Natural Gas and Australia’s Electricity System

Natural gas is used in our homes for heating, hot water, and cooking, but it’s also a major player in Australia’s electricity system, providing a ready source of stable and ongoing (24 hours a day / 7 days per week) power as well as secure, stable and affordable energy for our communities.

Natural gas plays a critical role in Australia’s electricity supply. In 2019, of the 265,117-gigawatt hours (GWh) of electricity generated in Australia, natural gas accounted for 21 percent. It is the second largest source of electricity generation. In that year, natural gas’ share of electricity generation equalled the contribution of all renewables (bioenergy, wind, hydro, solar and geothermal) combined.

Natural gas is the most significant fuel for electricity in Western Australia, Northern Territory and South Australia accounting for 61 percent, 58 percent and 49 percent of generation, respectively in 2019.

Australia’s Federal Government recently reiterated its support for gas, confirming it would be a major part of Australia’s economic growth post-COVID. Prime Minister Scott Morrison referred to gas as a “critical enabler of Australia’s economy.”

“Our competitive advantage has always been based on affordable, reliable energy. As we turn to our economic recovery from COVID-19, affordable gas will play a central role in re-establishing the strong economy we need for jobs growth, funding government services and opportunities for all.”

Gas is also playing a role globally in our journey to a lower carbon world. As a cleaner energy source, it will be part of the future of electricity generation, partnering with renewables to bring reliability, stability and a reduction in greenhouse gas emissions in the electricity sector.

Where does natural gas come from?

Australia has significant gas resources, with natural gas being Australia’s third largest energy source after coal and oil. Gas comes from large reservoirs in gas fields either onshore or offshore, occurring in fourteen different basins across Australia.

Large resources lie off the north-west margin, off Western Australia in the Bonaparte, Browse and Carnarvon basins. This makes WA the nation’s largest producer of natural gas. In 2019-2020, Western Australia’s natural gas production accounted for 54 percent of Australia’s total production volumes of 141 billion cubic metres.

The Cooper and Eromanga Basins that span across South Australia’s north east and into Queensland host Australia’s largest onshore oil and gas developments. There are currently 160 producing gas fields in the Cooper Basin, feeding into major production facilities at Moomba in SA and Ballera in QLD through a network of pipelines.

The Gippsland Basin in Australia’s south east is another major source of hydrocarbons and supplies gas to customers in Victoria, Tasmania, New South Wales and South Australia

Queensland is a major producer of LNG and CSG, with rapid growth in the past decade. Queensland’s LNG production accounts for 30% of Australia’s output.

Australia is currently the world’s largest exporter of liquefied natural gas (LNG), which is becoming an increasingly important part of the global push for emissions reductions as a cleaner and economic fuel option.

More recently, onshore coal seam gas (CSG) wells have provided a significant additional source of gas. Based largely in eastern Australia, CSG gas projects were not commercialised until the mid-1990s.

The recently-approved $3.6 billion Narrabri coal seam gas project in northern NSW will comprise 850 new gas wells drilled over two decades, with owner Santos claiming it has the potential to provide up to half of NSW’s natural gas needs.

Around the world, natural gas as an electricity source has trended upwards for more than three decades, and is currently the number one electricity source in the world, accounting for 29 percent of OECD gross electricity production.

How is gas turned to electricity?

From the gas wells, gas is compressed for transport. Some of the gas is used at this stage for gas powered generation (GPG) or stored in large facilities for later use.

Two main types of power stations are used to turn natural gas into electricity.

  • Open cycle – natural gas is burned to produce pressurised gas which spins the blades of a turbine connected to a generator. Inside the generator, magnets spin, causing the electrons in wires to move, creating an electrical current, generating electricity.
  • Combined cycle – in addition to burning gas to turn a turbine, combined cycle power plants also use the waste heat to boil water and produce steam which drives a second turbine, generating more electricity. This means that combined cycle power plants are generally more efficient than open cycle, generating around 50 percent more electricity.

Combined cycle power stations are generally used every day to supply baseload power. Whereas open cycle stations are ideal during periods of high peak demand, where the power system is stretch to its limits, such as on hot summer days.

CSIRO’s GISERA released a report that assessed the life-cycle greenhouse gas emissions of a coal seam gas (CSG) to liquefied natural gas (LNG) project in Queensland, and the relative climate benefits of using natural gas in place of black coal as fuel for generation of electricity in Australia.

While CSG is measured to be more emissions intensive than coal (on a per unit basis) in the production stages, the report finds that in the full lifecycle of electricity generation, gas-fired electricity is significantly lower in greenhouse gas emissions than coal-fired electricity.

The report noted:

“In Australia, if Surat Basin natural gas was used to displace domestic coal fired electricity generation, GHG emissions intensities would be 0.66 t CO2-e/MWh (open cycle gas turbine) or 0.48 t CO2-e/MWh (closed cycle gas turbine) representing a reduction in emission compared with coal of 31% and 50%, respectively.”

Gas on the electrical grid

The ‘grid’ is the name of the energy generation, transmission and distribution network that carries electricity from various power stations across Australia to homes and businesses.

From the power plants, where electricity is produced, high voltage transmission lines carry the electricity over long distances. Distribution networks then convert the high voltage back to low voltage currents for distribution via the local poles and wires to homes, offices and factories.

How much electricity do we make and use in Australia? And how much of our gas goes to electricity?

Electricity supply accounts for around a quarter of Australia’s total energy consumption.

The Federal Government’s 2019 energy statistics show Australia’s electricity generation at an estimated 265,117 gigawatt hours (GWh).

In the Government’s Australian Energy Statistics Australian Energy Update 2019, (which uses 2017-2018 data) showed ~37 percent of Australia’s total gas consumption in 2017–18 was for electricity generation.

Who regulates the electricity market?

The Australian Energy Regulator (AER) is responsible for regulating electricity networks and covered gas pipelines, in all jurisdictions except Western Australia. It also sets the amount of revenue that network businesses can recover from customers for using these networks. It governs the National Electricity Market and spot gas markets in southern and eastern Australia and monitors and reports on the conduct of market participants and the effectiveness of competition.

The Australian Energy Market Operator (AEMO) manages electricity and gas systems and markets across Australia, helping to ensure Australians have access to affordable, secure and reliable energy.

AEMO operates two wholesale electricity markets in Australia: the National Electricity Market (NEM), which operates in eastern and south-eastern Australia, and the Wholesale Electricity Market (WEM), which operates in Western Australia.

NEM and WEM aim to support greater competition and investment in the electricity industry and allow generators and wholesale purchasers greater flexibility in how they sell or buy energy.

Gas – reliability and renewables

While coal still accounts for over half of Australia’s electricity generation (56 percent in 2019), the nation’s transition away from coal gives gas an opportunity to increase its market share as an abundant but less pollutant energy source.

Natural gas as a source of electricity generation increased by 31 percent year-on-year in 2019. Its functionality as a baseload power source is becoming more recognised as our electricity consumption changes from traditional steady demand to more swings and fluctuations. Unlike coal, gas generators can quickly ramp up and down to match demand changes.

Gas’ flexible generation and reliability make it an ideal partner for intermittent renewable energy sources such as wind and solar to match supply and demand. Natural gas also allows for more renewables to be integrated into the grid due to its short response time.

While it’s more expensive than coal, natural gas is an affordable, abundant and cleaner source of energy. Natural gas powered generation for electricity emits up to half the emissions of traditional generation – benefits that align with the Federal Government’s plan to ensure affordable, reliable and secure electricity supply into the future.

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