Domestic gas supplies to be reserved in bid to lower power bills
Australia’s gas supplies are poised to be reserved for local use as the Morrison government moves to further drive down household power bills and protect domestic manufacturing jobs.
Plans to establish a national gas reservation scheme – long called for by blue-collar unions – will be unveiled on Tuesday, adding pressure on state and territory governments to overturn their bans on onshore gas exploration.
Recent estimates have found if producers were forced to make a minimum amount of gas available for local users, flow-on reductions for household electricity bills could be up to $270 a year.
Federal Energy Minister Angus Taylor will unveil a suite of interventionist measures, designed to shore up domestic gas supplies and protect Australia’s manufacturing industry.
High gas prices have pushed up household electricity prices, with standby emergency gas generators often acting as price setters in the national electricity market.
The government will examine options for how a reservation scheme could be applied at the national level and will warn the states it is prepared to go it alone if they don’t come to the table.
Mr Taylor will also bring forward a review of an emergency trigger that can slash export levels of gas, while producers and liquefied natural gas exporters will be pressured to be more transparent on prices, reserves and resources.
The Australian Energy Market Operator (AEMO) warned in March of winter gas shortages in Victoria, NSW and South Australia by 2023 unless more was found or imported, with depleting offshore fields and pipelines from the northern states needing expansions.
Prime Minister Scott Morrison will ramp up pressure on NSW and Victoria to end their moratoriums on gas exploration and drilling when he meets with state and territory counterparts at Friday’s Council of Australian Governments in Cairns.
He has blamed state government restrictions for causing high energy prices, declaring he wants “to see those bans go”.
Mr Taylor said past approvals of large gas export projects had not adequately considered the impact on the domestic gas market, contributing to some of the pressures seen in recent years.
“We cannot afford to repeat these past mistakes,” he said.
“The reliable, secure and efficient supply of both gas and electricity requires the delivery of enough gas, at an affordable price.”
Mr Taylor said state and territory governments must “do their part” by freeing up supply and supporting investment through the removal of bans on gas exploration.
Natural gas currently trades between $8 and $12 a gigajoule in the east coast market, compared to about $4 a gigajoule in 2014, which has driven up household costs and crippled some large-scale industrial users.
A report from the Institute for Energy Economics and Financial Analysis last month found the introduction of a domestic gas reservation could achieve substantial reductions in both gas and electricity prices for consumers.
The report found if a domestic gas reserve was established within the east coast market, wholesale electricity prices could fall by up to 27 per cent, pushing retail prices down 17 per cent.
The Coalition government threatened heavy-handed measures in early 2017 to impose export restrictions on gas unless local producers prioritised supply for the domestic market amid dramatic warnings of winter shortfalls.
Both the AEMO and the Australian Competition and Consumer Commission found the move had resulted in the spot price of gas in eastern Australia falling by more than 25 per cent and gas contract offers by up to 50 per cent.
Federal Resources Minister Matt Canavan said a detailed consideration of a gas reservation scheme, to be finalised by February 2021, would require state and territory governments to remove unwarranted restrictions on gas developments.
“Price and supply are inextricably linked,” Senator Canavan said.
“To put downward pressure on prices and shore up supply, we need more exploration and production.