The Federal and South Australian Governments have signed a $1.08 billion State Energy and Emissions Reduction Deal. Under the agreement, the governments will pursue initiatives that create additional dispatchable generation to help deliver affordable and reliable power, unlock gas supplies to help prevent shortfalls in the market, kick-start works on a new interconnector between South Australia and New South Wales, and invest in key emissions reduction projects.

The Federal Government will contribute $660 million and South Australia will provide $422 million as part of the agreement.

Key components of the deal include:

• A gas target of an additional 50 petajoules per annum by the end of 2023 and a stretch target of 80 petajoules per annum by 2030 to help increase the supply of reliable and affordable gas to users in South Australia and the broader east coast gas market;
• $400 million in Commonwealth funding for investment in priority areas such as carbon capture and storage, electric vehicles, hydrogen and other emissions reduction projects in South Australia to help meet and beat Australia’s commitments under the Paris Agreement;
• Up to $100 million joint support for Project EnergyConnect through joint underwriting of key early works on a 50/50 basis to boost the flow of power between South Australia and New South Wales; and
• Up to $110 million in Commonwealth concessional finance for solar thermal and other storage projects in South Australia.

Prime Minister Scott Morrison said the agreement is key to ensure South Australians get a fair deal on energy, businesses get the affordable energy they need to create jobs and Australia meets its emissions reduction targets.

“Families and businesses need affordable, reliable power. That is what reduces prices and creates jobs. Australians also want to ensure we are doing everything we responsibly can to combat climate change,” the Prime Minister said.

“This means getting more gas into the market to support the increase in renewable solar and wind power coming into the electricity system. One works with the other to deliver lower cost, lower emissions and reliable power.”

“This deal also makes sure that Australia gets ahead and stays ahead in the new energy economy by supporting the next wave of technologies, with a $400 million commitment for investing in key areas that have the potential to deliver new industries and opportunities for South Australians,” he added.

Premier of South Australia, Steven Marshall, said the MoU backs the SA-NSW Interconnector – which will bring down bills for consumers in SA by around $100.

“This agreement also coordinates our efforts to deliver a hydrogen export industry in South Australia, deliver carbon capture and storage to reduce emissions, deliver the infrastructure needed for electric cars, and generate new revenue for farmers from carbon reductions.”

Minister for Energy and Emissions Reduction, Angus Taylor, said the agreement will also benefit the broader National Electricity Market (NEM).

“The focus on gas will help South Australia meet its own gas needs and assist efforts to prevent forecast shortfalls in the broader east coast gas market from 2023, as part of our gas-fired recovery.”

Minister for Energy and Mining, Dan van Holst Pellekaan, said the agreement will contribute to South Australia achieving net-100 per cent renewables by 2030, and becoming an exporter of renewables and gas to support the NEM.

“The joint commitment to develop hydrogen hubs in South Australia is a strong sign to our global partners in Asia and Europe that South Australia can lead the nation in this new industry.”

The inclusion of gas supply targets and regulatory reform actions in the agreement builds on the measures the Government has outlined as part of Australia’s gas-fired recovery from COVID-19.

Achieving improved and lower-cost gas production in the Cooper Basin and a step-change in gas production in the Otway Basin will be a key focus.

Both governments will continue to address regulatory barriers to investment, share National Greenhouse Accounts data and work co-operatively through existing national governance frameworks to achieve national policy objectives in energy affordability, energy security and emissions reduction.

The Australian Petroleum Production and Exploration Association (APPEA) said the deal shows the importance of gas working with renewables.

“Natural gas plays an important role in balancing renewable energy, ramping up and down to match supply and demand,” said APPEA Chief Executive, Andrew McConville.

APPEA’s South Australian Director, Claire Wilkinson, added that gas is already playing an increasingly important role in South Australia to balance intermittent renewable electricity.

“This deal reaffirms how gas works hand in hand with renewables,” Ms Wilkinson said.