CSG in New South Wales

• Figure 1 - NSW Energy Consumption Forecast
• Figure 2 - NSW Gas Demand Forecast
• Figure 3 - Major Existing NSW Power Stations
• Figure 4 - NSW Electricity Generation Projects with Approval in 2010
• Figure 5 - NSW Electricity Generation Projects Pending Approval in 2010
• Figure 6 - Apex Projects and the Major NSW Gas Pipelines (shown in blue)

New South Wales – Commencing Rapid Growth Stage

Figure 1 shows a prediction of NSW’s energy consumption from present to 2025 clearly showing a rapidly increasing demand for energy. Figure 2 shows a predicted increased demand for gas in the various consumer sectors of NSW to 2030. Figures 3 to 5 show the planned electricity generation trend in NSW moving towards a reliance on gas as the primary fuel source.

Major NSW Gas Industry Influences

The following key points highlight the future committed direction for power generation in NSW and its dependence on gas.

• Owen Inquiry (Owen, 2007)

In September 2007, Professor Anthony Owen completed his inquiry into electricity supply in NSW.  The purpose of this inquiry was to assess the future base load electricity generation requirements of NSW and the most efficient means for ensuring the required investment funds would be forthcoming at the appropriate time. The key findings and recommendations of the Inquiry were that:

• NSW will require new base load generation, with investment required in the order of $7b to $8b to fulfill this need over the next 10 – 15 years. Preparations need to be made so that this base load can be operational by 2013-2014
• Coal or gas will meet most of the new base load generation needs
• Emissions trading rules will influence the technology choice for new generation.  The Inquiry noted that gas combined cycle power stations have less than half the carbon emissions relative to new coal-fired power stations and could be expected to benefit from emissions trading rules accordingly.
• The most efficient means for NSW to ensure the required investment is forthcoming in a timely way is to improve the commercial and policy arrangements required for the private sector to invest in base load generation
• The Government of NSW divests itself of State ownership in retail and generation to facilitate and promote private sector investment in generation.

The Inquiry also reported that the average annual NSW energy growth is 1600 GWh/Yr.  This is equivalent to the output of a 300MW power station operating at a 60% load factor and consuming approximately 12 PJ per annum. In other words, NSW requires the equivalent of a new 300MW gas-fired combined-cycle power station each year to keep pace with the state’s electricity growth. 

Any retirement of coal fired plant due to emissions trading influences would increase the need for new investment in power stations.

• NSW Government Decision on Retail and Generation Ownership

While substantial political debate preceded and followed the privatisation aspects of the Owen Inquiry, on 1 November 2008 NSW Premier Nathan Rees announced that the Government would sell the State-owned retail electricity businesses, power generation sites and outsource the trading rights for the generators. 

• Carbon Pollution Reduction Scheme (or similar)

On 15 December 2008 the Federal Government released its white paper on carbon reduction for Australia.

Modeling performed by Government retained independent consultants highlighted that there will be significant impacts on coal-fired generators.  It was said that it was highly unlikely that new current technology coal-fired generation will be built in preference to combined cycle gas generation at carbon costs of ~$25/t CO2e. Further, while the precise impact is highly sensitive to the assumptions adopted, it is clear coal-fired generation output will reduce over the next decade.  The consultants each independently assessed where the imposition of CPRS would impact generators’ output by more than 25% under a 5% and 15% emissions reduction target. 

Australia’s commitment to a CPRS or similar scheme remains the subject of debate and political instability and this along with threats of the installation of a resource industry “super tax” or similar continues to hamper the development of Australia’s coal seam gas industry.

The Vulnerability of NSW

NSW is supplied with 95% of its natural gas from interstate predominantly from the Cooper Basin in Queensland and the Bass Straight in Victoria. Two main pipelines feed gas from the north and the south. AGL produces CSG at Camden and feeds this gas into the main eastern pipeline via its Rosalind Park gas processing facility as shown in Figure 6. A small amount of gas is produced in the Gunnedah Basin. However, with the nationwide demand for gas increasing together with NSW’s strategic lack of State derived gas supply, this leaves NSW vulnerable to energy shortages going forward. NSW should recognise the strategic importance of its own gas resources and develop these resources to become self sufficient. Furthermore, the development of these important gas resources will result in millions of dollars worth of State revenue not only from industry development but also from resource royalties. This will greatly assist the State to develop its internal infrastructure to further strengthen its future position within Australia. Currently NSW lags behind other states in resource and infrastructure development.