Bowen vows to tackle gas crisis

Close-up of Australian energy minister Chris Bowen (safeguard mechanism)
Energy Minister Chris Bowen

New energy minister Chris Bowen has vowed to take the action necessary to ensure reliable and affordable energy supply amid a “perfect storm” that has sent domestic wholesale prices of power and gas soaring, Reuters reports.

This week, Australia’s energy market operator capped wholesale gas prices in southern states and activated for the first time a guarantee mechanism to call on more gas supply, as heating demand spiked amid a cold snap.

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It also urged gas-fired power plants to cover coal plant outages.

The government could also invoke a more drastic policy, the domestic gas security mechanism, to require east coast suppliers of liquefied natural gas (LNG) to hold back some exports for the domestic market.

However, Bowen said the gas security trigger was not easy to pull and would not help the current gas shortage, as it involves an annual review that would not take effect until January 1.

“It is not a short-term answer,” Bowen said at his first media conference since being sworn in.

The gas security mechanism, designed by the previous government to consider annual balances of supply and demand, also requires prior consultations with industry and regulators. Bowen did not rule out any particular options to resolve the gas crunch, but said he would wait to hear from energy regulators next week before deciding on the next steps.

“It is not necessarily going to get better straight away,” Bowen said, when asked whether the soaring wholesale prices would feed through to households.

Gas producers in the northeastern state of Queensland have responded to the emergency call for extra supply down south, but the pipeline delivering that gas has reached full capacity, the Australian Energy Market Operator said.

“Supplies remain tight,” an AEMO spokesperson said.

Australia’s second largest independent producer, Santos Ltd, said years of protests against new gas projects had slowed developments that could have averted a crisis.

“We don’t have gas we can just turn on,” CEO Kevin Gallagher said.

Professor Ariel Liebman, director of the Monash Energy Institute, said the best immediate solution would be “to pull the so-called ‘gas trigger’ to requisition supplies of gas intended for export”.

“In addition, the government should also seriously consider a full gas reservation policy for the entire country, similar to the one in Western Australia and the United States,” Prof Liebman said.

“We have huge amounts of coal seam gas which was allowed to be exported with none reserved for Australia which has ultimately led to a situation where Australians are paying for gas prices at global parity. 

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“Global gas prices are hyper sensitive to external changes in supply like the Russia-Ukraine conflict. This together with a cold snap and significant unexpected electricity outages have combined into a perfect storm pushing many small innovative electricity retailers to the wall or even bankruptcy, increased the cost of generating electricity and resulted in stark rises in gas and energy prices. 

“This would all have been preventable if successive governments had paid proper attention to rigorous monitoring and regulation of all the key energy markets in Australia. This is a policy failure a long time in the making and it will be very hard to remedy it quickly.”

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