Federal Government announces new gas plant at Kurri Kurri

Kurri Kurri $1 billion energy deal Scott Morrison gas prices
Prime Minister Scott Morrison. Image: Naresh777 / Shutterstock.com

The Federal Government has announced it will spend $600 million on a new gas-fired power station at Kurri Kurri in the New South Wales Hunter Valley region.

The funding has been allocated to Snowy Hydro Limited in the Federal Budget to build the 660 megawatt open cycle gas turbine.

The announcement comes after the Morrison Government threatened in September last year it would build a gas plant if ‘dispatchable’ power wasn’t brought online to replace AGL’s coal-fired Liddell Power Station, which is set to close in April 2023.

“This important project delivers on the Government’s 1000 MW target set last September, which was created to avoid unacceptable price increases following the closure of the Liddell Power Station in 2023,” Minister for Energy and Emissions Reduction Angus Taylor said in a statement.

Minister Taylor added that the project will deliver an important economic boost to the region, creating up to 600 new jobs during peak construction and 1200 indirect jobs across the state.

“We were very clear from the start—we will not stand by and watch prices go up and the lights go off. This project will deliver flexible gas generation to replace Liddell and maintain reliable power alongside Australia’s world-leading investment in renewables,” Minister Taylor said.

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“This is a responsible investment. Expected investment returns for the Hunter Power Project are strong and Snowy Hydro is on track to deliver this critical, dispatchable capacity, on-time and on-budget.

“The Morrison Government has also announced a $24.9 million package in the 2021-22 Budget to support new gas generators to be hydrogen-ready, including a $5 million commitment to Tallawarra B.

“The construction of two new gas power plants will create over 2,000 direct and indirect jobs. This is what the Government’s gas-fired recovery is about—helping Australia bounce back strongly from the COVID-19 recession.”

The announcement has been met with plenty of criticism, with the Clean Energy Council saying the new Kurri Kurri gas plant is both unhelpful and unnecessary, as well as saying it will stifle investment.

“Investors believe the role for government is to provide strong policy that provides investors clear signals and confidence to continue to make the most cost-effective and efficient investment in new generation. That is clearly renewable and energy storage,” Clean Energy Council CEO Kane Thornton said.

“Government intervention to directly build their own high-cost generation is not only a poor use of taxpayer funds but also further undermines investor confidence in new generation. In the Clean Energy Council’s most recent survey of CEOs of Australia’s leading renewable energy investors, after challenges with the grid, ‘Unpredictable or unhelpful government intervention in the energy market’ rated as the second most significant challenge.

“If Australia is to ensure we effectively manage the transition of the energy system, we need to restore confidence in the role of governments to work collaboratively and focus on clear market signals for investment and customer confidence.”

The announcement comes a day after a report by the International Energy Agency (IEA) urged the world to abandon plans for new coal, gas and oil projects, predicting a big drop in gas demand.

Even gas experts have questioned the decision, with Dr Madeline Taylor, an expert in energy and natural resources law at the University of Sydney warning that the funding for Kurri Kurri creates a policy signal that could now reinvigorate the dormant petroleum exploration licences in NSW, which could see gas development of prime agricultural land in the Hunter region to supply more gas.

More to come.