If you want renewables, you also need gas

Yesterday, federal Labor gave preliminary approval for a 40-year extension to the North West Shelf (NWS) gas project in Western Australia. The existing permit was due to expire in 2030, and the project’s owner, Woodside, had been pushing for approval to extend it for six years.

I’ve got a couple of thoughts. First, it’s a great that a decision was finally made, and that it was a positive one. If the Labor government wants to push ahead with its renewables transition, then it needs gas. Nuclear is banned in this country, and coal has been given its marching orders. Without a massive, costly over-build of renewables and battery storage, you need something to bail you out during a dunkelflaute.

And in Australia, that something is gas. Fifteen percent of NWS production will be reserved for domestic use in Western Australia, including anything produced by a potential Browse Project expansion. While the economics of the reservation policy are highly dubious, there are still legitimate energy security considerations, and politically it will effectively cross-subsidise the renewables transition—i.e. households won’t ‘feel the pinch’ as much as they would have otherwise.

But why did it take six years?! If we want to continue enjoying nice things in this country, taking six years to approve a gas project is not the way to go about it—and this project already existed! I do worry that by dragging its feet for so long, the Albanese government has done damage to foreign investors considering new major gas projects in Australia. The fact that Resources Minister Madeleine King fired a mob boss-like shot across the industry’s bow, saying Australians are “tired of seeing our vast gas resources exported overseas… [the] gas industry should pay careful attention to public concern of rising gas prices and supply gaps”, only strengthens that worry.

As for the environmental concerns, they’re being overblown. For example, the Australian Conservation Foundation asserted:

“That the gas is destined for export makes no difference to its climate impact. It will be felt by Australians through more intense and frequent extreme weather events like bushfires, heatwaves, floods and coral deaths.”

No, it won’t. You can’t compare the world as it exists against a hypothetical fantasy land where there’s some binary choice between more natural gas or more renewables.

In the real world, gas is primarily replacing coal—it’s a “bridge” energy as nations make the costly switch to zero-carbon alternatives like renewables and nuclear—and it emits around half as much carbon as coal for an equivalent amount of energy. As a substitute for coal, more gas (LNG) being exported onto global markets will reduce its price, causing more people to switch from coal to gas, reducing the demand for coal (the demand curve shifts down to the left).

In other words, the NWS extension is likely to lower the amount of global carbon emissions, not raise them. To the extent that such exports have any influence on climate change and its links to weather severity and frequency, the project’s extension will be felt by Australians through fewer such events, not more!

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