"News that the energy market operator has triggered more gas emergency measures to secure the electricity system highlights that the energy crisis remains intense and fraught," Innes Willox, Chief Executive of national employer association Ai Group said today.
"Gas storage in Victoria is running low and AEMO has triggered the Gas Supply Guarantee, leading gas suppliers in Queensland to redirect enough gas to sustain gas-fired generation across the market. Gas generators have kept the electricity system going this winter, albeit at enormous cost, as a quarter of coal generation was unavailable at once.
"The acute phase of our energy crisis is not over. It could get worse at any time this winter. We are clearly not out of the woods. And most energy users have not yet felt the cost impact of recent necessary emergency measures, nor of the less dramatic but more sustained rise in wholesale electricity and gas prices that will last for years. Serious pain is coming for industrial energy users and their customers.
"We are also again seeing the unintended consequences and trade-offs involved in our best efforts to manage the situation. Gas demand is higher than expected due to the call on gas generation to substitute for coal. An additional reason for the drain on Victorian storages may be that in Victoria the gas price is currently capped – at an eye-watering $40 per gigajoule, ten times the historic average and four times the level of a year ago. The cap is important to protect energy users from vastly higher prices in a tight market. Meanwhile the currently uncapped prices in other States are $50/GJ or more, and gas has been flowing to where prices are highest.
"The corollary of price controls is thus some degree of rationing. We should all hope this does not need to go further before spring comes. But the stability of the electricity system is essential for us all. Importantly, our energy systems are interdependent, and so are our States. There is no solution that sets one State against another. We will get through this together, or not at all.
"When the season turns in Australia, winter will be drawing closer in the Northern Hemisphere. With Russia tightening the screws on Europe's gas supply, we can expect further chaos on global markets. High international price pressures will be felt here in Australia.
"Relief from those high prices will take years. AEMO's Integrated System Plan offers a sensible pathway for a stronger, cheaper and cleaner electricity system. That system will be vastly less exposed to the problems we are experiencing today. Getting there will take a lot of urgent action across all levels of government, large investment by energy suppliers and energy users, and the full and informed consent of communities near new energy projects across the country.
"Meanwhile the outlook for the gas market needs immediate rethinking. The most recent gas projections removed a fifth of local gas demand through efficiency and substitution by 2030; if we're going to achieve that we need much more government effort starting now. More concerningly, the projections met one third of local demand with LNG imports by 2030. Import flexibility could still be important, but the feasibility, affordability and reliability of that option are now under a cloud post-Ukraine.
"Our gas troubles today could get even worse if we don't prepare. Whatever we do on supply or demand, it must add up," Mr Willox said.
