporter Daniel Mercer
South Australia draws much of its gas from the Cooper Basin in the state's north-east. (Supplied: Beach Energy) © Provided by ABC Business South Australia draws much of its gas from the Cooper Basin in the state's north-east. (Supplied: Beach Energy)

South Australia's energy minister has launched a strident defence of the gas industry, saying his state's global leadership in the switch to green power would not be possible without the fuel it produces.

Speaking at the oil and gas industry's annual get-together in Adelaide this morning, Tom Koutsantonis said there would be "no net zero" without gas backing up intermittent renewable energy sources.

The comments came as former Reserve Bank of Australia governor Glenn Stevens warned that Australia faced structurally higher interest rates that would be fuelled in part by the "prodigious" investments required for the energy transition.

In a rare public speech since stepping down from the central bank in 2016, Mr Stevens said huge sums of money and vast amounts of resources would be required to wean the economy off fossil fuels.

And he said finding the required resources such as the labour and materials was likely to be the tougher challenge, noting the economy was already stretched.

'Prodigious investment required'

As a consequence, the transition was likely to put upwards pressure on inflation for some time yet, he said.

"Policies addressing climate change, presumably require users of energy to face permanently high prices for carbon-based energy from now on," Mr Stevens told delegates attending the Australian Petroleum Production and Exploration Association conference in Adelaide.

"That will be part of the transition.

"The transition will also require prodigious amounts of investment – prodigious amounts of investment – including by the public sector as the economy is re-tooled.

"And here it's important to note that it's not just a matter of finding the dollars to pay for that re-tooling.

"The bigger problem may well be finding the real resources – the labour, the capital goods capacity, the infrastructure capacity – to actually do the work.

"Not just the money but the real resources have to be found.

"Those resources are pretty fully employed right now actually."

Earlier today, Mr Koutsantonis argued that gas would be essential to efforts to keep the lights on and industry afloat even as renewable sources provided more and more of South Australia's energy supplies.

The minister pointed out that South Australia was a global leader in renewable energy, which met about 70 per cent of the state's needs in the past year.

However, he said the state labour government would be relying on gas to provide so-called firming services even as renewable energy levels rose to 90 per cent in the years ahead.

Gas the firming fuel: Koutsantonis

To that end, he said gas from the Cooper Basin in the state's north-east, where producers Santos and Beach Energy have operations, would need to keep flowing.

"The truth is this state produces more renewable energy than any other jurisdiction in the world," Mr Koutsantonis said.

"Yet the only way we can deliver, 70 per cent, 80 per cent, 90 per cent renewables is knowing that I have Santos and Beach Energy standing behind the South Australian government, providing that gas to our generators to firm that renewable energy for the remaining 10 per cent.

"That is something that is lost on people across the national electricity market, across the globe.

"Gas is the firming fuel. Gas will help us decarbonise."

South Australia closed its last coal-fired generator seven years ago and since then has relied on ever-growing amounts of wind and solar power backed up by gas-fired generation, a number of grid-scale batteries and imports from Victoria.

According to Mr Koutsantonis, who last week travelled to a major hydrogen conference in Holland, Russia's invasion of Ukraine had demonstrated the importance of gas to keeping emissions down during the transition.

He said emissions in Europe increased last year as the continent turned to coal to replace Russian gas, which had accounted for about a third of supplies before the war in Ukraine.

Longer-term, the minister said capturing and storing the carbon from gas along the production of hydrogen from renewable energy would enable South Australia to completely decarbonise its electricity system.

Gas demand call 'misleading'

Andrew Stock, a former executive at energy giant Origin and founding director of the Clean Energy Finance Corporation – the federal government's green bank – labelled the minister's comments misleading.

Mr Stock said gas demand for electricity in South Australia was already declining as the share of renewable energy in the mix increased, and this trend would not reverse.

He said there was therefore no need for new gas supplies and the state government should instead focus on building short and long-duration storage capacity required to fill in the blanks left by wind and solar power.

To this end, he said batteries were getting better at providing energy for longer periods, pointing to evidence of designs overseas that could discharge for days at a time.

He also said pumped hydro projects such as Snowy 2.0 in New South Wales and Kidston in Queensland would play a critical role in propping up the system for longer periods.

"We need to transition away from gas," Mr Stock said.

"And I think it's very misleading to say the sorts of things that the minister said today.

"The fact is that gas doesn't really have a role in terms of achieving net zero because every time we produce more, we burn more and it produces more emissions, which just makes the problem worse."


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