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Government support for a gas-led COVID-19 recovery

Prime Minister Scott Morrison recently announced a gas-led recovery to the economic recession brought on by the COVID-19 pandemic. A key part of the government’s JobMaker plan, the government expects the industry to create over 4,000 jobs.

Prime Minister Scott Morrison recently announced a gas-led recovery to the economic recession brought on by the COVID-19 pandemic. A key part of the government’s JobMaker plan, the government expects the industry to create over 4,000 jobs.

With AGL set to close the Liddell Power Station in 2023, the issue of supply is also top of mind. Part of the government’s plan is to establish a National Gas Infrastructure Plan to identify priority pipelines and critical infrastructure. The government has indicated that it may even step in where the private sector doesn’t, with the Prime Minister stating that the government will build a 1,000 megawatt power station in the Hunter Valley in the absence of private investment.

The government plans to increase gas supplies in the market by:
●    Setting supply target requirements on gas licenses;
●    Opening up five gas basins including Beetaloo Basin in the Northern Territory and the North Bowen and Galilee Basin in Queensland;
●    Putting in place new agreements with east cost LNG exporters to avoid supply shortfalls;
●    Exploring options for a prospective gas reservation scheme;
●    Increasing competition and transparency by reforming regulations on pipeline infrastructure;
●    Improving access and competition by commencing work on a dynamic secondary pipeline capacity market; 
●    Establishing an Australian Gas Hub to enable a transparent gas trading system;
●    Introduce a voluntary industry-led code of conduct by February 2021; and
●    With the ACCC, reviewing the calculation of the LNG netback price.

Domestic gas prices are key to the reforms - it’s estimated that domestic prices are 25% higher than international export prices. With gas prices falling, the government can promise voters lower prices while enabling manufacturing. Delivering affordable and reliable gas forms the basis for the government’s plan to fuel the economy.

The government’s plans are not without their critics. Tech entrepreneur Michael Cannon-Brookes, favours renewable energy like wind and solar. Rather than relying on gas to fuel manufacturing, he has pushed for a green jobs plan. His plan isn’t at odds with estimates made by the Australian Energy Market Operator (AEMO). AEMO has indicated that gas is likely to be less affordable than other forms of energy like batteries and hydro or demand response programs. 

Labor spokesperson Mark Butler, has argued that renewable energy could create even more jobs - over 50,000. A view echoed by Independent MP, Zali Steggall who also believes renewables should be included in the government’s plans. The issue with renewables is that they can’t yet provide stable energy supply that gas can deliver.

The announcement was closely followed by an additional $1.9 billion technology investment, that included enabling the Australian Renewable Energy Agency (ARENA) to keep operating. ARENA would also issue clean technology grants hub, funding technologies like carbon capture use and storage. 

At present, detail about these initiatives is limited, but we can expect further information and possibly more commitment to the industry in the Federal budget to be delivered on 6 October. 
 

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