Queensland’s plans for new gas-fired power is an exercise in pragmatism

• Queensland’s Energy Roadmap includes provision for investment in new gas-fired power plants
• Gas-fired generation required to stabilise an electricity grid that has increasing variable renewable energy generation
• QPM Energy CEO David Wrench said the policy is a pragmatic move in the right direction

Queensland’s Energy Roadmap has caused no end of grief to green groups dismayed by its commitment to maintain coal-fired power plants and invest in new gas-fired plants.

In its April 8 announcement, Minister for Energy David Janetzki said Queensland’s five-year plan had to ease pressure on the state’s balance sheet, de-risk its energy future and add significant generation capacity.

“We’re delivering effective asset maintenance so Queensland’s power plants can remain in the system and support our grid with affordable and reliable generation,” he said.

“Queensland’s coal-fired fleet is the youngest in the country and coal generation will continue to play a central role in our grid.”

In the latest state budget, it set aside $479.2 million in 2025–26 for the development of the 400-megawatt Brigalow Gas Peaker Project at Kogan Creek

Government-owned Stanwell Corporation will continue to work with Quinbrook Infrastructure Partners on the proposed 114MW Lockyer energy project, which combines batteries and hydrogen-ready, high efficiency aero-derivative gas turbines to provide firming power while CleanCo will investigate a new gas turbine at Swanbank.

And the policy has drawn support from some players in the gas supply industry.

Speaking to Stockhead, QPM Energy (ASX:QPM) chief executive officer David Wrench said that while the State Government still had targets around emissions from the grid, the Energy Roadmap is a great policy.

“I think they’re moving pragmatically in the right direction. Clearly the Queensland grid needs more gas-fired firming generation to support the transition to renewables and a lower carbon emission grid,” he said.

Why gas-fired generation?

So just why is gas-fired generation still important even as the world chases net zero?

Wrench pointed out the challenge was in managing the performance of the electricity grid as more variable renewable energy generation is added to the network.

“Solar generation is very strong, particularly in Queensland during the day. But it tails off in the evening at sunset and doesn’t contribute any generation during the evening,” he said.

“Wind is more variable. It may or may not be generating at the right time, it just depends on the weather conditions.

“So you’ve got a very substantial portion of generation already added to the grid and continuing to be added to the Queensland grid every year, which is very variable.”

Where the problems lies is that peak demand on the grid typically occurs in the late afternoon and early evening when there might be insufficient renewable generation capacity, creating an unstable mismatch between demand and supply.

“Of course, that’s when gas-fired power stations are ideal because they can turn on very quickly and start generating and supplying power right at the time when the market desperately needs it,” Wrench said.

He added that gas-fired plants could also fill baseload demand requirements at night once the coal-fired stations are retired as they reach the end of their operating lives.

Wrench noted that while batteries and pumped hydro could also help support the grid during times of high demand, the gap between the renewable supply and the actual load in the system could be so great that it needed very substantial new generation coming in.

Supply and demand concerns in other Eastern states could also put pressure on the grid as it is all interconnected.

“You need more gas-fired generation as a backup. If you had another 100MW new variable renewable you almost need another 1000MW of gas-fired generation, batteries or pumped hydro,” he added.

“It’s an interesting dilemma, but QPM’s view is that, particularly in Queensland, this type of flexible, dispatchable generation support to the grid is absolutely essential and we’re pleased the government has recognised that and is absolutely supportive of it.

“But we need to do more.”

Hurdles for gas-fired generation

While Wrench believes the Queensland Government is heading the right way in backing gas-fired generation, he warned of challenges ahead.

Any new plants will need to secure gas turbines at a time when they are in high demand.

“One of the things that we’ve done is secure two gas turbines (for the company’s proposed 112MW Issac Power Station) and if we hadn’t gone ahead with those two units there would be a very little chance of getting anything before 2030 in the current market,” Wrench said.

The second challenge is securing long-term gas supply at competitive prices to run a gas-fired peaking power station effectively, an issue that QPM has already managed thanks to the large, uncontracted, gas reserves of 315 petajoules available at its Moranbah gas project.

“We can deliver on the Government’s objectives but I think it’s going to be very difficult for others to do so,” Wrench said.

That gives a strategic advantage to companies, like QPM, who have planned for the future.

Pushing ahead

The Queensland policy dovetails well with QPM’s plans but does not change what the company has been doing.

“It’s good that they’re supportive, it’s better than them saying no more gas, which would have been a problem and clearly a negative,” he added.

“But it’s great that the Government is being positive towards the development of gas-fired power stations. I think it’s a great initiative and we’re looking forward to the Government’s ongoing support as we develop our part of that solution.

“We think we can meet the Government’s objectives by building the power station using our own assets and infrastructure, but clearly we need government support for approvals.

“So we’re hopeful that government will support us to the extent that they can help us get the project running quickly.

“It’s entirely consistent with their policies.”

QPM’s planned 112MW Issac Power Station represents the first phase of its Issac Energy Hub that seeks to leverage its significant gas reserves.

It will increase the company’s portfolio of dispatchable generation to 284MW and provide the platform for further expansion towards its target of 500MW.

Capex has been estimated at $215m including contingency and commissioning is targeted for as soon as mid-2027 if a final investment decision is reached before the end of 2025.

The plant will consume an estimated 11 terajoules of gas per day (4 petajoules per year) at a gas supply cost of $4.50 per gigajoule ($4500/TJ) based on internal supply costs from the Moranbah gas project.

Importantly, it is expected to substantially increase QPM’s revenue and earnings with over 75% of its revenue coming from electricity sales.

At Stockhead, we tell it like it is. While QPM Energy is a Stockhead advertiser, it did not sponsor this article.