Regarding "gas shortages"
Hi there, thanks again for giving us the opportunity to ask questions on the project.
The main justification for the project is the need to increase gas supply in Victoria. Could you provide us with some info regarding the projected gaps between gas demand and supply for the following years in Victoria?
Thank you for contributing.
There are mixed views reported in the media about whether gas is needed or not which has made some members of the community question the rationale for the project. This is understandable.
Early in 2018 the media reported Victoria would experience significant gas shortages within three years based on a gas forecast report from the Australian Energy Market Operator (AEMO) despite falling gas consumption in the state. AEMO told the media it was hoping the report would encourage a market response to help fill the gap but warned some intervention may be needed if the private sector does not come up with a solution.
In June 2018 AEMO Gas Statement of Opportunity, the AEMO stated ‘no supply gaps are forecast before 2030 under expected market conditions.’ But the AEMO’s executive general manager of planning and forecasting, David Swift still warned that the supply-demand balance in the Australian gas market was still very tight. "An increased need for gas-powered generation due to weather related or contingency events could still adversely impact this forecast and tighten the supply demand balance once again," Mr Swift said. But the report also said new gas reserves and additional gas supply infrastructure would need to be delivered to keep on top of the issue.
The latest AEMO 2019 Gas Statement of Opportunities (GSOO), released on 28 March 2019, said the east coast gas market faces tight supply from 2021 and shortfalls from winter 2024 if more is not done to replace rapidly declining output from Bass Strait and supplies from Queensland limited by pipeline capacity.
‘‘Southern Australia’s overall supply demand balance for 2021-2023 remains very finely balanced, reflecting the ever-tightening integration of Australia’s electricity and gas markets in the context of an evolving and dynamic energy system,’’ AEMO’s chief system design and engineering officer Alex Wonhas told the ‘Australian Financial Review’ when the report was published.
The report said:
“Supply from existing and committed gas developments is forecast to provide adequate supply to meet gas demands until 2023. However, risks remain that any weather-driven variances in consumption or electricity market activity that could increase gas demand, creating potential peak-day shortages as outlined in AEMO’s 2019 Victorian Gas Planning Report.”
In the short term the need for Gas Power Generation (GPG) would be a key factor:
“The key uncertainty that could have a material impact on gas supply adequacy in the short-term is the level of GPG demand. Demand for GPG in the NEM [(National Electricity Marke]t) is highly variable, and is influenced by weather conditions, the reliability of coal-fired generation and coal supplies, the timing of new generation and transmission development, and the retirement of ageing thermal generation.”
The report also supported the requirement for development of LNG import terminals and said:
“Continued interest in LNG import terminals, particularly in Victoria, New South Wales, and South Australia, would be expected to help relieve pressure on meeting southern gas demand during peak periods and assist in reducing pipeline constraints, but may do little to ease gas pricing pressures.”
The report also said within the next five years, domestic gas demand, particularly in the southern states, will be difficult to meet in its entirety without either:
- Exploration and development of new southern resources, or
- New gas supplies delivered via LNG import terminal, or
- Major pipeline infrastructure expansions to deliver Queensland and Northern Territory gas southwards, or
- A combination of all three.
It also supported a Victorian-based LNG import terminal and said “Without any upgrade to the existing pipeline infrastructure: An import terminal in Victoria, either Melbourne or Gippsland, has the biggest projected impact to reduce projected shortfalls. In addition to providing an additional unconstrained source of gas for Victoria, this terminal is projected to reduce pipeline and storage infrastructure congestion, enabling greater access to supply from northern fields.”
@LachlanS Thank you for taking the time to reply.
I have also read AEMO's reports but I would assume that AGL has its own forecasts regarding potential gas shortfalls in Victoria. Last year AEMO said that there would be adequate gas supply until 2030 and this report did not affect AGL's plans to proceed with this project.
Would it be possible to get some info regarding AGL's forecast regarding the adequacy of gas supply for the next years?
We’d just like to apologise for the delay in addressing your enquiry – we have received a large number of complex and detailed questions that we need to discuss with a few specialists.
This is not the way we want to deal with community concerns and we’re working to be more responsive in the future.
We’ll respond to your question shortly.
It is not currently not part of AGL’s core business to offer incentives in this way. As a retailer, AGL supplies energy to its customers, it does not facilitate the installation of hot water appliances.
We help our customers reduce their carbon footprint by providing them with the tools to make better decisions on their energy consumption. This includes providing data on which of their appliances are using the most energy through ourEnergy Insights program.
AGL also reaches out to certain customers on our hardship program to help replace some of their more energy intensive appliances. While this does have the benefit of reducing carbon footprint, ultimately the goal is to reduce the hardship customer’s bills.
Currently, the Victorian State government offers rebates of up to $1,000 to eligible households to reduce their expenses and lessen their carbon footprint. It is not in our commercial interests to offer incentives that are already readily available from the state government.
Apologies for the delay. We had to escalate this question internally.
You’re right, AGL does do its own internal forecasting on the state of the gas market in Eastern Australia as well as rely on other independent external reports.
- A report by EnergyQuest, released 21st December 2018, identified a major gas shortfall from 2022 in the southern states including Victoria. It also emphasised the need to progress LNG projects to avoid the crisis.
- The Australian Domestic Gas Outlook Conference, the CEO of Orica, Alberto Calderon called on the government to use a gas export cap to address gas shortages and high price.
- We also presented at the Australian Domestic Gas Outlook Conference last year and shared our views of the market as well, and we have been concerned for some time there will not be enough gas for Victorians from 2021+ to meet their winter peak demand.
- Most recently, you can find our view on the market and the potential for a shortfall in the linked presentation at the Taylor Collison East Coast Gas Day. This can be found on our website here.
As a company with 1.4 million gas customers, we can’t just rely on the AEMO for evidence of a gas supply crisis.