Although the Government is yet to release the details of projects that the Future Fund will go toward, it has stipulated that approximately $3 billion of the total renewable energy budget is for carbon capture and storage (CCS) and clean coal initiatives. Most of the funding, around $7 billion, is for renewable energy. The exact benefits Australia will get out of this $10 billion are unclear, but it is fair to say that any benefits will be expensive. The $2.4 billion CCS Flagships Program aims to help deliver two to four industrial scale CCS projects, providing 1,000 MW of CCS power generation by 2020. The $1.5 billion Solar Flagships Program aims to deliver four solar projects providing 1,000 MW of power. Both of these programs also require significant private and state government funding.

What we do know is that the $10 billion of funding does not include any money specifically to promote natural gas usage or investment. To be fair, one of the eight shortlisted projects for the Solar Flagships first funding round proposes to retro-fit a coal-fired power station with gas-boosted solar Fresnel technology (a technology in which the gas industry should take a strong interest). In addition, the CCS funding presents opportunities for pipelines. But it seems that the cost effective, emissions reduction potential of natural gas is not something that the Government feels it needs to encourage or promote.

If $10 billion had been spent on natural gas – the most cost efficient existing low emission technology – the Government could have installed around 8,000 MW of new baseload gas-fired power generation. The capacity would be significantly greater if the money had been spent on converting existing coal-fired power generation to gas.

Approximately 8,000 MW of new gas capacity would mean that roughly 60,000 GWh of electricity production could shift from black and brown coal to gas. This would result in an emissions saving of 35 MMt/a. As Australia’s emissions were 597 MMt/a in 2007, this represents an almost 6 per cent reduction in emissions. We could be at our 2020 target already.

Despite the Government’s lack of attention with regard to natural gas in general, and gas pipelines in particular, the natural gas and the electricity industries, don’t seem to be fazed. According to the Australian Bureau of Agricultural Resources and Economics (ABARE), 80 per cent of new electricity capacity built last year was gas-fired. Of the future power generation projects that ABARE tracks, well over 50 per cent are gas-fired.

However, Government decisions, which at first glance have nothing to do with gas or pipeline businesses, are increasingly impacting on those within the gas and pipeline industries.

At the top end of the scale, Government policy mechanisms, which directly fund otherwise uneconomic projects that compete with gas demand, have significant potential to undermine pipeline investments. This is often called the ‘picking winners’ approach. The Solar Flagships Program is one manifestation of this type of approach. When Government funding such as this is provided for renewable power generation, other energy sources in the area can suffer. This is particularly relevant in remote regions that do not have good connections to the electricity grid. To date, the most cost effective way of powering these regions has often been with gas.

The Mount Isa region is a perfect example of this. Its main source of electricity is currently gas-fired power generation. Gas is supplied through the Carpenteria Gas Pipeline. There are proposals for geothermal power generation and solar power generation in the region. Without Government funding, these proposals wouldn’t get built. In the absence of Government intervention, the most cost effective way to increase the power supply in the region would be to expand the existing pipeline and gas-fired power generation infrastructure. Without Government funding, not only is the gas industry faced with losing potential growth, it is highly likely that the Government will fund electricity transmission infrastructure to connect the renewable energy to the National Grid, allowing another source of competition into the region.

The gas industry, and APIA, needs to take every opportunity to remind the Government to consider the impacts on existing, efficient investments, rather than ‘picking winners’, and disadvantaging successful industries.

At the other end of the scale, the pipeline industry is seeing an increase in costs, arising from planning decisions made by state and local governments. Pipeline easements situated near cities and demand centres face the challenge of re-zoning and general development. When a planning authority makes changes necessary to allow development of rural land, landowners, developers and Government (through stamp duty) stand to profit. Pipelines do not. Unlike power lines, roads, train tracks, and other infrastructure, pipelines are underground, out of mind and out of sight. Living in close proximity to pipelines does not have the same negative connotations as power lines and roads (radiation concerns and visual pollution for power, noise pollution for roads). As such, pipelines are not viewed as an impediment to development.

Risk minimisation measures that were designed for rural environments need to be revisited and often increased when rural land is urbanised. Too often, the pipeline owner is left to bear these costs alone. Early engagement with planners and developers can help, and low-cost risk minimisation measures can be implemented when all parties work together. Co-operation and communication are the key, but often pipeliners are not included in planning processes or decision-making.