South Australia’s $1 Billion Energy Deal Builds on Gas-Fired Recovery

April 19, 2021 Updated: April 19, 2021

The South Australian and Federal governments have signed an AU$1.08 billion (US$834 million) agreement to provide South Australians with reliable and affordable energy while maintaining emission reduction targets.

The deal involves a $100 million energy grid interconnector between South Australia and New South Wales and an investment of $510 million for emissions reduction projects such as carbon capture and storage, hydrogen, solar thermal, and electric vehicles.

But the deal also includes a push for an increase in gas supply, building on the government’s Gas-Fired Recovery plan—a plan to reduce costs and emissions and address Australia’s forecasted gas supply shortfall.

Prime Minister Scott Morrison said in a media release that the plan will play an important role in supporting families and small business while still addressing climate concerns.

“Families and businesses need affordable, reliable power. That is what reduces prices and creates jobs,” Morrison said. “Australians also want to ensure we are doing everything we responsibly can to combat climate change.”

Morrison added that the energy deal needed gas alongside renewables to achieve both affordability and reliability.

“This means getting more gas into the market to support the increase in renewable solar and wind power coming into the electricity system,” he said. “One works with the other to deliver lower cost, lower emissions and reliable power.”

Australia has set a target of net-zero emissions by 2050—in accordance with its commitments to the Paris Agreement—and gas has been part of the government’s plan to reduce emissions while maintaining reliable energy generation sources.

According to a report by CSIRO (pdf), compared with coal, domestic gas use for power generation will reduce emissions by an estimated 31 or 50 percent, depending on the type of gas turbine used.

However, the decision to transition from coal to gas has been met with criticism by those favouring carbon-free sources of power generation.

According to the Climate Council, Australian Energy Market Operator (AEMO) reports have said that the gas shortfall has been exaggerated.

“The Morrison Government’s ‘gas-fired recovery’ fantasy is just that, an expensive, dangerous, and unnecessary fantasy,” said Climate Council researcher Tim Baxter.

Gas is also driving up power prices and prices for our manufacturing industries. It has no role to play in our economic recovery,” said Baxter.

In an interview with 2GB, Minister for Energy and Emissions Reduction Angus Taylor argued that AEMO’s reports have previously failed to estimate gas supply needs accurately.

“They’ve made mistakes in their forecasting in the past which have been very significant,” Taylor said. “They’ve under-forecast the amount of gas needed in the system by many times in the past.”

Taylor also said that the push against gas did not support a reduction in greenhouse gas emissions and only served to disadvantage Australian families and businesses.

“The ironic thing about gas is that a lot of the anti-gas activists say, ‘well, it’s important to get rid of gas because of the emissions,'” he said. “Frankly, more gas in our system right now will bring down emissions.”

Taylor went on to say that the removal of the gas supply would only hinder Australian families and businesses.

“What we’ve got is these activists who are acting against the interests of Australia, against the interests of Australian manufacturing, against the interests of Australian small businesses and households,” Taylor said.