Installing small-scale gas-fired power generation plants will cut greenhouse gas emissions by 10 per cent. And installing these plants in office blocks, schools, hospitals and social housing projects will potentially ease power cost increases.
A report to be released today by the Per Capita think tank will provide backing for Sydney City Council’s plans to power the city through a series of gas engines and will feed into the power price debate.
Per Capita executive director David Hetherington told The Australian encouraging investment in small-scale gas plants, which are cheaper and cleaner than coal-fired power stations, would lower emissions and take pressure off future electricity price rises.
The Per Capita report calls for a radical rewrite of the rules of Australia’s electricity market to make the switch to the small-scale gas plants, known as distributed gas-fired power generation, arguing that the technology is proven, widely used in Europe and half as carbon emissions-intensive as coal.
It says the government could speed the process by targeting distributed gas-fired power generation as it builds 19,000 new public housing dwellings.
The report argues that coal-fired power generators are receiving implicit market subsidies of $5.3 billion through below-market coal and water charges.
And distributed gas-fired power generation is being discouraged by power retailers imposing barriers to easy connections to the electricity grid.
The report comes as the electricity industry mulls over new investments to boost capacity to meet growing energy needs and complains that the uncertainty created by the lack of a carbon price is hampering its ability to make long-term commitments.
Per Capita argues that Australia must begin the task of reducing its emissions now, but finds that only large-scale wind and gas-fired power generation fit the bill in terms of technologies immediately capable of reducing greenhouse emissions.
“Since wind cannot provide baseload power, gas must underpin the lion’s share of the effort,” the report says. It argues that a redesign of the energy market rules would remove barriers to investment in distributed gas power and encourage the private sector to invest in small-scale gas-fired power plants in office buildings, hospitals and unit blocks.
A 50 per cent substitution of coal for gas would require the construction of 8050 1MW units at a cost of $14.1bn and could cut Australia’s greenhouse gas emissions by 10 per cent, or 50 million tonnes of CO2 a year.
Per Capita argues that the private sector could be encouraged to do this if it were paid a market price for all electricity the plants produced instead of just what was returned to the grid and that under a $20 a tonne carbon price, gas generation becomes cheaper than coal. Per Capita calls for changes to electricity pricing, arguing for higher charges at the height of summer and winter when demand is greatest. This would enable greater payments to distributed gas producers and encourage more into the marketplace. To ensure producers and consumers could respond to the new pricing regime, smart meters such as those being trialled in Victoria should be rolled out, the report says.
