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The Guardian - AU
The Guardian - AU
National
Peter Hannam

Gas shortages possible during bouts of extreme weather over next four years, Aemo warns

File photo of a natural gas pipe
Gas supply gaps, particularly in extreme weather conditions, could require exports to be diverted south, the Australian Energy Market Operator says. Photograph: Jono Searle/AAP

South-eastern Australia faces possible gas supply gaps for at least the next four years during bouts of extreme weather, potentially requiring exports to be diverted south, according to the gas outlook from the Australian Energy Market Operator.

Aemo’s gas statement of opportunities report found that gas output in New South Wales, South Australia, Victoria, the Australian Capital Territory and Tasmania would meet demand until 2027. But customers could face shortfalls, particularly if cold weather coincided with low levels of renewable energy generation.

“The risk of gas shortfalls each year from winter 2023 to 2026 in all southern jurisdictions remains under extreme weather conditions and periods of high gas-powered electricity generation, with those risks further exacerbated if gas storage levels are insufficient,” said Aemo’s chief executive, Daniel Westerman.

“While production capacity commitments have increased for 2023 compared to the 2022 GSOO and several key infrastructure projects are on track for delivery, there is forecast to be a 16% reduction in production capacity this winter compared to 2022 in Victoria, which increases supply pressure in the southern regions,” he said.

Although Australia is one of the world’s largest producers of gas, most of the supply in the eastern states is earmarked for export. The main southern fields in Bass Strait are in decline, and may result in Victoria becoming a net-importer by the winter of 2027, according to Aemo’s projections.

A prolonged and extensive cold snap last winter sent demand soaring and triggered a suspension of the national electricity market. Although gas is generally declining as a fuel for power generation, its high cost relative to historical levels and limited availability can trigger electricity price spikes as happened last year.

The impact of the suspension contributed to rises in the proposed default market offers for the coming year of up to a third, regulators reported on Wednesday.

Gas demand is forecast to peak more often during winter than summer when there is less solar power and “wind droughts” can set in. Victoria may be the most vulnerable among the states to shortages due to its relatively high dependence on gas space heating.

Actual and forecast gas generation, 2019-42

Aemo forecast total available supply from the state’s Gippsland region would drop 13% from 2022’s output of 326PJ of gas to 284PJ this year, and more than halve to 130PJ in 2027. Port Campbell’s output would drop a third this year to 32PJ before more than doubling to 73PJ by 2024 as four new committed wells begin production.

“Unless new Victorian supply is developed, Victoria is forecast to become a net importer of gas from winter 2027, as Victorian annual consumption exceeds Victorian production,” Aemo said.

“Victorian supply adequacy is projected to tighten in the later years of the outlook period and an annual supply and peak day shortfall is forecast in 2027.”

Actual and forecast flows out of Victoria 2019-27

The potential supply gap for Victoria is forecast even though the state’s gas consumption is projected to fall 9.1% by 2027. But investments “are needed in the near term to ensure operational solutions from 2027”, Aemo said.

Across all states except Western Australia, Aemo forecasts residential and small commercial gas consumption “to gradually decline in the short term, with more significant fuel-switching in the medium to longer term as the economy transitions to meet net zero emissions goals”.

“Overall, electrification is forecast to reduce natural gas consumption from residential and small commercial consumers by 158PJ, down to 75PJ by 2042,” it said.

“If the rate of electrification is slower than forecast, the risk of supply gaps increases, further highlighting the uncertainty in the investment needed in gas supply.”

Aemo said the assessments assume gas from Queensland’s LNG exporters is made available to the domestic market when required to avert domestic shortfalls.

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