16 October 2017 BZE Discussion Group “A Short-lived Gas Shortfall Tim Forcey Dylan McConnell 1
Eastern Australia gas exports (LNG) dwarf domestic use Starting in 2015… …disruption! The end of cheap gas in Eastern Australia. And the spectre of actual shortages? 2
AEMO’s “Gas Statement of Opportunities” (GSOO)… X …opportunities to invest in fossil gas supply infrastructure. AEMO’s 20-year outlook, xx updated annually. 3
9 March 2017 Gas shortages causing electricity blackouts? Seriously? X Gas industry & political responses / “opportunities”: • Frack the NT • Frack Victoria • Frack SA xx • Frack NSW’s Pilaga State Forest • Pipelines from the NT • Pipelines from WA • LNG import to Westernport Bay 4
Thanks protestors! Now you can all go freeze in the dark! 5
19 May 2017 Our report… “A Short-lived Gas Shortfall - A review of AEMO’s warning of gas supply shortfalls” Tim Forcey Dylan McConnell 6
AEMO new CEO from the USA Audrey Zibelman 7
One month later, June 2017… … AEMO publishes Energy Supply Outlook. X No more gas shortfalls / blackouts. xx 8
3 months pass… 9
25 Sept 2017 “GSOO update” AEMO abandons 20-year outlook to focus on just 2 years: 2018 & 2019. AEMO devises “worst-case” annual gas supply/demand scenario…. 10
… and the gas “shortfall” returns! Xxxxxxxxxxxxxxxxxx And it’s “three times bigger!” X Xxxxxx 11
But just 8 days later… No more gas shortfall, as PM Turnbull again “jawbones” gas giants. (3 October 2017) 12
What’s going on?? 13
Six different types of gas “shortages / shortfalls”: 1). We’ve run dry! All the gas is gone! NOT! See next slide… 2). … 3). … 4). … 5). … 6). … 14
Heaps of gas in the ground! After 2036, 5.5 X gas still remains. 40,000 PJ and 220,000 PJ, total = 260,000 PJ. Good to the year 2146? 15
Gas supply/cost “curve”. Lots of gas… but it’s not cheap. ~ Only 100,000 PJ shown. 16
Six different types of gas “shortages / shortfalls”: 1). We’ve run dry! All the gas is gone! NOT! See next slide… 2). Something blows up – Longford September 1998 3). Low pressure in a suburb on a cold winter day 4). Gas can’t be adequately supplied to a gas-fired power station !!! BLACKOUTS !!! (e.g. AEMO March 2017, investigated by Forcey & McConnell) 5). Gas can’t be adequately supplied to an entire city during a cold winter spell (e.g. Sydney) (i.e. AEMO 2014, investigated by Forcey & Sandiford) 6). A “hypothetical, worst-case scenario” annual supply/demand imbalance (AEMO / ACCC Sept 2017) 17
7). Not a shortage Market “tightness”… leading to high gas price$… … is a shortage of cheap gas, … but not a “gas shortage”! Yearning for the good ‘ol days of cheap gas… 18
6). A “hypothetical, worst-case scenario” annual supply/demand imbalance More accurate to call this a hypothetical ”imbalance”, rather than a “shortfall”. Gas can be readily stored: • Dandenong (VIC), • Port Campbell (VIC) • Newcastle (NSW) • Silver Spring (QLD) • Moomba (SA, QLD) • in the pipelines • in the gas fields. Differs to electricity in this respect. Confusing? 19
The interconnected Eastern Australian gas production and transmission system 20
6). A “hypothetical, worst-case scenario” annual supply/demand imbalance A “real” (vs “on-paper”) gas imbalance… • will appear only after some warning (if at all) • will be managed operationally • will be “sorted out” commercially (either before or after the event) Good (indeed critical) for AEMO to present the numbers… but has the political & media response been overblown? 21
2018 Eastern Australian “hypothetical gas-supply imbalance - worst case” (Data from AEMO GSOO Update Sept 2017) 2500 2000 1500 1000 Petajoules / year 500 0 -500 22
AEMO’s “worst-case scenario” has a very high probability of not occurring. < 0.0? % of exceedence? For 2018 worst-case “shortfall” AEMO assumed this weather report: • hot summer (higher electricity demand) • cold winter (higher gas demand) • not windy (re wind power) • not rainy (re hydroelectricity) also • coal plants fail (even more than usually expected) • renewable-energy projects announced after 1 July 2017 not included • construction of renewable-energy projects assumed delayed • industrial gas demand suddenly increases, despite high gas prices • in buildings, any movement away from gas slows / stops. 23
Uncertainty on the supply side Shell, in particular, has control over huge amounts of undeveloped QLD coal seam gas. Enough to supply four more LNG trains in Gladstone QLD. 24
