Opinion

John Hewson
Never let a good gas crisis go to waste

Can you imagine our governments encouraging our food producers to export all their product even if it meant Australians would go hungry? Our local butcher tells us it’s a very real consequence of live animal exports, that reducing the availability of beef and sheep for our domestic market seriously raises the price of these meats. We have done this with gas, which is so important for household heating and cooking and as an input for many industries.

Gas producers have been mollycoddled with huge tax breaks to focus on exports rather than domestic supply, so much so that we now have a serious domestic gas crisis, in terms of both availability and price. It’s a legacy of the neglect of Coalition governments. The new Climate and Energy minister, Chris Bowen, refers to this as “nine years of denial and delay, their 23 energy policies, their ad hocery”.

The gas crisis embodies all the worst features of our political system. It’s one in which vested interests can wield influence over governments to extract significant profits, pay little or no tax and basically rip off the broader Australian community by exploiting what should be a significant national asset and a key element of our sovereignty and self-sufficiency. The new Labor government has inherited this poisoned chalice from its predecessors at the worst possible time, where the cost of living is a dominant issue. In addition, it is being pressured by many in the media who had campaigned against Labor in support of the Morrison government and are now wanting it to fail.

As tempting as it may be to take hasty action, a commonsense approach is what’s needed. Bowen is emphasising Labor’s Powering Australia plan and a willingness to rely on the expertise of the regulators – those overseeing the energy industry as well as those representing consumers. Obviously it would be a big call for a new government to pull the gas reservation trigger. It’s reasonable to say this is what consumers and voters might expect, but such action would probably require some restrictions on gas exports, which would likely draw widespread criticism from the gas industry. It’s an interesting political question: How long can Labor blame the Morrison government for its lack of leadership on energy without taking steps to fix it themselves?

In announcing its decision, the new government must define a pathway forward. That could be to announce an aim of, say, a 10 per cent reservation over the next five years, to be achieved in a number of steps and perhaps beginning with a modest 2 or 2.5 per cent. The big gas suppliers should then be encouraged to bring to government any environmentally responsible proposals for new gas, or other initiatives that could be fast-tracked to increase supply. It should be recognised that a domestic gas reservation scheme can still be consistent with a strong strategy for exporting liquefied natural gas. There have been some scaremongering comments suggesting that a reservation scheme would discourage investment in the industry and therefore constrain future supply, but I am yet to find any evidence to support this view.

Big gas suppliers such as Santos and Origin have been in the media recently lobbying for their positions. However, there is an element of hypocrisy in Santos’s offer to drill another three wells in the Cooper Basin. It begs the question, why didn’t they do this 10 years ago? They are also keen to finalise approvals for their Narrabri project, though this coal seam gas venture promises to be an environmental disaster and has already stirred some very negative community reaction.

A couple of years ago when I was chair of Bioenergy Australia, we worked very closely with the office of the then Energy minister, Angus Taylor, his consultant Deloitte and the Australian Renewable Energy Agency (ARENA) to develop a bioenergy road map. Bioenergy is typically produced from biomass residues and waste materials from primary and secondary production sectors. Clearly the use of organic waste to produce energy can play a central role in the natural transition to a circular, low-carbon economy. Organic wastes can be converted into renewable, reliable and distributable sources of energy to produce heat, electricity and transport fuel. They can support other renewables and play a crucial role in the stabilisation of the grid.

An important element of our road map was the view that, by 2030, some 20 per cent of gas could be supplied from biomethane, at a price approaching the long-term target for hydrogen of approximately $15 per gigajoule. This biogas, which is produced through anaerobic digestion, has a substantially identical composition to natural gas and can be injected into pipelines and used interchangeably with natural gas in all applications. Bringing biomethane into the supply mix would allow large gas users to acquire their gas at much lower prices and get the decarbonisation and emissions reduction benefits as well. Biomethane’s contribution could be about 5 per cent within 18 months, which could do much to ease the current gas supply and price pressures. For some reason, the Morrison government did not act on this matter.

The development of a strong bioeconomy can provide skilled employment opportunities to regional areas and stimulate economic development. The Clean Energy Finance Corporation has estimated that
the Australian bioenergy and energy from waste market has the potential to attract $3.5 billion to $5 billion investment, mostly in regional economies and infrastructure. Infrastructure Partnerships Australia estimates an investment opportunity for generating energy from waste of $8.2 billion to $13.7 billion by 2030.

Apart from these economic, investment and job opportunities, biogas can be a key contributor towards reductions in carbon emissions. Further, biomethane specifically offers an avenue for gas supply security. The biomethane industry is in its infancy in Australia, especially when compared with Europe and North America.

Deloitte has estimated there is 371 petajoules of identifiable recurring biogas potential in this country. If just 20 per cent of this potential resource were to be targeted for biomethane production, 74 petajoules of domestic gas would be produced. The Australian Energy Market Operator’s base case for gas in 2026 is an estimated annual southern shortfall of 51 petajoules. Biomethane has significant potential to address future gas shortfalls, especially throughout southern Australia, where large amounts of agricultural residue provide plentiful feedstock and where the biggest gas shortages are predicted to occur.

The message is clear. Taking up the biomethane opportunity would increase domestic gas production across the country and also allow our natural gas industry to meet its supply commitments to international markets. This can be achieved with a few simple steps, including structuring a domestic gas reservation scheme to motivate market participants to contract with biomethane producers to inject renewable gas into pipelines. Improved access to gas infrastructure may also be required, along with changes to injection guidelines and probably an expanded pipeline network. Incentives could encourage the uptake of renewable gas and seize the considerable export potential for biomethane through liquefied natural gas terminals to the international green gas markets. These steps may also provide an opportunity to set a fuel security target for locally produced renewable transport fuel, thereby increasing the availability of bioCNG – compressed biogas – and domestic green gas production.

This is a very real opportunity for Anthony Albanese’s government to demonstrate that it can manage a crisis to our clear national benefit. The technologies are well developed and proved, and as such de-risked for bankers and investors. In view of the urgency of the climate challenge, we should be taking every opportunity to facilitate the transition to a low-carbon Australia. This gas crisis provides us with such an opportunity for a reset of our thinking and policies. It’s time to be creators and inventors, rather than  wreckers and destroyers. 

John Hewson is a former chair of the Bioenergy Australia board and has advised on biogas projects.

This article was first published in the print edition of The Saturday Paper on June 11, 2022 as "Never let a crisis go to waste".

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John Hewson is a professor at the ANU Crawford School of Public Policy and former Liberal opposition leader.

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