On Thursday afternoon, about 100 people representing big energy users and suppliers leapt on an urgent call.
The Australian Energy Market Operator was explaining why it had issued a “threat notice” that warned gas could be disrupted if supplies ran low.
It was the first time Aemo had issued such an alert since it had gained new powers a year ago. Extended cold weather across southern states had prompted residents to crank up heaters while a lack of wind meant gas-fired power stations had burnt more of the fossil fuel.
An unplanned outage at Victoria’s Longford gas facility didn’t help, stoking memories of the 1998 fire that killed two workers and disrupted gas supplies in the state for 19 days.
Internal discussions suggest Aemo intervention won’t be necessary. Longford will start ramping up in coming weeks and gas storages, such as Victoria’s Iona, will be replenished. The squeeze on supplies spanning South Australia to Tasmania and New South Wales should then ease – provided there aren’t other surprises.
In a week marked by the federal opposition’s pledge to build seven nuclear power plants starting from as early as 2035, the possibility of gas disruptions inevitably fed into the wider energy fracas.
“We know very well that Labor has been suffocating the supply of gas,” Ted O’Brien, the shadow energy minister, told reporters on Friday afternoon. “Right now the operator is warning Australians, that unfortunately, it could be lights out.
“Senior citizens don’t know if they should eat tonight, or turn the heater on,” O’Brien said, adding the energy system was in “dire trouble”.
A spokesperson for the federal energy minister, Chris Bowen, countered that the market was working “exactly as it should”.
“Aemo has confirmed it has adequate levers available to address any issue if it materialises,” she said. “Unlike the Coalition, which ignored gas shortage warnings for years, [Labor] took immediate strong action when it came to government on both gas supply and price by introducing the gas mandatory code of conduct.”
Lily D’Ambrosio, Victoria’s energy minister, said “Aemo is confident that the east coast gas market will have enough gas to get through winter”.
“These alerts are a regular part of managing the gas network and signal to the market to increase their production and supply of gas to avoid a shortfall.”
‘This is a nasty problem’
The prospect of factories in Victoria and NSW having gas supplies cut off with just a few hours’ notice underscores the urgency of addressing problems now, says Andrew Richards, the chief executive of the Energy Users Association of Australia.
“We don’t need the distraction of [whether] nuclear happens in 2040, 2050, or wherever it is,” Richards said. “What we’re focused on is good energy market policy, to ensure the lights stay on, to put downward pressure on prices, and decarbonise the system. That’s our priority, and that’s what has to happen in the next 10, 15 years.”
The electricity market already rewards big users who power down to avoid blackouts during peak load periods. A similar scheme looks likely for gas as governments must ensure households with gas heaters can use them, particularly in winter.
Tony Wood, the Grattan Institute’s director of energy policy, says there is “blame all around”.
“The big gas companies are driven by the export volume, not by the domestic market”, with about three-quarters of eastern Australian gas earmarked for exports, he says.
Yeah, about that gas shortage... pic.twitter.com/hvaCpUhMaG
— Greg Jericho (@GrogsGamut) June 20, 2024
Pipelines pumping gas southwards during winter are operating at full tilt. Efforts, particularly in Victoria, to deter gas use starting with new homes mean pipeline operators have little incentive to invest in assets that could be stranded within a decade or two, he says.
“The Victorian government, for a long time, has been to a degree anti-gas [and] the federal government hasn’t known what it wants to do about gas,” Wood says. “To be fair, this is a nasty problem.”
Gas has also not been a cheap source of energy since eastern Australia got hitched to global prices over a decade ago with the completion of huge liquefied natural gas export terminals. Whenever gas is used as the price setter in the national electricity market – as often happens during low renewables output – wholesale power prices also jump, contributing to bigger bills for households and businesses.
Asked on Friday if a Coalition government would secure more gas for domestic use – especially as customers like Japan have lately been re-exporting surpluses – O’Brien said: “We will have more to say about our energy policy in due course.”
“What we need to do is we need to make sure we clear the decks when it comes to unnecessary red tape,” he said. “An increase in supply means not only do we keep the lights on but we get prices down.”
Market analysts, though, doubt extra supplies from sites such as Narrabri in NSW would ever be large enough to make a material difference to global prices.
‘Really high pressure’
In the near term, whether gas supplies suffice may hinge on fickle weather.
Ashleigh Madden, a communications meteorologist at Weatherzone who advises energy clients, says a “really high pressure” system sitting over southern Australia in autumn had likely been a one-in-4,000-year event. It resulted in long stints of calm weather, reducing output from windfarms and contributing to greater gas use.
Promisingly, the first of a series of cold fronts will sweep over south-eastern Australia, starting this weekend. “It looks like we’ll see some wind associated with that system, which will be good,” Madden says.
Temperatures, too, “should warm up slightly” ahead of those cold fronts, as they typically draw into air from the north-west rather than Antarctica. However, relief will be temporary, with the mercury dropping to be several degrees below the norm for Adelaide and as much as five below for Melbourne on some days.
Solar output, already reduced during winter, may increase provided the cold fronts don’t combine with north-west cloud bands streaming off the Indian Ocean. Those risks are hard to tell, Madden says.
All up, energy authorities have left themselves little margin for error, Grattan’s Wood says. What you should do is “hope for the best and plan for the worst, and what they’re doing is hoping for the best and planning for the best”.
