The Australian gas market has failed. Regulation of the failure has also failed. Radical intervention is now necessary to stabilise the Australian energy grid.
As things stand today, the gas spot market is trading at $16Gj, miles above the supposed Code of Conduct price cap of $12Gj. It has been this way for months:
In consequence, power prices are at nosebleed levels and rising:
This week, the Australian Energy Market Operator made clear that 26 gas peaker plants will be required if the Albanese Government’s renewables rollout is to work:
Without these plants, peak season demand for electricity will deliver a rolling crisis comprising price shocks and blackouts.
Australia is also certain to miss its Paris Agreement emissions targets.
However, none of these gas speakers will be built with failed gas market blocking the way.
Without the security of gas supply, nobody will put capital at risk. This is why only one tiny gas peaker has been built on the past decade, despite the obvious commercial opportunity.
Direct and radical intervention in the failed gas market is the only way forward for the national interest.
This should take the following form:
- a $6Gj export levy should be placed on all eastern gas exporters;
- “use it or lose it” laws must be passed to guarantee no production boycotts.
This guarantees local supply will be abundant and cheap, as well as collecting appropriate taxation for the Australian people for their resources.
Expropriation of gas reserves can proceed if there are production boycotts and the acreage is either re-auctioned to other gas firms willing to extract or, better yet, be placed within a new National Gas Company.
If this results in some firms being forced to declare force majeur on gas export contracts, then so be it.
Our Asian customers are re-exporting millions of tonnes of LNG they don’t need. They will understand that there is no security of supply for them while it does not also incorporate Australia.
A brief kerfuffle is easily managed politically, with gas measures immensely popular in the electorate.
The Resource Minister for the Albanese Government, Madeleine King, openly praised WA gas reservation this week and there is NO EXCUSE for not extending it to eastern states:
When it comes to energy in WA we are in a far better position than many of the Eastern States.
Thanks to the foresight and courage of the Carpenter Labor government, WA has relatively affordable and plentiful domestic gas for homes and businesses.
The east also has plentiful gas but it all siphoned off to China:
It’s time to take a fair share for Australia back.
