Natural gas to speed up Australian transition to clean energy?

The following Bloomberg article highlights the need for gas as a transitional energy source from fossil fuels toward cleaner energy technologies.

Read the full article here.

Below are our key takeaways:

• Natural gas will help accelerate Australia’s transition to cleaner energy, according to Former Chief Scientist and government special adviser on low emissions technologies, Alan Finkel.
• With Australia looking to phase out its reliance on coal-fired power plants and pivot toward solar and wind, natural gas will need to act as a stopgap to ensure reliable energy supply, said Finkel.
• Finkel also said that energy generated from coal is “too slow to respond” and won’t be able to support the kinds of green technology that will turbocharge the transition.
• Finkel closed by saying, “There is a pursuit of perfection to say get out of fossil fuels completely, and eventually we will. But for the next 10, 15, and 20 years, being able to call on natural gas to firm up the solar and wind electricity in a country like Australia will enable us to develop and deploy solar and wind at enormous scale -- more quickly than if we cannot call on natural gas”.

As of 2020, ~54% of all electricity generation in Australia was produced by coal fired power plants, gas contributed ~20%, and renewables contributed ~24%.

The interview with Finkel states what we think is obvious, that it isn’t possible to just shut down 54% of power generation capacity and replace it with cleaner renewable technologies overnight.

We agree with Finkel’s comments about needing new investment in the gas industry to act as a “stopgap” for the next “10-15-20 years”.

Eventually the world, along with Australia, can transition away completely from fossil fuels. But over the medium term we think the oil and gas industry is being starved of new investment at the expense of energy security.

We’ve long held the view that gas is the natural transitional fuel that can bridge the gap between fossil fuels and cleaner energy sources. Burning gas to produce power has a far lower carbon footprint compared to coal and oil, with the added benefit of having all of the infrastructure in place to produce and consume it.

As a result, we are Invested in gas explorer Top End Energy (ASX: TEE), which holds prospects in the NT and in QLD.

To see why we are invested in TEE and what we are looking to see the company achieve over the next 12 months check out our 2022 TEE Investment Memo here.