AUST Business 28Dec
TOMAGO SMELTER IN GRID WARNING
Tomago Aluminium, the nation’s largest smelter and biggest single consumer of power, has issued a fresh warning over the frailty of Australia’s power grid next winter following the 2022 energy crisis.
The decision by energy ministers to remove coal and gas from the power grid fix known as the capacity mechanism has been called into question by Tomago given the experience of last winter, when the National Electricity Market was suspended for the first time.
“The challenge has been that historically, summer used to be the apex of concern for the electricity network,” Tomago chairman David Fallu told The Australian.
“We’ve obviously seen that’s now become a summer and a winter phenomenon. And so that’s why the support for energy security should be considered in the forms of support that it needs.”
While authorities have traditionally braced for grid blackouts during Australia’s peak summer period, high demand for gas over winter and the declining role of coal have also heightened risks to the grid during colder months.
“We’ve seen gas filling that support and I think there will be a requirement for that, particularly in the short term across both summer and winter periods now as we see it in Australia,” Mr Fallu said.
A plan for new gas powers to be handed to the Australian Energy Market Operator to avoid a fresh supply crisis next winter was rejected by big energy producers in October, worried a new interventionist regime will raise risks.
Those rules were agreed to by state and federal energy ministers in late October, however, with legislation to give the rules effect still before the South Australian parliament.
But the comments come amid a fresh war between the federal government and gas producers over price caps and potential export restrictions, rushed through parliament in December, which threatens to exacerbate uncertainty over east coast gas supply and pricing.
In August the ACCC warned of a “looming” shortfall in the east coast gas supply, saying domestic gas supplies could fall short of projected 2023 demand by more than 55 petajoules.
But that potential shortfall has been exacerbated by the passing of gas cap legislation and the subsequent suspension of sales negotiations over domestic gas supply for the next few years.
Shell and Woodside both suspended talks with customers for new supply contracts in the wake of the unveiling of the proposed rules by federal Energy Minister Chris Bowen.
Shell, operator of the QCLNG gas export plant in Queensland, said in mid-December it had suspended a tender process offering 50 petajoules of gas to buyers in 2023 and 2024 from its QGC business as it assessed the fallout from Labor‘s proposal to permanently control prices.
At the same time Woodside called a halt on talks to sell up to 50 petajoules of gas in 2024 and 2025, which had attracted more than 20 buyers.
The consultation period for the Albanese government’s Mandatory Code of Conduct closes on February 7, with greater certainty for manufacturers and gas-fired generators – and producers – not likely to emerge until after that date.
At the same time, some gas producers have said they will put emerging projects on hold pending the outcome of that consultation process.
Last week Senex, owned by Gina Rinehart’s Hancock Energy and Korea’s POSCO, suspended work on a $1bn Queensland coal-seam gas project aimed at injecting another 60PJ of gas into the domestic gas market within two years. And on Thursday domestic gas hopeful Comet Ridge pushed back talks to finalise a deal to sell gas to the Queensland government’s CleanCo from its Mahalo gas project until March – again, after the close of the Code of Conduct consultation period.
Comet Ridge managing director Tor McCaul said that, although significant progress had been made on the agreement, talks had been extended due to “recent market uncertainty”.
On Friday federal Resources Minister Madeleine King urged gas companies to engage with the consultation process rather than “threaten an investment strike”.
“The code of conduct is about ensuring fair and equitable contracts between gas producers and gas consumers in this country. The code puts the onus on purchasers and producers to act reasonably and in good faith,” Ms King said.
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