(EnergyAsia, November 5 2012, Monday) — The continued operation of Australia’s most polluting coal-fired power plants will slow the take-up of natural gas across the country, predicts carbon analytics firm RepuTex.

Coal’s affordability and dominance will result in lower profitability for operators of natural gas-fired power plants, discouraging their transition to the use of the cleaner burning fuel.

According to RepuTex, the withdrawal of Canberra’s contract-for-closure programme to pay for the closure of five of Australia’s highest polluting coal-fired plants by 2020, will result in only 2% growth in natural gas generation between FY2016 and FY 2020, down more than 6% from previous estimates.

RepuTex executive director Hugh Grossman said:

“The continued availability of cheaper coal-fired generation will slow the uptake of alternative types of low carbon generation such as natural gas, particularly given the sensitivity of gas-fired power generation to fuel input costs and carbon prices.

“The high carbon floor price and the contract-for-closure programme was favourable for gas-fired power generation. However the removal of these two mechanisms, combined with the expected rise in natural gas prices, is now likely to slow growth in gas generation to just 2% over 2016-2020, down from 6% growth should 2GW of emissions intensive generation capacity have been removed from the national electricity market.”

As a result of its linkage to the EU market, the Australian carbon price will trade at an average of A$12 per tonne of carbon dioxide from FY 2016-2020, well down from Treasury estimates, predicts RepuTex. (US$1=A$0.98). To ensure the closure of most polluting power plants, RepuTex said carbon prices would need to trade between A$70 and A$80 per tonne.