Warning over political donors as minister rejects claim he favoured gas

“We reject the premise there was undue pressure being exerted on AEMO,” the spokesman said. “The Commonwealth government sought to understand and raised the clear discrepancy … The AEMO ISP modelled a future gas price that was around double the forward price being set by the market.”

A high gas price would encourage generators to seek out cheaper power sources such as wind and solar.

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The Morrison government is considering several initiatives for a “gas-fired recovery” from the coronavirus recession.

It set aside $11 million in the federal budget for the gas infrastructure plan to build gas pipelines that connect with industrial and energy facilities and is finalising plans for a 1000-megawatt gas power plant in the Hunter Valley.

The gas plant, to be built by Commonwealth-owned utility Snowy Hydro in Kurri Kurri, NSW, would succeed the ageing Liddell coal plant, which is set to close in 2023.

Mr Taylor says 1000 megawatts of dispatchable power from a fast-start gas plant would help back up the growing share of intermittent supply from renewable energy and put “downward pressure” on energy bills.

AEMO has forecast a 154-megawatt shortfall following Liddell’s closure.

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Mr Taylor has set an April 30 deadline for private industry to commit to final investment decisions on dispatchable energy projects totalling 1000 megawatts, including gas plants and large-scale batteries.

His spokesman did not rule out using public funds to build or operate the Kurri Kurri plant but said early assessments of the plant’s viability were “very strong, with a larger generator expected to deliver a higher rate of return than a smaller generator”.

Snowy Hydro chief executive Paul Broad told a Senate estimates hearing last month construction would cost between $600 million and $650 million.

The Grattan Institute’s energy grid report, released on Sunday night, found while gas-fired power would play a role in supporting renewable energy by providing on-demand power, it should “not have an expanded role”.

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Mike is the climate and energy correspondent for The Age and The Sydney Morning Herald.