Tasmania is a much different place to what it was 12 years ago, when natural gas was first introduced to the state.
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As Tasmania gears itself to become the renewable energy battery of the nation, as envisaged by Prime Minister Malcolm Turnbull, you would be forgiven for wondering what the role of gas now is.
With negotiations over future gas contracts between the Tasmanian Gas Pipeline and Hydro Tasmania having stalled, the process has been sent to arbitration.
The undersea pipeline serves as Tasmania’s sole means of importing gas from the mainland and the state’s hydro-based generators utilise gas-fired generation.
Electricity tariffs for heating and hot water, however, are below cost, making gas a relatively unattractive option for consumers.
But, as the spectre of the 2016 energy crisis continues to loom large, experts say gas still has a vital role to play in Tasmania.
Goanna Energy Consulting principal consultant Marc White said “government leadership” was needed in order to provide clarity around the future of gas in the state.
“At the moment, it seems to be economically at risk of failure,” Mr White said.
“Economically, it’s not a good, viable business, unfortunately.
“The problem for gas is it’s not getting access to a level playing-field to compete for heating and hot water domestically.”
But Mr White said there was still a place for gas in Tasmania.
“You still need a dancing partner for renewables,” he said.
“So … the combined cycle plant can provide some ancillary services, perhaps.
“Particularly as Hydro does well.”
Mr White had some stern words for TGP as a result of their hitherto fruitless negotiations with Hydro.
“They’re sitting on this asset expecting to continue to derive their income but the main customers of the pipeline, the ownership of [the Tamar Valley Power Station] has changed and the strategy in terms of running the plant has changed,” he said.
Ownership of the power station was transferred from Aurora Energy to Hydro in 2013, at the behest of the state government.
“TGP is still trying to get its pound of flesh,” Mr White said.
“We all hoped that TGP would recognise that the world’s changed and write down the asset value.”
TGP chief executive Lindsay Ward, meanwhile, stressed the importance of gas to Tasmania’s ongoing energy security.
“Gas will always have an important role to play in Tasmania for energy security, state growth and job creation,” he said.
“The Tasmanian government recognised this 15 years ago and that’s why they were so instrumental in facilitating the construction of the TGP.
“A gas-fired power station is a critical element of the energy mix where there is a high reliance on renewable energy.”
Mr Ward suggested one only needed to look to the energy crisis to see that gas played a critical part in maintaining energy supply.
“Tasmania recently saw the impacts of low dam inflows – the lights would have gone out if the gas-fired Tamar Valley Power Station had not been available,” he said.
Despite the fractious relationship between his business and TGP, Hydro Tasmania chief executive Steve Davy also highlighted the importance of gas.
“Gas remains relevant,” Mr Davy said.
“If it’s appropriately priced, gas may well be part of the future energy mix.”
Mr Davy reminded Tasmanians that Hydro had reached gas supply agreements to “meet the needs of the Tamar Valley Power Station over summer, and our Tasmanian customers in 2018”.
He said Hydro would continue to advocate for a gas supply arrangement that was “fair and reasonable” for Tasmanians.
”We’d be failing Tasmanians if we accepted an arrangement that’s not reasonable or suitable for Tasmania,” Mr Davy said.
Energy Minister Guy Barnett, who assumed the mantle in September after Matthew Groom announced his intention to retire from politics, has been busy spruiking a “Tasmania first” energy policy.
He, too, believes gas will “continue to be a significant part of Tasmania’s energy mix”.
“The government recognises the importance of gas for both industrial and domestic users,” he said.