Finkel Review Calls for Australia to Decide on Gas Projects on Case-by-case Basis

Australian state governments should decide on gas projects on a case-by-case basis and the country’s energy market operator should have new “last resort” powers to entre commercial arrangements with gas-fired generators, according to recommendations by the Finkel Review released June 9.

The report by Australia’s chief scientist, Alan Finkel – which aims to shore up the country’s energy security – said governments should “adopt evidence based regulatory regimes to manage the risk of individual gas projects” rather than blanket bans.

Various moratoria, bans and restrictions on onshore gas develop has been blamed, in part, for concerns that the country could face gas shortages by the end of the decade.

“The panel considers that governments should avoid blanket restrictions and bans on gas projects and instead encourage the safe exploration and development of the industry,” it said.

AEMO should have “last resort” powers

The Australian Energy Market Operator should be given a last resort power to procure or enter into commercial arrangements to have gas-fired generators available to maintain reliability for electricity supply in emergency situation by mid-2018, it said.

“However, the right to use this power should only be exercised if certain conditions are not met in the market. Appropriate parameters will need to be established,” it said.

Clean energy target is needed

The report also recommended a clean energy target, which could encourage new investment in gas-fired power plants after years of stagnation.

“A Clean Energy Target will encourage new low emissions generators into the market in a technology neutral fashion. Under the mechanism, new low emissions generators such as wind, gas, or the combination of coal with carbon capture and storage, will receive incentives to enter the market,” it said.

In addition to incentivising generation into the market, the clean energy target is also aimed at lowering long-term emissions.

“A mix of wind, solar and coal generation would be equally acceptable as a mix of wind, solar and gas generation as long as the emissions reduction trajectory is achieved,” it said.

As part of the transition, generators would also be required to provide three years’ notice of their intention to close, it added.

Australia currently has a renewable energy target, which the review said would continue to its scheduled 2020 end.

More transparency required in gas market

AEMO should also be given expanded visibility on gas contracts so that it can plan for responses to shortages, the review said.

“Gas producers and major gas consumers should produce and provide to AEMO a rolling monthly look-ahead for six months and an outlook for three years,” it said.

And, it called for governments to work with communities to encourage safe exploration and production. 

The government will now consider the recommendations and the detail in the report, minister for the environment and energy, Josh Frydenberg said.

He said that it is clear that “'business as usual' is not an option”. 

Nathan Richardson