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Gas-rich Australia is facing a looming energy shortage

LNG01

Gas-rich Australia is facing a looming energy shortage

How has it come to this? The Australian Energy Market Operator has just released its 2017 Gas Statement of Opportunities. It makes sobering reading, with warnings of a looming gas or electricity shortfall in eastern Australia. The nation is demanding solutions, but how long will it take, we wonder, for political debate to turn into action?

Regular readers of our blog are well informed of Australia’s gas crisis. And now it seems the perfect storm has arrived.

The 2017 Gas Statement of Opportunities offers a stark assessment of the current energy market and also a considered view of the future.

The report raises a number of potential market-led solutions to the gas shortage:

  • Redirect a small portion of LNG supply from exports to the domestic market.
  • Increase production from existing gas fields.
  • Explore and develop new fields.
  • Build the Northern Gas Pipeline, which will link Northern Territory gas with the eastern and south-eastern Australian markets.
  • Develop the proposed Narrabri Gas Project in New South Wales.
  • Invest in alternative electricity generation and storage technologies.

The report may be misleadingly entitled, as the AEMO warns that these fixes are a number of years away and many are limited by production moratoria.

But this problem isn’t years away. It’s here now.

Indeed, the AEMO states that unless additional gas is produced, there could be either a gas or electricity shortfall between 2019 and 2024. This means that very soon Australia will be forced to choose between gas consumption or electricity generation, which means a prolonged, painful future for consumers and/or businesses.

But perhaps the last point on innovation may hold the most hope? Tesla has just thrown down the gauntlet to South Australia with the bold claim of solving their electricity grid problem in 100 days. While Tesla is known for optimistic production targets, framing the debate in days rather than years will go a long way in shaping the debate for what’s possible.

Tesla won’t solve the gas imbalance, but given the stagnation of policy at a national level it is this kind of immense and immediate action that’s needed to solve such an immense and immediate issue.

This post was contributed by a representative of Montgomery Investment Management Pty Limited (AFSL No. 354564). The principal purpose of this post is to provide factual information and not provide financial product advice. Additionally, the information provided is not intended to provide any recommendation or opinion about any financial product. Any commentary and statements of opinion however may contain general advice only that is prepared without taking into account your personal objectives, financial circumstances or needs. Because of this, before acting on any of the information provided, you should always consider its appropriateness in light of your personal objectives, financial circumstances and needs and should consider seeking independent advice from a financial advisor if necessary before making any decisions. This post specifically excludes personal advice.

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5 Comments

  1. Xiao Fang Xu, there is a major flaw in your thesis. The fact is that the natural gas industry is global running at excess capacity and has been for years, forcing down prices through lack of market demand. We don’t need to exploit more resources as we have inadequate demand for the supply of goods (gas) and as they are essentially entirely running to the profit of foreign exporters such as Chevron who are paying almost nothing as a Royalty as compared for example to what the state of Qatar received for their gas exports it is not in the best interests to export more gas for Australia. We the domestic market are being held to ransom of the foreign gas extraction rent seekers who are making up their extra profits from the falling global market by extorting excessive pricing for our own gas and exporting sometimes at a loss. While as a young economics student I was indoctrinated in the all ills are solved by the market theory it is in fact bulldust, as a good friend of mine who write for CEO forum once told me, you can’t blame a banker for being greedy, that’s why they became a banker. For the record Mike Baird and Malcolm Turnbull are former bankers and Mike Baird ran straight back to the warm embrace of the rent seekers he handed massive profits to in the privatisation of the NSW power grid. Scott Morrison who appears to be economically illiterate as of all things is actually the federal treasurer used to be the Housing Industry Chief lobbyist and surprisingly feels that Negative Gearing and the CGT discount and any many of market and public subsides to hold up his and other MPs property portfolios are in the national interest… There is no public interest test in Canberra or any level of Australian government for that matter, only self interest.

