With coal power in Australia nearing its end, transitioning to greener forms of energy and meeting our net zero ambitions will require us to use every tool in our energy toolbox.

With a diverse $26 billion portfolio of energy infrastructure assets spread right across the country, APA is uniquely positioned to understand the challenges in decarbonising Australia’s energy system. 

The retirement of coal power stations first is the biggest single emissions reduction initiative Australia can undertake.

Despite the increasing volumes of renewables entering the system, black and brown coal generation still dominate the energy mix in the National Energy Market (NEM) and have much higher carbon emissions than energy produced by nearly all other forms of generation, including gas powered generation (see Figure 1 below).

Black and brown coal currently provide almost 50 per cent of electricity generation in Australia and are also one of the biggest sources of carbon emissions.

What is becoming clearer by the day is that along with transmission and renewables, we need gas to deliver a smooth transition as coal exits the system.

This is reiterated in AEMO’s 2024 Integrated System Plan, which highlights the need for flexible gas-powered generation to ‘back-up’ renewables and storage on the pathway to net zero.

The Federal Government’s May 2024 Future Gas Strategy also recognised that natural gas is needed through to 2050 and beyond, even if its production levels and use will fall over time.¹ This is because:

• Gas will continue to support existing industries through the transition, particularly those that can’t electrify or use gas as an industrial feedback;
• Gas powered generation will flexibly back-up renewables when the wind isn’t blowing and the sun isn’t shining.

Unless we have a reliable, long duration source of energy to replace coal generation, governments will seek to keep coal open for longer than necessary. We have already seen this in Victoria, and in May this year the NSW government secured a two-year extension to Eraring Power station, the biggest coal power station in the NEM.²

New gas supply will be critical to the transition

To ensure we have a smooth energy transition, one of the most pressing issues that we need to address in Australia is the urgent need for new gas supply.

As AEMO’s 2024 Gas Statement of Opportunities made clear, a looming gas supply gap is forecast to emerge by as early as 2027 on the east coast.

But according to estimates prepared by the ACCC, future demand could be met until 2035, if domestic gas reserves are developed and new resources are discovered.

Australia has an abundance of natural resources, such as solar and wind, and we have an abundance of gas resource in regions such as the Beetaloo basin in the Northern Territory, which have the potential to boost supply across the east coast of Australia.³ 

However, it is no secret that these types of projects are complex, and they require a supportive regulatory environment that can help unlock new investment and fast-track project delivery.

The role of gas infrastructure in bringing on new supply

The job doesn’t stop at investing in the right gas supply projects. We also need to make sure we have the infrastructure to transport the gas where it’s needed.

The Future Gas Strategy recognises that the current infrastructure linking up northern supply to the southern markets is limited and that more investment in pipelines and storage capacity is needed, fast. This is because gas demand is likely to become increasingly ‘peaky’, particularly during periods of renewable energy droughts.  

At APA, we have been focussed on making investment decisions ahead of demand.⁴ Over the last four years, we have invested approximately $700 million expanding our East Coast Grid to ensure there is sufficient capacity to manage the forecasted increase in demand. 

However, even with this investment, more capacity is urgently needed. AEMO forecasts the north-south transportation of gas will be increasingly relied on to meet southern gas demand, including for GPG. The incremental expansion of existing infrastructure is the most efficient, timely and lowest cost solution to ensure that gas is delivered when and where it is needed.

In short, we need to focus on retiring coal as a sensible first step to meet our net zero ambitions. However, to ensure an orderly energy transition and make sure the lights stay on, we need gas to be on standby when coal closes. This means we need to invest in new gas supply and gas infrastructure now, so that we can meet the energy needs of the future.

¹ Link to Strategy - https://www.industry.gov.au/sites/default/files/2024-05/future-gas-strategy.pdf

² Link to media release - NSW Government secures two-year extension to Eraring Power Station to manage reliability and price risks | NSW Government

³ Link to media release - APA signs initial agreement to commence work to connect Tamboran's Beetaloo Basin assets

⁴ Link to media release - APA delivers capacity boost to the east coast gas grid