The Australian Energy Market Operator has released a more bleak outlook for potential gas shortfalls in Australia’s domestic market, but said they could be much worse if renewable energy projects are delayed or one of Australia’s ageing coal units fails.
AEMO, in its third report in six months, now projects shortfall risk of between 54 petajoules and 107 PJs for 2018, and of between 48 PJ and 102 PJ for 2019.
“Based on the most recent information from industry, together with AEMO’s forecast demand, gas supply remains tight in eastern and south-eastern Australia in 2018 and 2019, and there remains a risk of a supply shortfall,” AEMO CEO Audrey Zibelman says in a statement.
Prime minister Malcolm Turnbull seized on the report, saying it was “three times worse” than earlier feared. The chief reason appears to be reduced production numbers, which account for nearly the entire accounted shortfall.
The report, however, points to two other key factors that could play on the market, and which were cited in its forecast for electricity supply earlier this month: namely, the risk of a major coal unit failing, and the possibility that the expected number of renewable energy projects may also fall short.
AEMO sees the new build of renewable energy as critical to help meet supply shortfalls in the electricity market, and in its latest report says that more renewable energy will mean less need to burn gas for electricity.
If new renewables are delayed beyond current commitments, then this could account for nearly half of the potential shortfall.
But it also warns that more gas will be needed if one of the country’s ageing coal generators went out of service for an extended period, as had happened in three of the last five years (Yallourn (flood), Hazelwood (fire) and Eraring.
“With an aging coal fleet, there is potential for a more serious failure to occur than is typically addressed by normal preventative maintenance,” AEMO says, in what some might interpret as a backhanded criticism of the government’s push to keep the ageing and increasingly decrepit Liddell coal generator open another 5 years.
For 2018, the shortfall risk is put by AEMO at between 54 petajoules and 107 PJs. For 2019 it is between 48 PJ and 102 PJ.
The potential gas shortfall is being used by the federal Coalition government and lobby groups to argue for NSW, Victoria and the Northern Territory to remove their restrictions on coal seam gas. But AEMO’s report says this would do nothing to relieve potential shortfalls in the next 12 months.
Independent studies have also said Australia does not have a shortfall, because there are plenty of gas reserves (not including onshore CSG reserves), but much of it is undeveloped because of the cost. AEMO appeared to echo that view:
“Higher (gas) prices … may lead to the acceleration of projects not yet online or the expansion of gas projects already producing in the longer term, but is not expected to materially alter outcomes within the next 12 months,” it says.
AEMO’s demand forecasts for gas also showed an increased range, allowing for greater industrial use of gas at the top end, and factoring in much reduced use of gas by households and small businesses, and in new residential developments which are focusing on electricity-only supplies.
The Coalition has also been mulling the imposition of export controls on the LNG industry, but after a meeting in Canberra on Monday, has given the east coast gas giants “one last chance” to free up enough fuel for the domestic market, the AFR reports.
Giles Parkinson is a journalist of 30 years experience, a former Business Editor and Deputy Editor of the Financial Review, a columnist for The Bulletin magazine and The Australian, and the former editor of Climate Spectator.