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APA Group Limited ACN 091 344 704
Level 25, 580 George Street, Sydney NSW 2000
PO Box R41, Royal Exchange NSW 1225
P: +61 2 9693 0000 | F: +61 2 9693 0093
APA Group | apa.com.au
APA Submission:
Safeguard Mechanism implementation: production variable and international best practice benchmarks
22 January 2024
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APA Group Limited ACN 091 344 704
Level 25, 580 George Street, Sydney NSW 2000
PO Box R41, Royal Exchange NSW 1225
P: +61 2 9693 0000 | F: +61 2 9693 0093
APA Group | apa.com.au
Edwina Johnson
Branch Head, Safeguard and CBAM Review
Lodged online
22 January 2024
RE: APA Submission to Safeguard Mechanism implementation: production variable and international best practice benchmarks
Dear Edwina,
Thank you for the opportunity to comment on the Australian Government’s exposure draft
National Greenhouse and Energy Reporting (Safeguard Mechanism) Amendment (Production
Variables Update No.2) Rules 2023. We have appreciated the engagement the Department has undertaken to date and look forward to further engagement on these important issues.
APA is an Australian Securities Exchange (ASX) listed owner, operator, and developer of energy infrastructure assets across Australia. Through a diverse portfolio of assets, we provide energy to customers in every state and territory on mainland Australia. As well as an extensive network of natural gas pipelines, we own or have interests in gas storage and generation facilities, electricity transmission networks, and 692 MW of renewable generation infrastructure. APA currently has two gas pipeline facilities, and a dual fuel power station that are covered by the Safeguard Mechanism (facility specific baseline).
We support the global transition to a lower carbon future and are actively supporting the energy transition taking place across Australia. In August 2022 we released our Climate
Transition Plan, outlining APA’s pathway to net zero operations emissions by 2050, and we released our Climate Report in September 2023, disclosing progress against our Climate
Transition Plan.
Our submission relates solely to the proposed production variable of 0.177 t of CO2-e per
MWh electricity generated/ exported (refer to the end of section 57 of Schedule 1 of the
Exposure Draft of the National Greenhouse and Energy Reporting (Safeguard Mechanism)
Amendment (Production Variables Update No.2) Rules 2023).
We would welcome the opportunity to discuss our submission.
Kind regards
Victoria Somlyay
General Manager - Sustainability
APA Group
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1 Key Points
Our submission is informed by our experience owning, operating, and developing energy infrastructure assets across Australia, including the Diamantina Power Station, the Gruyere
Hybrid Microgrid, and other off-grid generation assets.
We understand from the explanatory document that the best practice emissions intensity value for the electricity generation production variable is based on the top 10% of Australian industry performance, and that the chosen best practice facilities were drawn from a range of sectors including oil and gas, mining, and manufacturing.
As the explanatory document does not provide the type(s) of electricity generation at the selected facilities, we would welcome the release of the underlying information used to calculate the benchmark to assess its adequacy and applicability to off-grid or remote electricity generation facilities.
We offer the following key points for consideration in implementing the Safeguard
Mechanism rule:
❖ As gas continues to play a role in firming renewable generation, government should be
technology neutral in incentivising emissions reduction and supporting the construction
of best practice Gas Power Generation (GPG) to ensure reliability of electricity supply.
❖ Off-grid electricity generation requires a different approach to best practice emission
intensity as the available energy mix differs from on-grid solutions. Off-grid solutions
must also supply their own ancillary services (such as spinning reserve).
❖ We would like to work with the Government to develop a dedicated production variable
for off-grid or remote electricity generation facilities.
APA Group Limited ACN 091 344 704
Level 25, 580 George Street, Sydney NSW 2000
PO Box R41, Royal Exchange NSW 1225
P: +61 2 9693 0000 | F: +61 2 9693 0093
APA Group | apa.com.au
2 Submission Response
2.1 Role of gas in firming electricity supply
Renewable electricity generation is set to increase while the country aims to achieve the
82% renewable electricity target by 2030 and drive decarbonisation. Despite the increasing adoption of renewable electricity generation, GPG will remain an essential component of the energy supply mix due to its ability to provide dispatchable energy in response to variable renewable energy generation. GPG also provides the ancillary services or essential system services vital to ensuring a stable and consistent power supply.
Forecasts such as the Future Ready Scenario of the South West Interconnected System
(SWIS)1 predicts 8.2 GW of on-grid energy to be from GPG sources to support the predicted implementation of renewable electricity generation and long duration energy storage.
Similarly, the Australian Energy Market Operator (AEMO) released in mid-December 2023 its draft 2024 Integrated System Plan (ISP)2, that warned without coal-fired generation the
National Electricity Market (NEM) will require 16.2 GW of GPG for peak loads and firming.
During periods of renewable resource shortfalls there will be risks to reliable and secure energy supplies. Without adequate investment in dispatchable technologies there is a real and persistent risk to the reliability of the grid. The new Safeguard rule should not restrict capital flow to lower carbon energy transition activities, such as high efficiency GPG in the short and medium term that would serve to support the energy transition.
2.2 Off-grid power generation
APA’s customers and capital markets are overwhelmingly factoring in net zero commitments.
