Woodside sparks fight of fossil vs fossil

 

The ABC reports that the Opposition plans to adopt former PM Malcolm Turnbull’s short-lived National Energy Guarantee as its energy policy going into the upcoming election.  Energy policy has been called the “killing field” of Australian politics.  In an unexpected announcement on energy policy, Woodside petroleum argued that Australia should dig up a page from the 2012 policy playbook. 

Woodside CEO Peter Coleman argued that Australia should reinstate a price on carbon emissions.  The statement reflects the market position of Woodside, a major supplier of natural gas.  In a market where coal competes against relatively cleaner burning natural gas, electricity generators would be incentivised to shift away from coal-fired generation towards gas turbine power generation.  Gas turbines have other advantages.  A utility operator can rapidly switch on gas turbines to respond to sudden changes in variable renewable energy generation like wind and solar or when a heat wave brings on air conditioner demand late on hot summer days.  It actually makes sense for gas suppliers to pay for CO2 due to efficiency advantages, but only if coal generators also must pay to emit carbon dioxide, a relatively more expensive alternative. 

Gas is cited by some energy analysts as a ‘transition fuel’ since gas turbine plants can react more responsively than megawatt-sized coal plants.  However, gas is also criticised because fugitive methane emissions at gas wells contribute to global warming ten times more on a molecular basis than a similar volume of carbon dioxide.  Ultimately, by mid-century, even gas-fired turbines would need to switch fuels to low carbon or zero-carbon feeds with hydrogen or ammonia to reach carbon emission reductions.  Coleman said,

“We need a price on carbon, [and] we need to ensure that the most effective energy gets into the system.” 

In Australia, Woodside joins BHP and Rio Tinto in the call for carbon pricing.  In October, ExxonMobil made similar arguments in the US.  Coleman said, “‘By the time the science is proven, it will be too late to act,” but perhaps the real motivation is policy certainty under conditions of reasonable corporate profitability in the near and medium term.  The gas-versus-coal argument actually makes good sense in the near term until greater integration of zero-emissions energy then displaces gas. 

 


This story is featured in the 23 November 2018 edition of The Warren Centre’s Prototype newsletter. Sign up for the Prototype here.