A meeting of state and territory energy ministers will tackle secret long-term gas contracts in an effort to make the sector more competitive, the federal environment and energy minister has said.
Speaking to ABC’s AM on Friday, Josh Frydenberg took aim at the opaque contracts’ role in raising the price of domestic gas. Australia had a tight gas market because it was exporting liquid natural gas, he said, raising the domestic price to world levels.
The minister said Australian gas prices were lower than Asia’s, despite an analysis released this month showing that gas is being shipped and sold to wholesale customers in Japan for 40% less than it is sold to Australian customers.
Frydenberg said Friday’s Council of Australian Governments meeting would “agree on a significant suite of reforms in the gas market designed to create greater liquidity and transparency in pricing”.
“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.”
The comments follow an Australian Competition and Consumer Commission report in April which found that the Australian industry received “few, if any, real offers for gas”, including offers being “at sharply higher prices and on strict take-it-or-leave-it terms”.
The ACCC called for greater transparency of gas contracts and consideration of whether joint marketing by one of the largest suppliers, the Gippsland Basin joint venture, had substantially lessened competition.
At the time, both the Australian Workers’ Union and Australian Industry Group raised the alarm that high gas prices were hitting investment and jobs in energy-intensive heavy industry.
Frydenberg said it had taken “too long” to upgrade the Haywood electricity interconnector between South Australia and Victoria. He said this had contributed to higher energy prices in South Australia, along with a cold snap, an increase in gas prices, and the intermittent nature of renewable energy.
On ABC News Breakfast, Frydenberg said the Australian energy regulator would decide on South Australia’s call for a new interconnector with New South Wales. “We’re looking to truncate that long process so a decision can be made in a quicker time frame and that will obviously be important,” he said.
But Frydenberg said after the approval process “the cost of an interconnector is ultimately borne by the consumers”, according to the energy regulators’ formula of which consumers benefit most.
On ABC’s AM, Frydenberg repeated his observation made in an interview with Guardian Australia that coal only makes up 60% of Australia’s electricity generation, down from more than 75% in 2004, and is falling over time.
“Renewables have gone from 8% a decade ago to 15% today and will go to 23% by 2020,” he said.
He said solar photovoltaic power had a very high market penetration of 15%. The cost of batteries would decrease 60% in the next decade, providing base-load power in intermittent periods when the sun wasn’t shining.
On News Breakfast he said the the renewable energy target did “have an impact on prices” because solar and wind power were more expensive than coal. “But the cost of renewables is coming down dramatically … In the last seven years alone, the cost of wind has come down by about 80%. And the cost of solar photovoltaic has come down by 50%.”
New technologies such as battery storage would boost use of renewable energy and were supported by through the Clean Energy Finance Corporation, he said.
The Greens have called on Coag to consider making emission reductions an objective of the national electricity market.
The party’s energy spokesman, Adam Bandt, said if states and territories didn’t agree the Greens would push for federal legislation to include the objective of cutting pollution.
The change could force energy regulators to favour investing in grid developments that support renewables and increase the flow of energy between states from renewables rather than fossil-fuel intensive sources.
