High gas prices and a shift towards running homes and businesses on electricity has helped delay an expected gas shortage in Australia’s southern states until 2028, a government agency says.
A report by the Australian Energy Market Operator (Aemo) said the increased cost of the fossil fuel and trend towards electrification had combined with mild winters to reduce gas use.
It said the delayed closure of the Eraring coal power plant in New South Wales, from August this year until 2027 at the earliest, had also cut forecasts of how much gas would be needed.
As a result, gas shortfalls on days of peak use were not expected until 2028, three years later than previously expected, Aemo said. Longer-term supply gaps over seasonal and annual timeframes were also now forecast to occur later than previously in 2028 and 2029 respectively.
The finding may ease pressure to find a short-term solution to the expected shortfall in Victoria in particular, as existing fields in the Gippsland and Otway basins run out of gas.
Aemo’s chief executive, Daniel Westerman, said the report, titled The Gas Statement of Opportunities, highlighted structural changes in the east coast market. He said solutions being considered to address the shortfall included new production, new gas storage facilities and short-term liquefied natural gas (LNG) terminals.
The gas industry and some other business leaders have called for governments to allow new fossil fuel basins to open and be developed.
Dylan McConnell, an energy systems expert at the University of New South Wales, said increasing gas supply was not the only way to address shortages. “The other obvious option is to reduce demand,” he said.
He said for residential and commercial uses, this could be achieved by switching from gas to renewable electricity and battery storage and improving energy efficiency.
Aemo’s report said the LNG export industry was the biggest gas user in the country, dwarfing consumption from all other sources including households, local industry and gas-fired power generators.
It said there was uncertainty about the scale of gas needed for electricity generation, but it was expected to play an increased role as backup power source at times when renewable output was low. Gas power currently provides about 5% of electricity in the National Electricity Market (Nem) that supplies the five eastern states and the ACT.
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Alison Reeve, the deputy director of the Grattan Institute’s energy and climate program, said as coal power stations closed, most modelling suggested indicated a small amount of gas would be required as backup while the rest of the market transitioned to renewable energy.
“Gas is not going to replace coal. Coal is going to be replaced by renewables,” she said.
Labor has a target of 82% renewable energy by 2030, with higher percentages expected after that, based on gas and energy storage in batteries and pumped hydro providing backup. The Coalition has said, if elected, it would slow the rollout of renewable energy, rely on more fossils fuels, including an increased amount of gas, and eventually build nuclear power plants at seven sites, mostly after 2040.
The climate change and energy minister, Chris Bowen, said Aemo’s report showed the gas market outlook was improving and “now secure into 2029”.
“Gas has an important role to play in our energy system as we transition towards 82% renewables,” he said. “Unlike coal or nuclear, gas power generators can be turned on and off in a couple of minutes and when it’s off, it’s zero emissions.”
