Gas is facing a tougher than expected battle
Date: 26-Oct-01
Country: AUSTRALIA
The Australian Gas Association said less optimistic forecasts for gas to take a rising share of the primary energy market, including power generation, demonstrated the need for a national policy to encourage gas use.
"Between now and 10 years out there is not going to be a big dash to gas for power generation," AGA chief executive Bill Nagle told Reuters.
"The new figures reflect more resilient coal consumption in power generation and less fuel-switching to natural gas in a range of applications than was previously expected."
This month's Australian Bureau of Agricultural and Resource Economics (ABARE) forecasts are for gas to boost its Australian primary energy market share to 23.9 percent by 2019/20, from 18 percent in 1998/99.
While its growth is still rising at a faster rate than other fuels, the new forecast compares to ABARE's 1999 forecast gas to take a 28 percent share of primary energy use by 2014/15.
Limited government action, the low-cost of coal and National Electricity Market hurdles have slowed the expected rise of gas which is seen as part of the solution for Australia's greenhouse gas emission problems.
The Electricity Supply Association of Australia expects gas will account for a fair proportion of 4,000 to 7,000 MW of new generation it forecasts will be needed by the end of the decade, in addition to 3,000 MW of extra mandated renewables.
ESAA managing director Keith Orchison said the cheaper cost of building gas-fired plants and their flexibility particularly in meeting peak and intermediate demand would drive new projects.
COAL DILEMMA
Power generation accounts for almost 40 percent of Australia's greenhouse emissions, which have risen by 33 percent since 1990. Australia plans to limit its growth in total emissions to 108 percent of 1990 levels by 2008-2012.
The Federal Government's dilemma is that while coal-fired power, which accounts of about 80 percent of generation, is a major source of emissions it also provides the cheapest power.
Several programmes encourage reduced emissions from coal-fired plants while the Government has mandated that electricity retailers should source an extra two percent of their supply from renewable energy by 2010.
But environmental groups want a higher percentage, targets set for gas-fired cogeneration and policies that favour closed cycle gas-fired generation over coal-fired power.
"The environmental movement does recognise gas as an important bridging tool, taking a greater part of the energy mix in the next 20 years as we move from fossil fuels to renewables," Climate Action Network co-ordinator Anna Reynolds said.
The gas industry is seeking improved favorable taxation arrangements and transmission pipeline regulation that will encourage new projects and help increase the sector's market share.
Federal and state governments meeting mid-year announced plans to develop a national energy policy and identified "wider penetration and uptake of natural gas" as a key issue.
The review, which has bipartisan support, is on hold until after a November 10 federal election while greenhouse policy is also in flux amid uncertainty on Kyoto Protocol rules.
STATES TAKE OWN ACTION
In the meantime Australia's states are taking widely different approaches to their energy policies.
In Queensland the government has released a controversial discussion paper on legislation requiring retailers in that state to source 13 percent of their power generation from gas.
The move was partly spurred last year by a strategy to encourage gas supply projects, including the ambitious Papua New Guinea to Queensland pipeline plan, to fuel new industry.
ACIL Consulting analyst Paul Breslin said only a few percent of the state's power demand was now met by gas and a 2005 start-up date for the 13 percent target was a tough task.
"When they first suggested it I think they thought the PNG pipeline would be built by 2005 and that is still jus