Eight gigawatts. That’s roughly how much new gas-fired peaking capacity AEMO’s Integrated System Plan still has pencilled into the optimal development path for the National Electricity Market out to 2050, even in the step-change scenario that assumes renewables do almost everything else. Eight gigawatts in a market whose entire public conversation for three years has been about how gas is finished. Something doesn’t add up, and I don’t think it’s the modelling.
I’ll declare my hand early. I think the gas industry has been written off in commentary faster than it’s actually being written off in the market, and the gap between those two things is where the interesting story sits.
What the consensus gets right #
Let’s be fair to the case against gas, because most of it is sound. Domestic gas demand for electricity generation has fallen as wind, solar and batteries have taken market share, and it will keep falling on any sensible forecast. The Clean Energy Regulator’s safeguard mechanism data shows gas-fired generators facing the same declining baseline obligations as everyone else covered by the scheme. East-coast gas reservation politics remain genuinely messy, and the long-running standoff over Narrabri and Santos’s broader east-coast supply position, which we covered in our profile of Santos at the centre of the east-coast gas standoff, shows how contested the resource base still is. None of that is in dispute.
Where I think the consensus overreaches is in treating “declining share of generation” as equivalent to “industry in terminal decline.” Those are different claims, and conflating them has let a lot of sloppy thinking pass as analysis.
The firming job nobody else wants yet #
Gas peakers aren’t competing with wind and solar for market share of annual output. They never were, not really. They’re competing with batteries for the much narrower job of filling the gap when renewable output drops and batteries have already emptied. We went through the maths of that contest in gas peakers versus big batteries: the firming maths in 2026, and the short version is batteries win the short, frequent calls and gas still wins the long, rare ones. A four-hour battery does not help much during a cold, still week in July when wind generation across three states drops to a third of nameplate for five straight days. Something has to carry that load, and right now the only things that reliably can are gas, hydro with enough storage behind it, or coal that’s meant to be leaving.
Kurri Kurri is the case study everyone reaches for, not because it’s been smooth, but because it illustrates the point precisely. The project ran years over its original schedule, which we tracked in Kurri Kurri: the peaker that took the long way round, and it still got built. Capital didn’t walk away from a gas peaker project even after years of delay and public criticism. That tells you something about where the firming money actually wants to go, as distinct from where the press releases say it should go.
Follow where the capital is actually landing #
Woodside’s project sanctioning since the Scarborough final investment decision wasn’t a company hedging a declining asset class. It was a company making a multi-decade bet that LNG demand, particularly out of north Asia, has another couple of decades of relevance even as the domestic east-coast market softens. We laid out that balance-sheet logic in Woodside after Scarborough: gas-in-transition meets the balance sheet, and the detail that stands out is how little the company’s public filings hedge on gas remaining core to the portfolio well past 2040. You don’t sanction a project of that scale on a resource you think the market has already priced out.
Compare that with how batteries are actually being contracted. The Capacity Investment Scheme, which we explained in how the Capacity Investment Scheme actually works, leans overwhelmingly on storage and renewables rather than gas, which is the policy signal everyone points to as proof gas is finished. Fair point, as far as it goes. But policy preference and physical adequacy aren’t the same thing, and AEMO’s own reliability forecasts keep flagging gaps that the CIS pipeline alone doesn’t close in every region, every year. When the official reliability standard is at risk, gas peakers are still the fallback everyone quietly keeps warm.
The retirement-replacement scoreboard still favours incumbents #
We’ve tracked the mismatch between coal retirements and firmed renewable replacement build in coal exits versus replacement builds: who’s actually ahead, and the honest scoreboard says replacement is behind schedule in most states, not slightly behind, meaningfully behind. Every time that gap widens, the practical fallback is whatever dispatchable capacity already exists or can be built fastest, and gas peakers build faster than almost anything else bar batteries. NSW’s coal exit running ahead of its REZ rollout, a mismatch I wrote about in our piece on the state’s transition, is the clearest live example on the east coast right now.
Eraring is the test case to watch here. The extended timeline for its closure, which we’ve covered in detail, exists precisely because the replacement capacity wasn’t ready. Every time a retirement date gets pushed, it’s a tacit admission that the firmed-renewables build is running behind the schedule the modelling assumed. Gas doesn’t need to win an argument about the future to stay relevant. It just needs other things to keep arriving late, and so far that’s been the safer bet.
Where the bearish case is actually right #
I don’t want to overstate this, because the bearish case on gas has real substance underneath it, and I’m not running a cheer squad for the sector. Gas-fired generation’s share of NEM output has genuinely fallen, and it’s not coming back to anything like its historical level. The economics of new gas peaker capacity depend heavily on running hours that are becoming rarer as batteries eat into the shoulder periods gas used to occupy. And the social licence question is real: every new gas project now faces planning and community scrutiny that didn’t exist a decade ago, which slows things down and raises costs regardless of what AEMO’s spreadsheets say is technically needed.
There’s also the domestic supply problem, which won’t resolve itself through sentiment. East-coast gas reserves are finite, and the political fight over how much gets reserved for domestic use versus exported as LNG isn’t going away. If anything it intensifies every winter the east coast runs a tight gas year, something we flagged as a recurring risk heading into winter 2028 in an earlier piece on the gas question.
A dry note on timing #
There’s a cricket parallel here I can’t resist, and I promise it’s the only one. Commentators love writing off the number eleven batter the moment the proper order collapses, right up until he blocks out four overs and saves the Test. Gas in the NEM is playing roughly that role. Nobody expects it to score the runs. It’s there to survive the overs nothing else can, and pundits keep forgetting that surviving overs is still a job worth paying for.
What actually changes the calculation #
The thing that would genuinely kill the gas peaker’s remaining case isn’t a renewables target or a safeguard mechanism tightening, it’s long-duration storage arriving at scale and at cost. Pumped hydro projects like Snowy 2.0 and Borumba, which we’ve tracked at length, are the real threat to gas’s firming niche, because they can do the multi-day job batteries can’t. Until one of those is actually delivering power reliably, at the scale promised, on the timeline promised, gas keeps the job by default. Marinus Link matters here too, since Tasmania’s hydro backed by that cable is one of the few other credible multi-day firming options on the table.
My read, for what it’s worth, is that the gas industry’s genuine problem isn’t demand destruction, it’s cost and reputational drag slowing new supply at exactly the moment the firming job gets harder. That’s a different disease to the one most commentary diagnoses, and it calls for a different remedy. Writing gas off as finished lets policymakers avoid the harder conversation about what replaces its specific function, on what timeline, at what cost. AEMO’s own planning documents, available through the Integrated System Plan published on AEMO’s website, still assume gas has a seat at this table for decades. The Clean Energy Regulator’s safeguard mechanism data, published through the regulator’s own safeguard mechanism reporting, shows the sector’s obligations shrinking but not vanishing.
So has the gas industry been written off too early? On the evidence of where capital, capacity planning and reliability forecasts are actually pointing, yes, at least in the specific sense that commentary has run well ahead of the physical and financial reality. The industry isn’t being saved by sentiment. It’s being kept alive by everyone else’s delays. Whether that’s a sustainable position for the next decade, or just a long goodbye dressed up as resilience, is the argument worth having properly, instead of assuming the ending’s already written.
– Marcus Wren, Editor