Energy company says importing LNG will firm up renewable energy projects but critics say gas is already more expensive than clean alternatives

This article is more than 1 year old

This article is more than 1 year old

Controversial plans to import liquefied natural gas into Australia to fill a shortfall as domestic gas is exported to Asia would significantly increase greenhouse gas emissions, AGL has conceded.

Energy companies have proposed four LNG import terminals for the east coast to ensure gas supply and ease high prices. The imported natural gas would effectively replace the two-thirds of gas sold overseas from export plants in Queensland.

One of the most advanced is proposed by AGL Energy, which wants to park a floating plant in Victoria’s Western Port Bay and connect it to the state’s gas network via a high-pressure pipeline.

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In an email to conservation group Environment Victoria seen by Guardian Australia, AGL said it could lead to a 20% increase in emissions compared with the same amount of gas extracted and used in Australia due to additional production, processing and transport of the LNG. Some of that increase would be counted as part of Australia’s emissions, and some in the country where the gas originated.

AGL said the project was critical to cutting emissions from the energy system as it would lead to coal plants, with higher emissions, being replaced by new renewable energy projects firmed by flexible gas plants that could be called on when required.

“A marginal increase in the carbon intensity of the gas used to firm up new renewable energy projects does not materially impact the significant carbon savings achieved by replacing retiring coal plants in this way,” AGL senior manager for project engagement, Kelly Parkinson, said.

There’s no scenario where [importing gas is] in the public interest or a good outcome for the environment. Mark Wakeham, Environment Victoria chief executive

But Environment Victoria chief executive, Mark Wakeham, said the idea Australia needed to import gas to have a clean energy transition was ridiculous and outdated. He said the rise of renewable energy meant the country was already burning eight terawatt hours’ less gas to generate electricity than five years ago. Several coal-fired power plants having closed in that time.

“There’s no doubt companies like AGL might be able to make some money importing gas, but there’s no scenario where that’s in the public interest or a good outcome for the environment,” Wakeham said.

The dispute calls into question the idea that gas should be considered “cleaner” energy, the descriptor used by the Australian Petroleum Production and Exploration Association (Appea), which represents the LNG industry.

In a recent submission to the Climate Change Authority, Appea said emissions from LNG were on average about half those from coal across its full life cycle, which includes extraction, processing, shipping, piping and burning for energy. An accompanying graphic suggested they were 39% lower.

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Opponents to gas industry expansion, including Environment Victoria, said further investment in the fossil fuel made little sense on environmental or economic grounds as it was more expensive than genuinely clean alternatives – solar or wind energy backed by batteries or pumped hydroelectricity.

They said Australia could meet current domestic gas needs at electricity plants, for heating and cooking and as a feedstock for some industrial processes from existing developments, if there was a domestic reservation policy that limited the proportion sold to Japan and China.

AGL’s proposal for a floating storage and regasification plant at Crib Point to operate from 2021 is before the Victorian government, which last month said it would have to undergo a full environmental effects inquiry. Some ministers have expressed support for the project.

The company said it would make gas supply more certain, reduce the urgency to open more gas fields and put downward pressure on wholesale prices by increasing competition.

Analysts at Macquarie Bank disagree on the last point, finding importing LNG would not lower prices in Victoria and NSW due to the additional cost of processing and new infrastructure. But they said it seemed inevitable at least one terminal would be built to meet demand.

The other relatively advanced proposal for an LNG import terminal is by Australian Industrial Energy at Port Kembla. Proposals by ExxonMobil in Gippsland and Venice Energy in Port Adelaide are at an earlier stage.

Australia’s LNG industry has expanded rapidly since 2012 to be the world’s second largest. It is expected its value will reach $48bn and it will be responsible for 7% of national emissions by 2020, effectively wiping out the emissions saved from the renewable energy target. Gas bills on Australia’s east coast have skyrocketed as the export industry sucked up most of the available gas to sell at higher prices on international markets.

Victoria uses 36% of the gas on the east coast, more than any other state. The state government is considering AGL’s proposal to import gas but has blocked further onshore gas exploration and development.

It has a moratorium on conventional onshore gas exploration until 2020 and an outright ban on unconventional gas projects that involve fracking. With the state facing an election on Saturday, premier Daniel Andrews last week pledged to put the fracking ban in the state’s constitution if re-elected.

Most analysts said there was no evidence Victoria has a significant onshore gas resource.