Australia's Snowy Hydro, Lochard Energy ink deal for Iona gas storage

Snowy Hydro has inked a 25-year gas storage agreement with Lochard Energy starting January 2028 at the Iona underground Gas Storage Facility in Australia to support its gas-fired generation fleet, the integrated energy provider said in a statement July 15.

The deal comes at a time when Australia's energy market is witnessing an uptick of cleaner fuels, including renewables, amid the progressive closure of the country's coal-fired assets.

Snowy Hydro helps manage intermittency in the National Electricity Market through its portfolio of power stations including the Snowy Scheme. As part of the long-term agreement, Snowy Hydro will be able to utilize stored gas when required to operate its gas fired power stations, it said.

"Snowy Hydro's generating portfolio of hydro, pumping and gas fired power stations continues to support further deployment of renewables into the grid by "firming" intermittent generation sources into reliable power," Snowy Hydro CEO Dennis Barnes said, sharing that the collaboration will support the company's operation of gas-fired power stations in Victoria.

Snowy Hydro owns and operates three gas-fired power stations located in the LaTrobe Valley and Laverton in Victoria, and at Colongra, New South Wales, with their total generating capacity being 1,290 MW.

Snowy Hydro is also constructing a 660 MW gas-fired power station at Kurri Kurri in the Hunter Valley, it said.

Meanwhile, Lochard CEO Tim Jessen noted that the agreement will underpin Lochard's Heytesbury Underground Gas Storage project through which it will further expand the Iona Gas Storage Facility to continue to provide critical energy storage services in Victoria.

Lochard Energy is also developing the H2RESTORE Project, which aims to develop underground hydrogen storage.

"We are currently undertaking a Feasibility Study, partially funded by Australian Renewable Energy Agency (ARENA), to understand the commercial and technical viability of storing hydrogen underground in Lochard's existing reservoirs," the company said in a LinkedIn post earlier this month.

"If viable, our H2RESTORE Project has the potential to not only shift large amounts of renewable energy seasonally, but it could also kick-start Victoria's hydrogen economy and repurpose existing underground gas storage assets," it said at the time.

In June, the Australian Energy Market Operator, or AEMO, had issued a notice warning of gas supply risks within the country's East Coast Gas System due to reduced delivery capacity from storage facilities, with the shortage expected to persist through Sept. 30.

"Recent gas supply and demand trends for the southern jurisdictions (New South Wales, Australian Capital Territory, Victoria, South Australia and Tasmania) indicate there is a potential for gas supply shortfalls due to the depletion of southern storage inventories, particularly Iona UGS," the AEMO had said in June.

Various measures including investments in new gas supply, maximizing production, monitoring and trimming gas demand requirements and expediting the construction of LNG import terminals have been suggested by industry sources in the past to meet any potential shortages in the domestic market.