Australian Energy Market Operator warns of looming domestic gas supply crisis

The Australian Energy Market Operator has warned of a looming domestic gas supply crisis, and noted that shortages over the 2018/19 summer would present huge opportunities for new technologies such as battery storage and demand management.

The warning of shortages, which are expected to impact electricity markets the worst in the states on NSW and SA, prompted Coalition energy minister Josh Frydenberg to renew pressure on Labor governments to wind back renewable energy targets, and drill for more gas.

However, as the AEMO report makes clear, Australia actually has a lot of gas, it is just choosing to export 70 per cent of that supply to customers overseas, because it can get more money.

There is also enough untapped gas in existing gas fields – but according to the gas producers, it can’t be extracted at a cheap enough price to make it worthwhile. What they are looking for is extra subsidies and price signals to make that worthwhile.

And, as AEMO also makes clear, the price of gas will not be coming down, paving the way for a shift to cheaper and potentially more efficient technologies.

“The increased cost of sourcing new gas supply means additional gas in the market may not translate to lower prices,” it says. It is this that presents the opportunities for other technologies, because their costs are coming down, and quickly.

And it seems those technologies are ready to compete. Tesla’s Lyndon Rive claimed on Thursday that Tesla could solve Australia’s problems by building a 100-300MWh of plug and play grid-connected battery storage in under 100 days.

And in a separate report also released on Thursday, industry analysts Reputex said the cost of renewables and storage had surpassed gas as the ‘least cost’ source of energy supply – even if the sun is not shining and the wind not blowing.

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Giles Parkinson