Friday’s meeting of every energy minister in Australia is looking to be at risk of bowing to gas industry demands and sparking a run on gas development around the country to head off a supposed shortage.
If they do that, it will be in the absence of any clear picture of actual gas supplies in Australia.
It will also happen amid concerns that those new supplies will land in the hands of the companies that already own most of the gas, and so do nothing to increase competition – the task that many say is the key to lowering energy prices around the country.
Gas prices have been rising. Those rising gas prices have led to a rise in electricity prices. And when wholesale electricity prices reached extreme levels in the first couple of weeks of July, the gas industry smelled blood.
“Gas-fired plant is ideal for responding rapidly to spikes in demand or sudden falls in renewable output,” Malcolm Roberts, chief executive of the oil and gas industry lobby group APPEA said in the Australian newspaper.
He argued that gas generators were getting squeezed out of the market by renewables and called for policies that encouraged more gas exploration to occur, “otherwise eastern Australia will face a supply-side crunch”.
Three days later, the Council of Australian Governments energy meeting was called. Josh Frydenberg, the federal minister for environment and energy, said the meeting would discuss gas supply, among other things.
Later that week Frydenberg went on ABC’s Lateline and said: “We need more gas supply. And more gas supplies in Australia.”
Soon state ministers appeared to get on board. On Thursday unnamed sources told News Corp Australia that they were considering allowing the expansion of coal seam gas. In New South Wales that would mean weakening environmental regulations, and in Victoria it would mean lifting a state-wide ban.
But if that happens, it will be despite the policy makers having no knowledge of whether there is actually any gas shortage at all. And it will happen despite the gas prices not being the main cause of those extreme prices in South Australia.
In April the head of the Australian Competition and Consumer Commission, Rod Sims, released its inquiry into the east coast gas market. The ACCC recommended that more information about gas supplies, as well as financial information, should be disclosed.
“The lack of consistent, publicly available data on the sector is an impediment to participants, investors and policy makers,” he said. (Nevertheless, the ACCC did go on to also call for more gas supplies to be opened up.)
But state policy makers already knew they were acting in the dark. As reported by Fairfax Media, in 2012 the NSW energy minister, Anthony Roberts, told a parliamentary committee exactly that.
Tony Wood from the Grattan Institute told Guardian Australia that more information would help the market operate better. “It would be valuable – and this is not unusual in the world, by the way – to have the major resource companies publish their forward resources on the basis of a standard, agreed methodology.”
“It certainly makes sense if you have a fight over whether we have enough gas.”
Bruce Robertson, a gas market analyst at the Institute for Energy Economics & Financial Analysis, agrees. “They have got to insist on consistent disclosure of reserves and resources in Australia,” he said. “They do it in the US so it’s not a big deal or a radical proposal.”
In a promising sign, Frydenberg said on ABC’s AM program on Friday that there would be agreements at the Coag meeting on that would be “designed to create greater liquidity and transparency in pricing”.
He continued: “We do have an abundance of gas, but we have very secret, long-term contracts which don’t produce enough efficient competition in pricing, and we’re going to change that today.”
But for Robertson, the main issue was breaking up what he said was basically a cartel with both the gas producers and the pipeline operators.
He said given that the gas producers such as BHP have claimed they have plenty of gas, the only thing driving up prices can be an exploitation of market power. Again, that was something identified by the ACCC inquiry, which concluded: “There are currently very few constraints on monopoly pricing by pipeline operators.”
Simms said in April: “The difference between a competitive market and an uncompetitive market in south-eastern Australia could be as much as $4 a gigajoule for wholesale gas.”
Robertson points out that if the price rises are a result of a lack of competition, then increasing the supply of gas won’t help – it would still be owned by the same operators and transported through the same pipelines.
Wood agreed that there was a need to break up what is known as a “Bass Strait joint marketing venture” which allows the two main operators there – BHP Billiton and ExxonMobil – to sell as a bloc.
But Wood thinks lifting blanket bans on CSG – like the one in Victoria – is a good move. Breaking blocs of gas companies, and forcing them to release more information, are two ways that the gas market could be improved, which would have knock-on effects for the electricity market.
But many others are pointing out a plethora of other options that Coag should consider. A big coalition of conservation and community groups, including Solar Citizens and GetUp, issued a joint statement calling for the Coag energy council to focus on developing a plan to move towards 100% renewable energy. The logic is that besides being essential to meet climate change targets, competition with the gas operators doesn’t have to come from other gas operators – renewable energy can also do that.
The Greens made similar calls. Their deputy leader, Adam Bandt, said: “The energy ministers must enable Australia to become a renewable energy superpower instead of protecting the rent seekers in the fossil fuel industry.”
And South Australia’s energy minister, Tom Koutsantonis, who has been at the centre of this national debate, has also emphasised the role of new technology in fixing the energy market. “Battery storage of renewable energy is also an exciting technology that, as it develops, will be a game changer and will dramatically bring down costs as cheap renewable energy is able to be delivered around-the-clock,” he said.
“... Currently, the [national electricity market] is not working, the gas market is not working and climate policy has not been integrated into energy policy, and that is leading to consumers paying too much for power.
“This is now an urgent issue that requires the ministers to take back power in decision making, form a consensus and agree to a reform of the energy market.”
Whatever happens at the Coag energy council meeting, the importance of good national policy on energy is hard to overstate, sitting at the very base of both the economy and the environment.
