New doubts have emerged about the availability of gas needed to fuel the Hunter Power Project at Kurri amid supply shortages along Australia's east coast.
The 660 megawatt peaking plant is due to commence operating on a limited basis in December. Its primary role will be to support the grid during periods of high demand or when wind and solar generation drops.
But the Australian Energy Market Operator has warned of increasing fears of gas shortages in recent months resulting from a combination of higher global LNG prices, intermittent renewables penetration, coal plant outages and extreme weather.
The Newcastle Liquid Natural Gas storage at Tomago, which supplies gas to industry across NSW, is currently holding 556 terajoules, which is 36 per cent full.
The Hunter Power Project will connect to the Sydney-Newcastle gas pipeline via a lateral that is being built between Killingworth and Kurri.
The lateral is due to be completed in the first quarter of next year meaning the Hunter Power Project will be fueled by diesel for several months.
However, diesel may still be required in the event that the plant is unable to access gas.
Australian Pipeline and Gas Association chief executive Steve Davies said the lack of investment in new domestic gas supply had left Australia closer to gas supply shortfalls.
"Gas infrastructure companies have invested to help solve this crisis without long-term contracts that provide certainty," he said.
"Governments must act to de-risk gas investments, which are essential if we are to close coal power stations and support intermittent renewables during the energy transition."
While AEMO, which runs the country's biggest gas and electricity markets, says it is confident that east coast gas supplies will be able to meet the spring demand, the long-term forecast is less certain.
"New investment is urgently needed if gas supply from 2028 is to keep up with demand from homes and businesses, and for gas-powered electricity generation," AEMO said earlier this year.
The Hunter Power Project is part of the federal government's Future Gas Strategy, which is designed to use gas will support the economy's transition to net zero
The strategy has come under fire from environment groups that argue it is a reckless plan to open up new industrial gas basins that would damage land, water and communities.
But AEMO chief executive Daniel Westerman said flexible gas-powered electricity generation was an essential component of the energy mix into the future.
"Gas, along with batteries and pumped hydro, will enable higher rates of renewables and support electricity reliability as Australia's coal-fired power stations retire," he said.
It is eventually intended that that the Hunter Power Project will run on a combination of gas and green hydrogen.
The plant's turbines will be capable of running on a blend of 15 per cent hydrogen from the commencement of operations, however, this can be increased to 30 per cent with some modification.
Gas pipeline operator APA has posted a stronger full-year profit amid an expansion and urges more domestic gas production to support an end to coal-fired power.
