Explainer: Is gas a transition fuel, a forever fuel, or a stopgap?

A consensus that all our coal fired power stations will close over the next 10 to 15 years has passed the title of most controversial fossil fuel to gas.

Methane – natural gas to its fans – is an indispensable part of our energy system for now and the foreseeable future.

The burning question for the energy transition: how far does that foreseeable future extend?

The industry, and many politicians, reckon the future of gas stretches as far as the Australian Energy Market Operator’s projections extend – 2050 -- and beyond.

But unless the vast bulk of gas in use by then is biomethane or green hydrogen, that’s too far into the future for scientists, net zero targets, and a growing number of voters dismayed at climate inaction and backsliding.

In any business in which gas is not intrinsic to a manufacturing process or imperative for high heat production, another burning question looms: Can these costly substitutes compete with cheap renewables?

The context

• Gas lost a golden opportunity to supplant coal in electricity generation when the Coalition axed Labor’s carbon tax.
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• Governments in Canberra and Queensland greenlit the development of liquefied natural gas exports in Queensland, without insisting that a portion be reserved for the domestic market – or even that the exporters be strictly responsible for their own needs. Bass Strait’s abundance began to flatline and decline, and new onshore fields intended for domestic use, such as Santos’ Narrabri field in northern NSW, faced relentless opposition and “lawfare”. The result: rising gas prices reflecting international prices, eventually driving down demand.
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• Annual domestic consumption was around 700 petajoules per annum a decade ago; it is now below 500 PJs and headed for about 425 PJs by 2030, with residential, small commercial and industrial customers all sliding.

Actionable insights

• The case for gas generation – backed not just by the gas industry but by large integrated energy companies, market bodies such as AEMO and leaders from the major political parties, is straightforward: Impressive as the boom in big grid batteries and accelerating rollout of residential and commercial batteries are, they won’t store enough energy cope with a one-to-two week wind and solar drought during a cold snap or cyclonic depression when wind and solar provide more than 80 per cent of grid power in the early 2030s.
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• The caveat: Things change quickly in the energy market. The entire 2020 Gas Statement of Opportunities mentions “electrification” three times; the 2025 document mentions it 38 times, and it's a key reason why gas shortfalls have been pushed back three or four years.
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• How else might the demand and supply picture change in the next five to ten years? In multiple ways. Electrification should increase electricity demand, which has been flatlining or falling slightly for years, and that might be good for gas generation. But battery technology is advancing at breakneck speed thanks to China’s BYD and CATL, and massive Chinese government spending. Big battery projects committed today are more likely to have two to four hours of storage; Quinbrook announced three weeks ago a huge slate of eight hour batteries for eastern Australia. That could eat into gas’s grid share, and profit, yet the 2025 GSOO mentioned batteries only four times.
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• Policymakers with their necks on the line are stuck with doing their homework, tweaking the trend lines – and making annual revisions to their projections.

Dutton counters with fuel excise cut

Opposition Leader Peter Dutton responded to the government's election income tax cut with a promise to cut the fuel excise by 25 cents for 12 months from when he takes office. (ABC). Dutton yesterday flagged a “very significant announcement” for his Budget Reply speech this evening.

Prime Minister Anthony Albanese said Dutton was “delulu with no solulu” (delusional with no solution).

“This guy [Dutton] wants a plan that will cost $600 billion, that will produce 4% of Australia’s energy needs. That’s the most expensive form of new energy possible - sometime in the 2040s, sometime in the 2040s - and a plan that the private sector won’t ever borrow,” Albanese said during the budget debate.

Renewable Energy Alliance and Community Power Agency said the federal budget was a missed opportunity for regional communities, reiterating their call for funding for Local Energy Hubs across Australia.

The hubs would have a strong outreach program staffed by independent local experts to provide accurate information, countering mis- and disinformation, to assist energy users and make a material difference to achieving renewable energy targets.

“We will now be looking closely for serious funding commitments during the upcoming federal election campaign,” RE-Alliance national director Andrew Bray said.

Expert view - Jack Curtis, co-founder of energy tech startup Neara

CATCH UP

Projects

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Environment Minister Tanya Plibersek will delay her call on the $30 billion extension of the North West Shelf project, one of the biggest cultural heritage decisions in Australia’s history, until after the federal election. The deadline for federal approval has been pushed out, again, this time from March 31 to May 31. Peter Dutton has committed to approving the project within 30 days if elected. (ABC) (SMH)

AusNet detailed key projects and programs underway to upgrade the network across Victoria, which it said would grow capacity, support growth across the regions and improve customer reliability.

​Meridian Energy will begin construction of the NZ$227 million 130MW Ruakaka Solar Farm in August, with 250,000 solar panels to cover an area the size of 170 rugby fields. It is located next to the 100MW Ruakaka BESS, which will be fully operational in April. The Energy Park is strategically located close to Transpower’s 220kV Bream Bay substation.

