AFR Live: ‘We need more supply, duh’: As the light finally...

AFR Live: ‘We need more supply, duh’: As the light finally shines on permanently in the dark, freezing cold retard PM, finally acknowledges gas shortfall risk several decades too late

• Low wind power generation amid a cold snap is threatening to create a gas shortfall

Gas shortage warning exposes deep energy mess

Low wind power generation amid an east coast cold snap is threatening to create a gas shortfall, exposing the effect of years of restrictions on new supply and jeopardising the Coalition’s ambitions to transition to nuclear power.
The Australian Energy Market Operator says the threat of gas supplies running short extends from NSW to Victoria, South Australia, Tasmania and the ACT and could last until September. The intervention has sparked acrimony from producers and gas users, who say it is “very frustrating” that repeated supply warnings have been ignored.

The squeeze in gas on the east coast comes after years of struggle by producers in the south-east to develop new projects, hindered by Labor’s intervention on gas prices and tight restrictions on gas development in Victoria and NSW.
But it also comes as the Coalition points towards gas as the way to keep energy prices affordable and the lights on in the 13-year period before the first of seven nuclear reactors it has proposed comes online. On Thursday, shadow treasurer Angus Taylor said gas would be an “important” shorter term energy source.
“In the shorter term, ... we need to have a balance of renewables and gas coming into the system. That’s a balance which other countries are pursuing,” Mr Taylor told ABC Radio on Thursday.
“Again, we’ve got ourselves into an immature debate, where you say: ‘Oh well, it’s all got to be renewables. We can’t have any gas’.”
A spokeswoman for Energy Minister Chris Bowen said AEMO’s warning showed the “system work[ing] exactly as it should”.
“Today’s notice is about a potential risk, not a risk that has eventuated. AEMO and the market are taking steps to ensure the risk is mitigated ahead of time,” she said, adding Labor had worked hard to secure more supply.
Australian Pipelines and Gas Association chief executive Steve Davies said industry had been warning about gas supply shortfalls for half a decade, but that little had been done and now businesses were “being asked to pay the price”.
“The extreme lows in renewable generation, particularly wind yields, have meant gas-powered generation has picked up a significantly larger load to keep the lights on and ensure electric homes can remain heated,” Mr Davies said.
In the first 19 days of June, as much gas-powered generation in Victoria had already been used as over the entire last winter, demonstrating its importance, Mr Davies said. “But you can’t have gas generation without supply.”

Andrew Richards, who runs the Energy Users Association of Australia – which represents large manufacturers and industrial gas users including Visy Industries, BlueScope Steel, Orora and Fletcher Building – said AEMO’s intervention was “a very clear, early warning that we need to get more gas flowing into Victoria”.
“The chickens are coming home to roost. If we’re managing gas supply through demand destruction that is very, very frustrating,” Mr Richards said.
“That is the end result of the Victorian state government blocking new supplies of gas for 10 years.”
AEMO called gas market participants onto a phone hook-up onThursday to formally notify them of the risk to gas supplies and to request producers to maximise delivery into the market.
While the operator is not intervening in the market at this stage, MST Marquee energy analyst Saul Kavonic said it was paving the way to issue directions to support storage.
“Prices are high, [which is] not politically sustainable for too long,” Mr Kavonic said.

“It’s another warning of how precarious Victoria’s energy situation is, which will only get worse over the next few years.”
But Victorian Energy Minister Lily D’Ambrosio said there was no cause for concern.
“We’ve had a very, very cold few days and that’s meant that Victorians are using more gas to keep themselves warm, and we want to make sure that they stay warm,” she said.

Wind power at a low

The squeeze on south-east gas supplies has been driven by the need for gas power plants to compensate for low renewable power generation, as is typical during winter periods when wind levels can subside for days at a time.
In the three days to June 20, average renewable power generation in the electricity market generated just 21.1 per cent of the energy used in Victoria, a state with higher-than-average wind capacity. It sank to a low of just 2.5 per cent during that period.

Several outages at coal power units have contributed to the market tightness, leaving the remaining coal units running almost flat out, market sources said.
Electricity market watcher Global-ROAM said seven coal power units out of the 44 across the National Electricity Market were out of action, including units at Kogan Creek in Queensland, and at Eraring and Mount Piper in NSW.
At the same time, the east coast’s biggest supplier of domestic gas, the Longford gas plant owned by ExxonMobil and Woodside Energy, is running below capacity due to an outage.
AEMO said maintenance work at offshore fields would continue to limit production at Longford until at least July 1.
The reduction of supplies from Longford has caused a run-down in gas levels at the main storage plant in the south-east, the Iona facility in Victoria. AEMO said gas storage at the Newcastle and Dandenong storage plants would also experience high withdrawal rates while the squeeze continued.
In a statement, Woodside said it was “taking steps to support the gas market in eastern Australia, following warnings from AEMO that supplies may not meet peak winter demand”.

“We are working with the operator to maximise gas production from the Gippsland Basin ... and offering all available volumes to market,” it said.
Josh Stabler, an adviser at Brisbane-based Energy Edge, said the threat of shortages in the south-east would only become “more real” as winter takes hold.
He pointed to the two concurrent issues of high consumption of gas due to cold weather, and the limit to gas supplies from the Iona storage plant, requiring “optimisation” of storage over the entire winter.
“It is a medium-term issue as storage at the current levels but will become more real at winter continues,” Mr Stabler said.
Under the regulations, any shortages that do result would hit industry rather than households, which would be prioritised in terms of the supply of available fuel.