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The Morrison government will allocate another $58.6m to “gas-fired recovery” measures in Tuesday’s budget and is continuing to hold out the prospect of building a new power plant in the Hunter Valley despite experts questioning the need for it.
The energy minister, Angus Taylor, will confirm on Friday new funding to support gas infrastructure projects, including a short-term loan of up to $32m to support early works for the Golden Beach gas production and storage project in Gippsland in Victoria.
The budget package includes $6.2m to further develop the Wallumbilla gas supply hub in Queensland. The Australian Energy Market Operator first implemented the hub in March 2014 as an exchange for the wholesale trading of natural gas and a single trading location was established in 2017.
The package also includes $5m for the commonwealth to work with the Queensland government on examining the feasibility of a new pipeline to link the North Bowen basin to the east coast market.
As well as confirming the budget spend, which follows $52.9m allocated to the “gas-fired recovery” in last October’s economic statement, the government will also release an interim report of its national gas infrastructure plan.
That plan identifies the new Golden Beach storage project and the expansion of the Iona project near Port Campbell as critical priorities. It floats an expansion of the south-west gas pipeline in Victoria and the construction of a new LNG import terminal at Port Kembla in New South Wales.
The plan notes the Port Kembla terminal is the most advanced option among six potential sites because it has secured development approval from the Berejiklian government and could be operational by mid-2023.
The plan notes imported gas “is generally more expensive since it includes the cost of shipping and re-gasification”. It says “in general, new domestic production tends to have a lower average delivered cost of gas, so the development of LNG import terminal facilities will result in the best outcomes if complemented by increases in domestic supply”.
The report states an import terminal would boost stability of supply and “add resilience in the case of peak daily demand during a particularly frosty winter”.
In a statement, Taylor said the taxpayer-funded investments were required to ensure there was sufficient supply of gas on the east coast of Australia. He said the government intended to ensure there was no shortfall because “the risk to the economy is too great”.
“Without action to address supply, industry and households will be faced with higher prices, disruptions in supply and unplanned outages,” Taylor said.
According to research conducted for the United Nations environment program, Australia is currently the worst performer on a list of the world’s 50 largest economies for “green recovery” spending to kickstart economic growth after the Covid pandemic.
Fugitive emissions from the booming LNG industry have led to increases in greenhouse gas emissions in Australia, and the Coalition has not telegraphed how it intends to address that problem given Australia’s commitments to reduce pollution under international climate agreements.
As well as the support for transportation infrastructure, the Morrison government has threatened to intervene in the market to ensure there are no shortfalls in dispatchable power generation once the ageing coal-fired power plant at Liddell in the Hunter Valley closes in 2023.
This week Energy Australia confirmed it would proceed with a new 300MW peaking power plant in the Illawarra. The government has also continued to hold out the prospect of Snowy Hydro building a new gas plant at Kurri Kurri to deal with any power generation gap created by Liddell’s exit.
The Kurri Kurri site was previously an aluminum smelter. It was bought by Hunter Valley property developers Jeff McCloy and John Stevens in 2020 with a plan to transform the area into industrial estates, a business park and a new suburb called Loxford Waters.
Officials from the federal energy department faced questions at Senate estimates this week about whether they were aware that Jeff McCloy of McCloy Group was, as the Labor senator Jenny McAllister put it, “a major Liberal party donor”. The officials said they were unaware of that.
Last week, the chair of Australia’s Energy Security Board, Kerry Schott, told Guardian Australia a taxpayer-funded gas-fired power plant in the Hunter Valley, if the government proceeded down that path, made very little commercial sense given the abundance of cheaper alternatives flooding the market.
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