Labor’s $4 billion deal: Gas and solar, a bob each way?

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By ERWIN CHLANDA and JULIUS DENNIS

The NT Government is spending vast amounts of money on two initiatives in direct opposition to each-other.

On the one hand it is grappling with having to use lots of gas. The Clare Martin Labor government, with her successor Paul Henderson as the “lead economic minister,” in 2006 contracted to buy $4 billion worth of gas, payable by 2034, whether delivery of it is taken or not.

On the other hand the present Gunner Labor government, together with the Feds, is paying $12m (including some in-kind) for a study about reducing the gas consumption by the government-owned electricity generation companies, and feeding more solar power into the Alice Springs grid.

Meanwhile Mr Henderson (pictured campaigning in 2017) has progressed to be a bigwig in the gas industry as the chairman of Mobile LNG Pty Ltd which provides advice for the gas industry.

His online CV says: “Paul has an unparalleled grasp of business and politics in the Northern Territory. As Chief Minister from 2007-12 and a Senior Minister from 2001, he dealt with a range of issues and challenges and helped put the Territory on the path to sustainable economic growth.

Through Bespoke Territory, Paul now works directly with clients to provide individual and discreet advice on how to succeed in this unique and dynamic part of Australia.”

Meanwhile a think tank setting out to decrease gas use in Alice is called Intyalheme Centre for Future Energy at Desert Knowledge Australia who are running the Future Grid project.

Manager Tristan Simons (pictured), when asked by the News, says the group will “produce a documented mapping of the future of renewable energy in Alice Springs by mid-2022,” but admits that early 2023 is more likely when “it will be out there for comment.”

He explained why a group cobbled together from locals is needed: “The Northern Territory … operates under energy policies and rules that are different to elsewhere, thus requiring work from Northern Territory-based people within both government and the energy industry.”

The group is led by a consortium of Desert Knowledge Australia, Power Water Corporation, Territory Generation and Eksistica.

Plus, says Mr Simons, “understanding how virtual power plants, microgrids, existing centralised generation, customer behaviour and appetite, and market conditions interact collectively is critically important”.

How it is that P&W, after half a century of monopoly operation in Central Australia, hasn’t got a handle on the “behaviour, appetite and market conditions” of the locals is not explained.

Says Mr Simons: “It is unusual to find an isolated and regulated network of this scale.”

That would be overlooking that an easy transplant to Alice Springs is a 50 megawatt hybrid solar thermal project (top of the page) underway in Mount Isa, our closest neighbour to the east, which will use concentrated thermal solar generation, solar PV with battery storage and fast acting gas as a back up to create baseload power.

Much like Alice Springs, Mount Isa is a regional hub that is not connected to the National Energy Market (NEM).

Stanwell Energy, which is owned by the Queensland Government, and Vast Solar have both put $5m on the table for a feasibility study to commence in the near future.

Essentially, the Solar PV will provide the daytime power and the thermal will look after the nights. The Solar PV system will come equipped with battery with quite low storage levels to fill in gaps should the gas need to be turned on.

Still the battery is huge compared to what we currently have in Alice Springs. The BESS here is a five megawatt system where the Mount Isa venture will be using a 52 megawatt system.

In theory, all of this will shake down to a third of the power being generated by the solar PV, about half from thermal, and around 15% from gas, lowering the region’s energy based carbon emissions by 85%.

With construction set to start in the second quarter of 2022, it is likely that work at Mount Isa will begin before we have even seen the Future Grid report.

Says Mr Simons: “The final outcome of the project is a ‘Roadmap to 2030,’ for how Alice Springs can reach 50% renewable energy use.”

He says: “At cer­tain times – e.g. in the mid­dle of a sum­mer day when air con­di­tion­ers are run­ning hard and demand for pow­er is high – Alice Springs can reach up to 50% solar.”

That can happen at present, occasionally. Does that suggest the 50% renewables, the NT Government’s target for 2030, has already been reached? Does $12m need to go to yet another report? For $8m the capacity of the town’s BESS battery system could have been doubled.

Part of the projects, says Mr Simons, “is looking at some of the reasons why the system controller requires a minimum number of gas generators on at any one time, and how we securely and reliably reduce this number”.

The cost for installing 10 gas fuelled engines at Owen Springs under the Giles government was $100m. They can be started in seconds to cope with the occasional vagaries of solar strength.

The gas generators act as a “backbone to the system, they provide things like inertia, frequency, and voltage control, that all help the system overcome events,” says Mr Simons.

The answer for loading more than the current 25% into the town’s grid may already exist, such as a bigger battery than the 5MW BESS.

However, there are the “financial constraints” of the Northern Territory “and [it] may not be the most appropriate solution in any case”.

Given the monumental $4 billion obligation under the Martin – Henderson deal there is a crucial aspect of the future operations: When we have too much solar power, should the controller shut down gas engines, the fuel for which we have to pay for anyway, or disconnect solar producers – many of them being private rooftop panel owners or solar farms – reducing their income.

As the controller would be working for P&W, which is carrying the $4 billion debt, one could imagine a vested interest to be operating to the disadvantage of the solar producers.

That, of course would make a mockery of the government’s “save the world” environmental policies.

P&W admits that in 2006 it made a deal with the Italian firm ENI “for gas supply from 2009 to 2034”.

P&W does not say how much it is for but the $4 billion figure – equivalent to half of the NT’s monstrous deficit – comes from an impeccable source.

P&W says it has historically been “and will continue to be the primary gas supplier to the generation sector in the NT,” and long term arrangements [are] in place to ensure sufficient gas to keep thermal generators running and maintain electricity supply”. As well, it “has signed long term gas sale agreements with a number of mining and industrial customers in the NT, including generators for future gas supply.

“In 2019 the Northern Gas Pipeline (NGP) commenced operations that provided P&W with access to new markets in the East Coast of Australia. P&W has signed a number of gas sale agreements for both short and long term supply.

“P&W is currently forecast to sell all available gas into the future and may need to purchase additional gas to meet predicted future demand.”

P&W is not disclosing details of these deals.

“P&W activities are complementary with the NT Government’s renewables policy by providing gas for thermal generation when required” and its “gas portfolio can also be used to support industrial development in the Territory.

It should be noted that industry standard gas agreements generally include some form of take or pay arrangements, which are reflected on both gas purchase and gas sale agreements.

“This only becomes an issue when gas is unable to be sold, which is not the case with P&W.”

3 COMMENTS

  1. All of which makes a mockery of Paul Henderson’s CV claiming he “helped put the Territory on the path to sustainable economic growth”.
    It’s way beyond time to abolish self-government of the NT.

  2. When talking about battery storage it is always written megawatts when it should be megawatt/hours, just megawatts is what is dumped on the grid at any moment, if it’s 5 megawatt/hours that could be 1 megawatt for 5 hours. It’s like this 2.0 nonsense that just 2!!

  3. Can someone please explain why the “excess gas” the NT government is committed to buying cannot be sold at a profit to supply the East Coast domestic market?
    We keep hearing that the East coast is short of gas, because private corporations
    got better prices for long term contracts to export gas than to supply the local market. There are even plans underway for LNG terminals to re-import.
    Australian gas back from Asia, at a higher price again, to supply manufacturers starved of gas.
    WA avoided this idiocy by quarantining a substantial proportion of their gas for domestic consumption.
    What price is the NT government paying for the gas, and how does this compare to the export price and the current domestic price on the East coast?

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