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Energy market operator warns of gas and power shortages

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Australia is facing widespread power shortages due to a lack of gas supply, with South Australia likely to be hit from next year.

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An assessment by the nation’s energy market regulator also warns rising energy prices may threaten the financial viability of some businesses.

The Australian Energy Market Operator says the gas and electricity markets can no longer be viewed in isolation and there was a need for a single energy view from a national perspective.

There could be widespread power shortages in NSW and South Australia from next year, followed by Victoria in 2021 and Queensland from 2030, the regulator warns.

“If we do nothing, we’re going to see shortfalls in gas, we’re going to see shortfalls in electricity,” chief operating officer Mike Cleary told the ABC today.

“If we use the gas for electricity, the potential for shortfalls are in the domestic and the industrial (supplies). If we use it in industrial and domestic, the shortfalls will be in electricity.”

Energy supply shortfalls could be mitigated in the short term by increasing coal-fired generation and renewable energy output combined with increased gas production and the possibility of LNG exporters redirecting a small portion of their production to the domestic market.

Modelling showed supply shortfalls of between 80 gigawatt hours and 363 gigawatt hours could be expected from summer 2018/19 until 2020/21, if there was no new development to support more gas-powered electricity generation.

Federal Energy Minister Josh Frydenberg said the projected gas supply shortfall had the potential to hurt both residential and industrial customers.

“This report is another reminder why the states and territories, who are locking up gas with moratoria, bans and regulatory restrictions, need to urgently rethink their position,” he said.

Australia was now exporting two-thirds of what the country produces, leading to a tight gas market, the minister said.

“What we need is more gas supply and more gas suppliers,” he said

Quarantining new exploration for domestic use was a “creative” suggestion from the Queensland government and worthy of further consideration, Frydenberg said.

South Australian Energy Minister Tom Koutsantonis said the report called for the removal of state-based onshore gas bans in order to boost production.

He said the state Liberals should immediately abandon their proposed moratorium on unconventional gas development in the South East of South Australia.

Experts estimated the region had “vast gas reserves” yet to be discovered.

“We need more gas supply in Australia, not less,” Koutsantonis said.

Marshall said the proposed moratorium would not hinder SA’s power supply as there has been no such exploration or extraction in that area to date.

He said his team is standing by its planned moratorium for the southeast, a decision informed by a two-year select committee, but would support gas exploration and extraction elsewhere.

“We would be doing anything we could to accelerate gas exploration in other parts of South Australia, both conventional and unconventional, which we haven’t ruled out,” he told ABC radio.

Prime Minister Malcolm Turnbull sheeted home gas shortages to state-based bans on onshore gas exploration.

Turnbull will hold meetings with the chief executives of east coast gas companies soon to address the issue, laying the blame on state governments for not allowing the development of gas resources.

“We are facing an energy crisis in Australia because of these restrictions on gas,” he said in Sydney today.

AEMO’s key findings

Declining gas production may result in insufficient gas to meet projected demand for supply of electricity from summer 2018-19.

Maintaining system security is becoming more challenging, increasing the risk of supply shortfalls in both gas and electricity markets.

Exploration and development of new gas fields would increase supply in the longer term.

Continued upward pressure on gas and electricity prices may threaten the financial viability of some commercial and industrial customers.

– with AAP

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