South-east Australia risks temporary gas shortages by 2023 winter, energy review warns
High household demand for gas in winter could leave south-east Australia vulnerable to a gas shortage as coal is phased out, the Australian Energy Market Operator says. Photograph: Lukas Coch/AAP
Tue 29 Mar 2022 03.31 AEDTLast modified on Tue 29 Mar 2022 03.32 AEDT
South-eastAustralia could face gas shortages as soon as the 2023 winter because of delays for a planned NSW import terminal and falling Bass Strait output, according to the annual review of the sector by the Australian Energy Market Operator.
Aemo’s gas statement of opportunities report, which maps the supply and demand for the fuel over the next two decades, said shortages could be avoided by using less gas in power generation on cold days but also accelerating the switch to electricity.
Regions affected by the potential shortfall during one-in-20-year extreme weather include Victoria, the state most dependent on gas for heating homes; Tasmania; the ACT and parts of southern NSW.
“A shortfall risk in the south-eastern states in winter 2023 is forecast under extreme conditions, given ongoing production decline from Bass Strait and pipeline capacity limits from northern Australia,” said Merryn York, Aemo’s executive general manager system design.
Household use of gas, in particular, is highly seasonal, with winter demand triple that of warmer months. Electricity demand, meanwhile, tends to peak during summer.
Gas use in the power sector has been declining as renewable sources grow. During still, cloudy days in winter, coal-fired power plants could be expected to fill much of the generation load, however, the accelerated closure of coal capacity may mean more gas is needed during winter as well.
AGL, Australia’s biggest electricity producer, is expected to close the first of the four units at its Liddell 1,680-megawatt coal plant in the Hunter on Friday, underscoring that transition. The other three units are scheduled to close in April 2023.
The majority of Australia’s gas is exported. There is no shortage, just limited pipeline or terminal capacity. In Bass Strait, though, which has long been the main source of the fossil fuel in southern Australia, output is forecast to keep shrinking.
Aemo uses five scenarios to project demand use. Under the so-called “step change” track – considered by stakeholders to be the most likely – a gas shortfall would be “narrowly avoided” in 2023. That outcome assumes gas demand will drop as consumers shift quickly to electricity, particularly for heating, and improve energy efficiency.
“While these [changes] are likely over time, the pace so far has been relatively slow, and urgent action would be needed to put south-eastern regions on the Step Change path by next winter,” Aemo said. If not, by the winter of 2023, “there are risks of small, infrequent gas shortfalls under extreme one-in-20 year demand conditions”.
To ensure the risks of forced gas shortages can be minimised, Aemo is planning to mimic demand management tools used to avoid power blackouts during summer. These include the Reliability and Emergency Reserve Trader (Rert) that rewards big electricity users to cut power use.
Aemo also issued a separate Victorian gas planning report to highlight that state’s challenges. It noted the Andrews Labor government is preparing a gas substitution roadmap to identify how the gas industry can contribute to the state’s net zero target by 2050.
Under the step-change scenario, Aemo forecasts a drop of 16.8% in annual gas consumption in Victoria by 2026, with peak day demands forecast to reduce by about 18%.
The ACT, too, has a climate change strategy to reach net zero emissions by 2045, including the removal of mandatory gas connections for new residential suburbs.
Aemo predicted that by 2035, seasonal supply gaps will be again be a risk.
By then, the south-eastern region would be “completely reliant on imported gas transported from northern supplies and Pket, and storage cannot fill the gap” without more investment, it said.
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