A leading industry expert has watered down warnings about a looming gas shortage that Prime Minister Malcolm Turnbull has described as an energy “crisis”.
The Australian Energy Market Operator (AEMO) released an assessment on Thursday warning consumers of future power supply shortfalls, which it said could cause blackouts in SA, NSW and Victoria unless gas production is boosted and supplied to electricity generators.
But RMIT senior industry fellow Alan Pears, who has worked in the field for about 40 years, said there was no need to “panic”.
“There is no energy crisis,” Mr Pears said.
“The electricity shortfall due to limits on gas supply, in the near future, is very small. AEMO estimates 363 GWh in 2020-21 – that is 0.2 per cent of the present 183,000 GWh consumed in the national energy market.
“The shortfalls are quite modest, and AEMO notes that they could be supplied from existing gas fields if the producers received appropriate ‘incentives’. So the short-term picture does not justify a rush into more coal seam gas or other new development.”
Mr Pears said the problem was not so much the annual consumption, but being able to manage energy usage during peak times. For example on a scorching day when everyone has their air-conditioning on, or in the middle of winter when people turn on their heaters.
He also said the main issue which AEMO failed to outline in its report was the need to improve energy efficiency.
“Its focus was wholly on energy supply. But what it fails to do is to recognise that price is not only based on cost per unit of energy, but also on how much people use. We need to be pursuing energy efficient opportunities.
“I think the AEMO’s warning has come as a result of all the madness of these recent debates, and a lack of confidence in a rational and timely policy response. They’re trying to put pressure on the government to save gas.
“We don’t have to be hysterical, but we do have to act.”
The AEMO assessment indicated there may be power shortages in NSW and South Australia from late next year, followed by Victoria in 2021 and Queensland from 2030.
The report also warned that rising energy prices may threaten the financial viability of some businesses.
The gas and electricity markets could no longer be viewed in isolation and there was a need for a single energy view from a national perspective, the assessment stated.
“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 on Thursday.
“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.”
It was recommended that 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 liquefied natural gas 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.
Mr Turnbull said he blamed state governments for not allowing the development of onshore gas exploration and development.
He told reporters at the Australian Financial Review Business Summit that he planned to meet with east coast gas company bosses to address the “energy crisis”.
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 is now exporting two-thirds of what the country produces, leading to a tight gas market.
“What we need is more gas supply and more gas suppliers.”
Mr Frydenberg said quarantining new exploration for domestic use was a creative suggestion from the Queensland government and worthy of further consideration.
– with AAP