Our 16 largest customers all have net zero or carbon neutral targets, and 10 of them have an interim decarbonisation target. These customers mine and export the ores and the critical minerals essential for Australia and the global economy to decarbonise. These mines are generally located in remote areas where a sustained and reliable source of power is essential, but there is no established electricity transmission network to connect to. Building transmission infrastructure in these remote locations would, in most cases, be uneconomic, as the distance to connect a facility would result in prohibitively high electricity transmission connection costs.
Generally, off-grid or remote industrial customers’ energy needs are fulfilled by installation of dispatchable thermal generation to meet the customer’s power requirements, including maintenance redundancy, with renewable generation installed to reduce the amount of gas or diesel required to meet the customers energy demand. As these off-grid facilities must be fully self-sufficient they are also required to provide the full range of ancillary services that on-grid customers secure at a fraction of the cost. The provision of these ancillary services occurs through part-load operation of the GPG facilities which results in lower operating
1 Sectoral emissions reduction strategy for Western Australia (www.wa.gov.au)
2 draft-2024-isp.pdf (aemo.com.au)
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APA Group Limited ACN 091 344 704
Level 25, 580 George Street, Sydney NSW 2000
PO Box R41, Royal Exchange NSW 1225
P: +61 2 9693 0000 | F: +61 2 9693 0093
APA Group | apa.com.au efficiency and higher emissions intensity compared to facilities that can operate at full load and peak efficiency.
Whilst some customers can implement renewable technologies, the options available are limited by several factors including the availability of land to host the facility, availability of renewable resource such as limited wind in many remote areas, production demand, and geographical criteria. Additionally, there are certain industries that require a constant source of heat, including smelting or calcination processes which cannot be provided by intermittent supply of renewable electricity alone.
2.3 A representative production variable for electricity generation
2.3.1 Proposed best practice emission intensity
The proposed best practice emission intensity of 0.177 tCO2-e per MWh electricity generated / exported could have significant unintended consequences. The proposed figure does not appear to be representative of all types of electricity generation, particularly for remote and off-grid solutions.
The proposed international best practice benchmark appears to be based on the top several facilities which are presumably using multiple types of electricity generation, primarily renewable electricity generation. For off-grid and remote generation scenarios, this would result in policy settings based on technologies that are not replicable at scale.
Assuming natural gas is available and there was a GPG technology that could operate at
100% efficiency, the heat rate of that GPG would be 3.6 GJ/MWh to reach an emission intensity of 0.185t of CO2-e per MWh electricity generated / exported 3. However, the implementation of current world best practice for Combined Cycle Gas Turbine technology has an emission intensity of approximately 0.360t of CO2-e per MWh electricity generated / exported with a around 7GJ per MWh electricity generated / exported. The proposed best practice emission intensity of 0.177 -e per MWh electricity generated / exported is not able to be achieved by gas turbine technology alone.
The proposed best practice emission intensity figure also potentially promotes outcomes which will disincentivise investments in new facilities, especially where these new facilities would replace older, higher carbon emitting facilities.
2.3.2 Off-grid electricity generation production variable
We propose that given the unique circumstances of Australia’s remote/off-grid energy users, the Government provide a separate remote or off-grid electricity generation emission intensity, which provides an appropriate benchmark for the typical available energy sources.
Remote and off-grid power solutions rely on either small open cycle gas turbines or gas fired reciprocating engines to provide the customer’s capacity. In our experience, the typical heat rates and emission intensities of these technologies are as follows:
3Emission factor for the consumption of natural gas is 51.5 kg/CO2-e per GJ National Greenhouse
Accounts Factors: Australian National Greenhouse Accounts, August 2021 (dcceew.gov.au) Table 2
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APA Group Limited ACN 091 344 704
Level 25, 580 George Street, Sydney NSW 2000
PO Box R41, Royal Exchange NSW 1225
P: +61 2 9693 0000 | F: +61 2 9693 0093
APA Group | apa.com.au
1. Open Cycle Gas Turbine (assume aero derivative technology)
Heat rate – 10 GJ/MWh; 0.515t of CO2-e per MWh electricity generated / exported
2. Gas Fired Reciprocating Engine
Heat rate – 9 GJ/MWh; 0.464t of CO2-e per MWh electricity generated / exported
Not only does the available energy mix differ from on-grid solutions, off-grid solutions must supply their own ancillary services (such as spinning reserve) resulting in significantly different facility loadings and lower efficiencies than on-grid solutions.
Aero derivative gas turbines solutions are better suited for weak networks and providing ancillary services, making them the most appropriate for off-grid facilities. We therefore recommend the best practice emission intensity be based on aero derivative gas turbines whose full load heat rate is 10GJ/MWh, providing an emissions factor of 0.515t of CO2-e per
MWh electricity generated / exported.
We would like to work with the Government to develop a dedicated production variable for off-grid or remote electricity generation facilities.
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APA Group Limited ACN 091 344 704
Level 25, 580 George Street, Sydney NSW 2000
PO Box R41, Royal Exchange NSW 1225
P: +61 2 9693 0000 | F: +61 2 9693 0093
APA Group | apa.com.au
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