The Australian Energy Market Operator (AEMO) has warned that Australia is facing a major energy crisis and will face energy shortages without a credible national reform on energy.
image

The energy market operator says in its newly released Gas Statement of Opportunities report, that gas and electricity can no longer be viewed in isolation with regards to energy policy.

The AEMO report predicts New South Wales, Victoria and South Australia will be impacted from the summer of 2018-19, and warns that the "tightening of the domestic gas market will have flow-on effects to the electricity sector unless there is an increase in gas supplies and development".

It also warns that rising gas and electricity prices could threaten the financial viability of commercial and industrial businesses.

The report found that even new supply with rising gas production costs, was unlikely to provide much relief and could still lead to business closures.

In a statement, AEMO's chief operating officer Mike Cleary said, "At a time when LNG export is dominating demand and supply of gas in eastern states, strategic national planning of gas development has never been more critical for maintaining domestic energy supply adequacy across both gas and electricity sectors."

Cleary adds that a national policy was required because the gas and electricity markets could no longer be viewed in isolation.

"The overall convergence of energy markets in eastern and south-eastern Australia demands a single energy view from a national perspective," Cleary said. 

"It requires holistic planning across the entire supply chain to enable investment decisions to be made in the long-term interests of consumers."

The AEMO report suggested options to resolving the energy shortage including redirecting exported gas fir domestic supply, increasing production and exploration from existing fields, exploring new fields, and building the northern gas pipeline.

"Energy supply shortfalls could also be mitigated in the short term by an increase in coal-fired generation and renewable energy output, combined with an uptake in technologies such s battery storage, together with increased gas production and the possibility of LNG exporters redirecting a small portion of their gas production to the domestic market," Cleary said. 

Cleary said that the warning set out in the report gave energy companies ample time to provide solutions before supplies dropped.

"If nothing was to happen and the market did not respond we'd expect a shortfall on gas between 2019 and 2024," Cleary said. 

"Anything that's going to help increase gas into the market is going to be good for the market. 

"Any impacts to the NSW market would impact the ACT with the current debate around Australia's energy security making AEMO's report more timely."