The southern Australian states could experience gas shortages during the upcoming winter peak periods and continued shortages within a few years.
The Australian Energy Market Operator (AEMO) delivered the harsh assessment by publishing an update on Thursday calling for urgent investment to secure gas supplies over the medium term.
Its 2023 gas report anticipates gas production to meet customer demand in central and eastern Australia.
But he said supply risks remained in the south as gas production declined, particularly in Victoria, where output is forecast to nearly halve by 2027.
The operator said the risk of supply gaps increases if excess gas production from northern states is exported rather than used for domestic demand.
From 2026, with no further commitments to expand domestic supply, or hydrogen or biomethane coming online as an alternative, Queensland producers may need to use contract gas for export to meet national requirements .
Australia’s energy ministers have already expanded the powers of the market operator to deal with immediate supply shortfalls on the East Coast.
Effective winter 2023, these new powers are intended to secure the gas and electricity markets and protect domestic gas consumers.
A domestic gas safety mechanism and an agreement between the government and gas producers are considered important to shore up domestic supply.
AEMO chief executive Daniel Westerman said existing agreements would help manage supply, but more production was needed to help prevent shortfalls during winter peaks and in the longer term.
“What we really need is to invest in more gas supply, which could be from traditional natural gas fields, or import (gas) to southern states or use renewable gases like biomethane or hydrogen when available,” he told ABC Radio. .
Gas will remain essential for electricity generation and will support intermittent renewable sources as coal-fired power plants are phased out, Westerman added.
But the Climate Council criticized the focus on increased gas supplies as a solution to Australia’s energy problems.
An energy expert from the group, Andrew Stock, said opening up new gas projects was not the answer and that Australia should instead speed up investment in renewable sources and energy storage.
“There is no shortage of hydropower, most gas storages are almost full so it would take significant failures in coal plants to create a gas shortage,” he said.
Gas-fired plants are forecast to support renewable generation, as at least five coal-fired plants are expected to close in the next decade, accounting for 13 percent of electricity market capacity.
An additional 2,000 megawatts of new grid-scale wind and solar generation and battery storage were added in the 12 months to February 2023.
Westerman said this would help make up for known winter generation gaps, including at Queensland’s trouble-plagued Callide C coal-fired power station, and since the retirement of NSW Liddell power station next month.
But there is uncertainty about how quickly consumers will change their gas energy preferences.
Electrification forecasts have been lowered to reflect a slower-than-expected fuel switch rate in homes and businesses.
Strong policy incentives and industry investment are recommended in the report to obtain the level of electrification required by governments.