We will build it if you don’t: Federal Government preparing to build a gas plant in Hunter Valley

The Federal Government is threatening to build a gas power plant in New South Wales if the electricity sector does not commit to replacing coal-fired power stations that are being retired.

With the coal-fired Liddell Power Station in the Hunter Valley due to shut down in 2023, the Federal Government is worried there will not be enough dispatchable power, given the sector’s focus on building wind and solar farms.

The Federal Government will demand electricity generators come up with a plan for 1,000 megawatts of new dispatchable energy in time for the end of 2023.

If it is not satisfied with the private sector’s commitments by the end of April next year, Prime Minister Scott Morrison is vowing to intervene directly in the market.

“We won’t risk the affordability and reliability of the NSW energy system and will step in unless the industry steps up,” Mr Morrison said.

The Federal Government has tasked Snowy Hydro Limited with drawing up plans for a gas generator in the Hunter Valley at Kurri Kurri.

Mr Morrison will press the Government’s case for more non-renewable power generation in a speech to business and industry in Newcastle on Tuesday.

Energy Minister Angus Taylor said the market needed to focus on new, dispatchable power, arguing current plans fall “far short of what is required”.

“Over the last decade, the private sector has not built a single new reliable power plant in NSW,” Mr Taylor said.

“The Government has always been clear — we need to see life extension or like-for-like replacement of Liddell.

“If industry steps up, we’ll step back.”

Government to unveil raft of new measures

The potential for a taxpayer-backed, gas-fired power plant comes as the Federal Government turns its eye to the troubled gas market.

The east coast gas market has boomed under the development of Queensland’s coal seam gas fields over the last decade.

But while that has made for a profitable liquefied natural gas export market, Australian commercial and industrial gas users have continued to pay high prices.

The Federal Government will announce a sweep of measures aimed at addressing that imbalance, including:

  • setting up a National Gas Infrastructure Plan to identify the priorities for investment in the gas transport network
  • establishing an “Australian Gas Hub” at Wallumbilla in central Queensland for domestic trade
  • supporting an industry-led, voluntary code of conduct for gas producers and consumers (with the threat of a mandatory code if agreement is not reached by February 2021)
  • re-negotiating agreements with east coast gas exporters to ensure enough domestic supply at reasonable prices
  • supporting the development of five key gas basins, particularly Beetaloo Basin in the Northern Territory

The Federal Government is promoting the initiatives as moves that will both lower gas prices and create jobs.

The Australian Competition and Consumer Commission (ACCC) has long raised concerns that local commercial and industrial users are paying more for gas than exporters are selling it for on international markets.

A domestic gas reservation policy has not been ruled out, nor has building terminals for importing gas.

The Government’s focus on gas is expected to draw the ire of the renewable energy sector and environmental groups, which point to significant improvement in the capacity of wind and solar power to support the nation’s electricity needs.