Worth a read‘No need to be defensive about gas’: NSW...

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‘No need to be defensive about gas’: NSW EnergyMinister

Samantha HutchinsonNational reporter

Jan 8, 2024 – 5.00am

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NSW Energy Minister Penny Sharpe says NSW willnot need Chris Bowen’s behemoth capacity investment scheme to shore up thestate’s use of gas, which will continue to play a critical role firming up agrid increasingly dependent on intermittent renewables.

While NSW is yet to announce any plans to actively support new gas supply, the Minns government minister acknowledged the utility that gas assets, including gas peaking plants, could play in the energy transition.

NSW Energy Minister Penny Sharpe: “you can turn on and off a peaking gasstation in a much easier way.” Flavio Brancaleone

But she said she sees more potential for afederal partnership and investment in alternative firming sources such aspumped hydro and other long-duration battery solutions.

“The whole focus on looking at alternativesand biofuels like hydrogen is really important, and it’s all coming along … butyou can turn on and off a peaking gas station in a much easier way,” Ms Sharpetold The Australian Financial Review.

“Batteries will do some of the [firming] workand once we’ve got longer duration [storage] through pumped hydro, they will[also] do some of the work. But there is a role for gas and I don’t feel theneed to be defensive about it.”

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And amid long-term questions about the viability of new gas projectsincluding Santos’ long-awaited Narrabri gas project, the minister said thegovernment was still working with Santos through an approvals process, but shewas open to importing gas via LNG terminals.

Her comments – which come as the Minnsgovernment approaches the end of its first year in office, and a baptism offire in energy as NSW confronts the potential for reliability issues –represent a major step-change from her predecessor, Liberal energy andenvironment minister Matt Kean.

They also come in just months after theminister revealed the government was in talks with Origin to keep its Eraring coal-fired power station in operation past a planned closure date in 2025.

‘It’s a large exit we need to manage’

Speaking to The Australian FinancialReview, Ms Sharpe insisted she has been forced to take a more pragmaticapproach after a period where new project approvals stalled, the $13 billionSnowy 2.0 project remains behind schedule, and more coal-fired power stationclosures loom.

“We’re trying to manage an orderly exit fromcoal-fired power, which is inevitable and also has to happen as quickly aspossible, but also you can’t ignore the reports that come through that suggeststhere will be some challenges around reliability. But it’s also about price,and we’ve seen them rising,” she said.

“So it’s not a case of ‘we’re keeping openEraring so we’re not committed to a transition’. That’s just not true … it’s alarge exit we need to manage.”

The government is yet to put a price onkeeping Eraring open, nor a timeline around how long the arrangement will last.

But as the discussions with the federalgovernment continue over the capacity investment scheme and funding avenues, Ms Sharpe said NSW stood to gain most from investment in pumped hydro, wind, solar, community batteries and even air compression.

Mr Bowen last year unveiled the investment scheme, which aims to force what some say could be up to $60 billion in new assets generating 32 gigawatts, which is about half the current national grid. However, Mr Bowen has ruled out opening the government underwriting scheme to gas projects.

And it’s a busy time in NSW for gas, which isset to play a growing role in the state’s firming mix. EnergyAustralia ispreparing to switch on the state’s newest gas peaking station, Tallawarra B, inthe Illawarra region this month, and construction is continuing on thetaxpayer-funded Kurri Kurri gas peaking plant in the Hunter region.

At the COP28 climate talks, federal EnergyMinister Chris Bowen also spoke to the virtues of gas as flexible power sourcethat can be switched on and off.

Under the former government, Mr Kean insistednew firming sources, including a 850MW super battery to be built beside Eraringand another next to Liddell, combined with other renewable energy sources,would cover the state’s energy and firming requirements without the need forNarrabri to come into production.

He repeatedly downplayed the utility ofSantos’ Narrabri gas project even as he signed off on the relevant approvals.

At the same time, the state’s $10 billion transmissionroll-out – which is necessary to connect Snowy 2.0 to the grid, as well as five renewable energy zones that will eventually become the state’s primary energy generators – had slowed to a crawl.

Renewable energy project approvals had alsocollapsed, resulting in a two-year drought in wind farm approvals.

Ms Sharpe says she is agnostic on Narrabri,and whether it proceeds is ultimately a question for Santos. But she also saysshe suspects Santos is informed by the same research the government receives,which says that gas will be critical to the state’s energy requirements forsome time.

“They’re a private company and have toultimately make their own decision about what to do with their project … theyread the same reports which we all do, which say there is going to be a needfor gas for a period of time,” she said.

“Long term, we actually think once hydrogenbecomes commercial and mainstream, there are some options there.”

But in a year when discussion of the state’senergy needs have been dominated by the closure of coal-fired power stations,outrage from other states regarding NSW’s contribution to the national gassupply, and the government’s negotiations with Origin Energy to extendoperation at Eraring, Ms Sharpe downplayed the likelihood of striking similardeals with a gas producer – such as Santos – to speed up new supply.

“We’re not yet at that point … There are other[options],” she said. “Where we get gas from is an obvious question and how weget it, whether it’s through LNG terminals or through other sources elsewhere,but that’s a different question to an existing power station and whether it’sthere. That is already providing gas, and is such a large part of the energymix.”

Other priorities include solving seriousplanning delays – sparked by fierce opposition in regional and rural areas –which have prompted energy sector investors to fume that they can secure agreen light in Queensland in a third of the time it takes to get approval inNSW, and two-thirds of the time it takes in Victoria.

Improving community consultation and offeringfat handouts ($200,000 per kilometre) to owners who allow infrastructure ontheir property has helped revive some progress in the transmission roll-out,but there is more work to be done, Sharpe said.

A renewable energy planning scheme is alsostill a work in progress and a joint priority with the state’s planningminister, Paul Scully. The release of new government guidelines simplifying theplanning process and what constitutes as a compliant project is one step toease the delays, but serious work still needs to go into getting communitiesonside.

“The thing I worry about is that I just don’tthink we’ve done a good job of dealing with the communities on the ground … therestill remains a lot of misinformation and distrust. It’s one of the things I’veasked Energy Co to really spend a lot of time on.”

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