PEP-11 and Santos' Hunter Gas Pipeline are among projects cited...

PEP-11 and Santos' Hunter Gas Pipeline are among projects cited as necessary to stabilise energy grid

By Matthew Kelly

April 12 2023 - 5:00am

Power grid instability adding pressure to build Hunter gas projects

A looming east coast gas shortage has reinvigorated support for two of the Hunter's most controversial energy projects - Santos' Hunter Gas Pipeline project and Asset Energy's PEP-11.

It comes as the Australian Energy Market Operator warns of potential grid instability and price spikes in coming years caused by gas shortfalls.

AEMO's latest Gas Statement of Opportunities report found gas output in NSW, South Australia, Victoria, the Australian Capital Territory and Tasmania would meet demand until 2027, but customers faced the prospect of shortfalls, particularly if cold weather coincided with low levels of renewable energy generation.

Supporters of gas argue it will play an increasingly important role during the transition to renewable energy. Snowy's Hydro's 660 megawatt gas-fired peaking plant at Colongra on the Central Coast was credited with preventing blackouts during power shortfalls last winter.

Snowy's new Kurri peaking plant was originally intended to be online to coincide with the closure of Liddell Power Station later this month, however, delays have meant the project will not open until late 2024.

The Hunter Power Project at Kurri

AEMO chief executive Daniel Westerman said the short-term gas shortfall risks and long-term supply gaps, due to declining production in southern Australia, would continue into this winter.

"The risk of gas shortfalls each year from winter 2023 to 2026 in all southern jurisdictions remains, under extreme weather conditions and periods of high gas-powered electricity generation, with those risks further exacerbated if gas storage levels are insufficient," he said

"While production capacity commitments have increased for 2023 compared to the 2022 Gas Statement of Opportunities and several key infrastructure projects are on track for delivery, there is forecast to be a 16 per cent reduction in production capacity this winter compared to 2022 in Victoria, which increases supply pressure in the southern regions."

The Hunter Gas Pipeline and PEP-11 have faced fierce opposition since they were announced.

Environmental and community groups argue the projects are unnecessary and will cause major, long-term environmental damage.

"The consensus is resoundingly clear - it is unacceptable to risk the beautiful NSW coast - our beloved asset that brings millions to the economy, that we depend on for well-being and livelihoods - to drill for fossil fuels (when most of our gas is exported) risking catastrophic harm to the coastal ecosystem and our way of life," Save Our Coast Founder Natasha Deen said.

But Asset Energy, which is seeking to extend the PEP-11 gas exploration licence off the Hunter coast, says its project would make a significant contribution to NSW's energy security.

Executive director David Breeze last week called on the NSW and Federal governments to urgently reconsider their position on gas exploration offshore at Newcastle as part of the solution to the east coast energy crisis.

"Provided that the gas prospects across PEP-11 are proven to be of commercial value, our project has the potential to supply 20 years' worth of gas for NSW," he said.

"We have committed to inject all of our produced gas into the domestic market - and more supply will mean lower prices."

David Breeze

Santos is expected to make a final investment decision this year on the Hunter Gas Pipeline between Narrabri and Newcastle.

The former state government cleared the last regulatory hurdle needed for Santos to begin construction of the pipeline that will connect the Narrabri project to the market.

Business NSW's 2019 Running on Empty report warned that a shortage of gas in the east coast market would have disastrous consequences for many businesses and industries, particularly large industrial users in the Hunter.

"The Hunter Region is sitting in two sets of cross hairs - one because we have a high proportion of businesses that use lots of power and are vulnerable to energy price increases and the second, because we have the skills, expertise and willingness to drive and be a major player in the new energy economy," Business Hunter chief executive Bob Hawes said last year.

"It's just that one set of cross hairs is crystal clear and the other a little shaky. We've got to fix that in a big hurry if the outcome isn't lopsided and we lose businesses before we have the chance to build the new ones."

But the climate council argues new gas projects are neither workable or sensible and has called for the acceleration of the clean energy transition.

"Opening new gas is not the answer," Climate Councillor and energy expert Andrew Stock said.

"We have to cut ties with gas by developing greater renewable capacity and more storage in the system, and electrifying our homes and businesses. That will cut greenhouse emissions and save Australians money on their bills, too."

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