Policy

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Minister for Energy and Resources Lily D’Ambrosio said the state government was helping households cut their energy bills by installing rooftop solar and energy efficient heat pumps. Under the $10 million Residential Electrification Grants program, households receive rebates of $1,400 for their solar installation and a $1,000 rebate for heat pump installation through Solar Victoria, with the remainder of the costs covered by AusNet.

The Australian Workers' Union endorsed the “critical investments” for the nation’s manufacturers under the Future Made in Australia initiative, including support for the Whyalla steelworks, along with green iron and aluminium. But AWU National Secretary Paul Farrow called for mandated Australian steel and aluminium in public infrastructure projects to ensure local industries benefited directly from taxpayer-funded measures.

How ‘France First’ doomed a nuclear CEO. (Politico)

China to expand carbon trading market to steel, cement and aluminium smelting industries. (Reuters)

Capital

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Frontier Energy (ASX: FHE) issued an updated finance strategy for the Waroona Renewable Energy Project, with Stage One comprising 120MW of solar generation and 80MW battery storage. Frontier has shortlisted parties for further due diligence, site visits, management presentations and negotiation of acceptable terms All parties have indicated a preference for involvement in project expansions beyond Stage One and support an accelerated expansion. The offers were received prior to the project’s inclusion in the Capacity Investment Scheme that provides a federally guaranteed revenue floor, which Frontier said had enhanced their ability to secure project development financing.

Renewable industry group the Smart Energy Council said it would spend $1 million on an advertising campaign headlined “Double under Dutton” outlining how the Coalition's nuclear power policy would double the power bills for millions of homes with solar.

Hyundai will make ‘low-carbon’ steel at US$6bn plant in Louisiana. (Canary Media)

The US Department of Energy reissued a $900 million funding opportunity to accelerate deployment of nuclear SMRs, removing community benefit requirements and shifting the focus solely to technical merit. (POWER)

Technology

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Global renewable power capacity increased by 585 GW, or around 15 per cent in 2024, the International Renewable Energy Agency said. Over three quarters of the capacity expansion was due to solar energy, led by China.

Wooden wind turbine towers reach new heights. (IEEE Spectrum)

How to decarbonise every building everywhere - just not all at once. (Canary Media)

Regulation

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The Offshore Infrastructure Regulator released new guidance materials on consultation and financial security under the Offshore Electricity Infrastructure Act 2021 (OEI Act) framework.

The New Zealand government plans to replace the Resource Management Act 1991, which has been the nation’s main tool to regulate land use and infrastructure projects to ensure sustainable use of natural resources. Two bills will be introduced by the end of 2025 to pass before the next election. The Expert Advisory Group’s report, endorsed by Cabinet, will provide the basis for the new laws.

People

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BlueScope’s former Chief Executive of Climate Change and Sustainability Gretta Stephens and Co-Managing Director of Potentia Capital Tim Reed were appointed as new members of the federal Climate Change Authority.

General Manager Regulation & Policy at Iberdrola Australia Joel Gilmore was appointed as a Climate Councillor to support the independent Climate Council’s advocacy. He is also Associate Professor at Griffith University’s Centre for Applied Energy Economics and Policy Research.
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Research

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​Methane emissions from the Hail Creek open-cut coal mine in Queensland's Bowen Basin far outstripped the operator's reported annual average for FY2023, if the observed measurements were sustained throughout the year, according to a study published in Environmental Science and Technology Letters. UNSW Sydney researchers, part of an international team led by UNEP’s International Methane Emissions Observatory, studied methane plumes via two different instruments attached to research aircraft.

Random

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​Fun fact: The 2025-26 Budget marked the first time since the 1940s, when Ben Chifley was Treasurer and Prime Minister, that there have been four budgets in a single parliamentary term.

What's on

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Opposition Leader Peter Dutton will deliver the budget reply tonight.

Malcolm Turnbull will address the National Press Club in Canberra on “Sovereignty and Security - Australia and the new world disorder” on April 1.

AEMO’s Group Manager, Gas Market and System Operations Matthew Clemow and IEEFA Australia’s Kevin Morrison will speak on day two of the Australian Domestic Gas Outlook conference in Sydney on April 2.

Angus Taylor will deliver a Post Budget Reply Address at the National Press Club in Canberra on April 2.

Donald Trump will announce major changes to US trade policy on April 2.

NEM review Chair Tim Nelson and SEC Board Chair Simon Corbell will speak at the Clean Energy Council’s Clean Energy Investor Forum in Sydney on April 3. Other speakers include CEFC Chief Investment Officer - Renewables and Sustainable Finance Monique Miller; ENGIE Renewables Australia MD Laura Caspari; Aquila Clean Energy ANZ MD Dennis Freedman; Tilt Renewables CEO Anthony Fowler; and Potentia Energy CEO Werther Esposito.