Potential supply impact of Lakes Oil Victorian onshore gas: Up to 20 PJ/yr; ~ 1% of total gas supply. X 2500 2000 1500 1000 Xxx Petajoules per year 500 xx 0 -500 25
Uncertainty around gas volumes to be exported as LNG ACCC, 22 September: “While the LNG projects have taken some steps to supply more gas into the domestic market, it is unclear to the ACCC why we are not seeing more of it and why such significant volumes of LNG are forecast to be sold on the international LNG spot markets in 2018.” PM Turnbull, 27 September: Will the PM ever have to invoke The Australian Domestic Gas Security Mechanism? (ADGSM) 26
Uncertainty around CSG supply and LNG export The coal seam gas giants: Shell - QCLNG, aka Arrow, BG, QGC (Netherlands/UK) CNOOC (Chinese National Offshore Oil Company) Tokyo Gas (Japan) Santos - GLNG Total (France) Petronas (Malaysia) Kogas (Korea) Origin - APLNG Conoco-Phillips (USA) Sinopec (China) 27
Is AEMO going “backwards” re transparency? AEMO need to provide more info / transparency describing their GSOO-Update assumptions. ---------------------------------------------------- Gas industry secrecy To be fair to AEMO, their largest uncertainty is around the numbers supplied by the gas industry. Can AEMO / ACCC / someone “shine a light” into the opaque gas industry? “An.. impediment to investment is the general lack of transparency of the Australian upstream gas market. Any overseas investor is likely to have great difficulty getting the most basic information about reserves, production and drilling results.” 28
Further work? The Bass Strait continues to be a huge gas supplier. But what do stakeholders… • Australian people • gas consumers • Australian government • Victorian government … know about what’s going on out there? Fairfax, 7 October 2017 29
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‘A short-lived gas shortfall’ Dylan McConnell Monday 16 th October 2017
New power system paradigm This figure presents the illustrates the current system (left) which includes a large capacity of “baseload” generation that operates most of the time, with peaking and intermediate plant ramping up and down to meet variations in demand. In a renewable system 9illustrated right), the variable renewables will provide the bulk of the energy, and firm, flexible renewables will ramp as required to fill the gap and meet the demand. [Source: Dr Jenny Riesz*, Dr Ben Elliston, Dr Peerapat Vithayasrichareon, Assoc. Prof. Iain MacGill, 100% Renewables in Australia: A Research Summary
Role of Gas
Gas and climate change
Gas power station emissions Intensity
Gas vs RE: electrical-energy production
Electrical energy cost comparison
New power system paradigm This figure presents the illustrates the current system (left) which includes a large capacity of “baseload” generation that operates most of the time, with peaking and intermediate plant ramping up and down to meet variations in demand. In a renewable system 9illustrated right), the variable renewables will provide the bulk of the energy, and firm, flexible renewables will ramp as required to fill the gap and meet the demand. [Source: Dr Jenny Riesz*, Dr Ben Elliston, Dr Peerapat Vithayasrichareon, Assoc. Prof. Iain MacGill, 100% Renewables in Australia: A Research Summary
Gas vs electricity storage (and demand response)
Energy storage (and demand response) Lazards, Levelised Cost of Storage 2015
Putting it all together
Putting it all together Finkel (2017), Independent Review into the Future Security of the National Electricity Market: Blueprint for the Future, page 105, (Adapted from AGL, A future of storable renewable energy, 2017, p.6)
What about “firming” fossil generation?
What about “firming” fossil generation?
South Australia in September . . . .
South Australia in September . . . .
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GROUP DESCRIPTION This Australia-originated Facebook group is for folks who wish to discuss methods & especially share data re space heating, water heating, and cooking in homes using electricity rather than fossil gas, LPG, or wood. Of particular interest is the use of high efficiency heat pumps for space heating and cooling, water heating, clothes drying… Get off gas! Xxxx Xx “My Efficient Electric Home” on Facebook. Xx Now with > 2,000 members. 48
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