A dash for gas could lock in damaging mistakes July 16, 2011
The multi-party climate change committee's Clean Energy Future package has good bits and bad bits and improves somewhat on the old carbon pollution reduction scheme. We should get on with it. There's one big problem: will the carbon tax drive a big switch to coal seam gas for domestic electricity generation?
That's a big problem because (a) there is a high degree of uncertainty about the potential impacts of coal seam gas (CSG) mining on Australia's groundwater and food security, and (b) it is far from clear whether extraction of CSG and other unconventional sources such as shale gas offer much, if any, reduction in greenhouse gas emissions over coal once leaks and other fugitive emissions, and the latest science on the warming potential of methane, are factored in.
We are entering what the International Energy Agency recently called a ''golden age of gas'', with estimated global demand doubling by 2050. Gas has become even more attractive as a baseload energy source, as alternatives to coal such as nuclear energy and carbon capture and storage (CCS) appear riskier or more expensive. Advertisement: Story continues below
We should ramp up renewables as fast and hard as possible but every official forecast or model I've seen assumes gas will provide a transition to a zero-emissions economy. The unnerving prospect is that the world turns to gas only to find we have constructed an expensive new fleet of long-lived power stations that scarcely help tackle climate change and soon become an obstacle to more rapid decarbonisation.
At existing prices, converting electricity generation from coal to gas - especially in Victoria and South Australia, where power stations rely on brown coal, which produces about 30 per cent to 50 per cent more carbon dioxide than black coal - is seen to be one of the quickest, cheapest ways to cut Australia's greenhouse gas emissions in bulk.
Whether through the government's tender for closure of 2000 megawatts of brown-coal generating capacity, or the opposition's direct action plan, both major parties are interested in going down this path.
A carbon tax at $23 a tonne and rising incrementally won't, by itself, be enough to force an immediate switch from coal to gas. The price would need to rise to $40 a tonne or higher, according to most observers, depending on how high you think gas prices might go as domestic users compete with offshore buyers.
But many in the industry believe it is already unlikely that a new coal-fired power station without CCS can be built in Australia - it would be hard to get finance, for a start - and introduction of a carbon tax should tip the scales even further against coal (which is what Treasury's modelling suggests).
If it is passed, most people expect a wave of investment in gas. This week energy giant Alstom calculated the carbon tax would unleash investment of $3.5 billion a year in utility-scale electricity generation over the next five years, of which half, or roughly 1500 megawatts of capacity each year, would be gas-fired plant.
By comparison, investment fell from $4 billion a year in 2008 to just $1 billion a year in 2010 due to ''crippling'' uncertainty about a carbon price, Alstom's Australian chief, Chris Raine, said.
Modelling last year by Australian Energy Market Operator Ltd forecast that, with a relatively low carbon price of around mid-$20, weak emissions reduction targets and a 20 per cent renewable energy target, Australia would build an additional 30,000 megawatts of gas-fired generation capacity over the next two decades. That's a lot.
Where will all that gas come from? Natural gas on the eastern seaboard has traditionally been sourced from Bass Strait, the Otway Basin or the Cooper Basin. These reserves - roughly 7200 petajoules (PJ) as of 2010, according to AEMO stats - are in decline.
On the other hand the eastern states' unconventional reserves are exploding. CSG is already at 36,598PJ and will rise as Queensland's massive export liquefied natural gas (LNG) projects come on stream. In Queensland and NSW alone, an area 10 times the size of Tasmania is now under permit for CSG exploration or development.
Shale-gas extraction may also be ready to take off in Australia with Beach Petroleum reporting initial gas flow from a well in the Cooper Basin and ConocoPhillips investing $110 million in the Canning Basin, just this week.
Unconventional gas is not just another mining boom. By now many of us have seen the hit doco Gasland. CSG and shale-gas extraction both use controversial hydraulic fracturing or ''fracking'' techniques - injecting a mix of water, sand and (sometimes highly toxic) chemicals to stimulate gas production - potentially contaminating aquifers.
Vast quantities of brackish water are produced during CSG production and must be treated and disposed of - then there are millions of tonnes of salt to deal with. The impact on the Great Artesian Basin and Murray-Darling Basin is unclear and the National Water Commission has sounded the alarm.
Both the Queensland and NSW governments are reviewing strategic land use to try to reconcile conflicts between agriculture and mining. A Senate inquiry is under way, chaired by Liberal Bill Heffernan, amid a grass-roots backlash by farmers and greenies rallying nationally under the ''Lock the Gate'' banner.
Although export LNG contracts worth tens of billions have been signed in Queensland and the scramble to produce first gas is under way - an estimated 40,000 CSG wells are set to be drilled in that state alone - the rollout is taking place under an unusual ''adaptive'' regulatory approach, which means that state approvals may be modified if unintended environmental impacts occur down the track.
So far, the federal government is along for the ride. But, as Senator Heffernan has warned, we must not allow the energy task to subsume the food task. It's a brewing storm.
Let's be clear: in ballpark terms, international demand for our gas is at least an order of magnitude greater than domestic demand and that's what's driving the unconventional gas boom.
It would be ridiculous to blame the carbon tax for every CSG or shale-gas well drilled in Australia. But there is a genuine debate to be had - power station by power station, gas field by gas field - about where we want our electricity supply to come from.
That debate must be informed by the best science on the full life-cycle emissions of new gas-fired plant, take into account all the environmental implications and opt for renewables wherever possible.
Yes, put a price on carbon - but let's not dash for coal seam gas. Let's take it step by step.
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