There is a big question being asked in Australian politics right now, but it ignores the easiest and only viable solution to the energy problem.
Former ANSTO chief executive Dr Adi Paterson says there are important businesses that need “reliable power all the time”. Mr Paterson told Sky News presenter Peta Credlin that renewable energy could not be the “entire energy system” for Australia. “That’s the plan of this government – it’s madness, it’s absolute madness,” he said.
The dark area of Australian politics poses a key question that has puzzled the country for a decade: Do you support renewable or nuclear energy for power generation? Energy Transmission?
This false binary ignores the only viable option. The easiest solution to the energy problem; which is using more gas to generate power.
Gas power produces half the emissions of coal, and whether you ultimately support renewables or nuclear in the long term, gas is essential as either is rolled out over the next 25 years.
Gas-fired power is the ideal backup for renewable energy because gas turbines can be turned on and off quickly, and can provide dispatchable power when the sun is out and the wind is not blowing.
The Australian Energy Market Operator (AEMO) recognises this and recently announced that the transition to renewables would require the equivalent of 25 “peak gas” power stations:
This graph shows the gigawatt capacity of different types of energy over time. Image: Introduction
Gas-fired power plants are also cheap to build, and in fact, we could build all 26 gas-fired power plants for the cost of one nuclear power plant.
Australia’s east coast has large amounts of cheap gas to run, and existing coal-fired power stations can be quickly converted to gas-fired stations at lower cost; without the need for New infrastructure goes beyond gas access.
There are still 15 of these coal-fired plants in the national electricity market.
The United States has converted more than 100 coal-fired power plants to gas since 2009, outpacing Australia in decarbonization despite its more divisive policies than ours.
CO2 emissions per capita. CO2 emissions from fossil fuels and industry, compared to Australia and the United States. This figure does not include land use change. Image: Introduction
Increasing gas-fired power is the only way Australia can meet the emissions reduction targets set out in the Paris Agreement.
So what’s the problem?
Given these huge advantages, why is gas being ignored in the discussion?
During and after the 2008 global financial crisis, gas reserves on the East Coast were sold to foreign oil companies.
Most of these reserves are located in Queensland, and are now 85% owned by the LNG export company operating out of Curtis Island.
This means that although the East Coast has a lot of cheap gas, most of it goes abroad, 72% of it to China, which incredibly often resells it to other countries:
Annual and projected total gas consumption. Chart: Australian Institute/AEMO GSOO 2024
The gas export cartel has deliberately raised the price of domestically supplied gas so that it is 500% higher than historical averages and is no longer usable as a fuel for energy production.
In fact, the artificial shortage engineered by the cartel is so severe that often there is no gas available at all and the national electricity company resorts to load shedding (blackouts) instead.
After Russia invaded Ukraine in 2022, the cartel profited from the war to the point that prices rose 2,200% above historical averages.
This was/is the focus of the explosion. Inflation impoverishes families Over the past two years.
So, nobody wants to build a gas-fired power plant or convert a coal-fired power plant to a gas-fired plant because there is no security of fuel supply.
Why doesn’t Canberra move?
But no politician will touch the gas cartel because of the toxic mix of fear and corruption.
When the profiteering from the Ukraine war began, the Albanian government backed down.
A Labor source said Dr Chalmers was still “affected” by the failure of the “super profits” mining tax in 2010 when he was a senior adviser to then Treasury Secretary Wayne Swan.
And when it finally managed to get the gas price to $12 per gigajoule, still too high for energy use, the price only lasted a few months before it took off again.
On the national liberal side, there is also a deplorable record.
This is the concept design for a small, zero-emissions nuclear reactor posted on Peter Dutton’s social media.
The Turnbull government installed the Australian Domestic Gas Security Mechanism (ADGSM) in 2017 that could force the cartel to supply more gas domestically. But it has never been used.
The cartel bribes both parties with donations, threatens them with campaigns, and recruits politicians with cushy positions.
It also sponsors think tanks like the Grattan Institute to produce bad ideas to cover up its malign influence.
Courage to act
If Canberra fails to break the cartel, Australia’s energy transition will fail through a combination of price shocks and blackouts.
This will lead to entrenched de-industrialization, increased supply chain dependence on China, and continued pressure on budgets, And consumer income.
The gas cartel is a cancer at the heart of the economy and must be eradicated or everyone will suffer.
The good news is that this problem can be easily remedied with stronger domestic sequestration policies, or even better, a 6 GJ gas export tax, which would raise billions of dollars in revenue while breaking the incentive to over-export.
All we need is a politician who has the courage to act in your best interests.
David Llewellyn Smith is Chief Strategist at MB Fund and MB Super. David is the publisher and founding editor of Macro Business magazine and was the publisher and global economic editor of The Diplomat, the leading economic and geopolitical portal for the Asia-Pacific region. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second edition of Garnaut’s Climate Change Journal.