  2. John has the right answer as evidenced by the fact that Foreign Governments from free market economies such as Singapore are major investors into our infrastructure. They themselves have become the rent seekers to our own demise as they are not only the owners to which we are now serfs to pay for the supply of our own resources from foreign power and owners with an ever increasing rate, they are in many cases also running private businesses in our economy which we are also offering a state subsidy for them to run. Metro Trains from HK is private but is an example of us paying a subsidy to a foreign company to provide a public service to the public of Melbourne, I used to be a believer in the efficiency gains of privatising state business but in the wild it is actually a joke, such of the public subsidy to Private Health industry that could be funnelled into Medicare allow Private Health to stand or fall on it’s own merits alone.

  3. “Those who would give up essential Liberty, to purchase a little temporary Safety, deserve neither Liberty nor Safety.”

    Mr. John, Government make this mess not private corporations. We do not have “Free markets” we have Crony capitalism ( fascism is correct word ).

    Venezuela, USSR, SFRY — all this countries had safety –until they don’t ( until they run out of other people money).

    all school of economic teach that monopoly is bad — I believe that is right.

    this is why: 
Monopolies are thus characterized by a lack of economic competition to produce the good or service, a lack of viable substitute goods, and the possibility of a high monopoly price well above the seller’s marginal cost that leads to a high monopoly profit.

    https://en.wikipedia.org/wiki/Monopoly

    average wage:
    Gas:
    Movie ticket:
    Rent:
    Milk:
    bread:
    beer:

    http://mccrindle.com.au/the-mccrindle-blog/40-years-of-change-1975-to-today

    life was cheaper than ( not everything ) –because now you have much bigger government than 30-40 years ago and regulations is bigger as well.

    google this: venezuela is latest example of socialist madness

    https://www.google.com.au/search?q=venezuela+is+latest+example+of+socialist+madnes+&ie=utf-8&oe=utf-8&client=firefox-b&gfe_rd=cr&ei=SiDHWM6CO83N8gfz25KQBw#q=venezuela+is+latest+example+of+socialist+madness&*

  4. A combination of green inspired state moratoria on gas exploration, coupled with growing gas export capacity, and politically motivated closures of coal plants, has created a looming shortfall in Australian energy supply.

    This disaster is self inflicted. Australian has vast gas resources, but hostile green influenced politicians have put obstacles in the way of exploiting them. At the same time, Australia has developed export capacity, which allows gas producers to sell what gas they have at international prices, bypassing marginal prices on the domestic market.

    257 thoughts on “Green Craziness: Deepening Aussie Energy Crisis”
    Patrick MJD

    It’s funny how Turncoat (Turnbull), an avid climate change and carbon tax/ETS supporter, says we have an energy crisis that he and his like created? Well done Turncoat

    angech

    Trumble is the correct name.

    James

    No its Malcolm Greaseball!

    https://wattsupwiththat.com/2017/03/09/green-craziness-deepening-aussie-energy-crisis/

    “There’s a sucker born every minute” is a phrase closely associated with P. T. Barnum, an American showman of the mid-19th century.

The Worlds Greatest Showman today Elon Musk

    According to the institute’s calculations, the price for batteries needs to come down to less than $250 kilowatt hour before it can be profitable.
    During his Twitter exchange, Mr Musk quoted a price of $US250kWh for a 100 megawatt hour system.
    But this converts to $331kWh in Australian dollars, and the price doesn’t include installation costs.
    Dr Dargaville said there was also confusion about whether Mr Musk meant to quote for a 100 “megawatt” system, or for a 100 “megawatt hour” system. It’s also unclear how many hours of storage the system would provide, either two hours or four hours.
    Mr Cannon-Brookes asked for a quote for a “100MW” system, but Mr Musk responded by giving a price for “100MWh” system.
    The difference could be significant.
    “If you want to build a system with four hours storage and 100 megawatt capacity, it would be a 400 megawatt hour system, and that would cost four times as much as a 100MW system,” Dr Dargaville said.
    “I know energy professionals that get this confused, it’s a real issue in understanding what people are talking about.
    “It’s a bit confused at the moment, and more details need to come out before we can properly assess what’s on offer.”

    http://www.news.com.au/technology/innovation/confusion-over-elon-musks-battery-offer-for-south-australia/news-story/8f06c79ecc676cb82336ee8f77e91f8b

    there is not enough surplus energy left over after construction of the generators and the storage system to power our present civilization

    https://bravenewclimate.com/2014/08/22/catch-22-of-energy-storage/

    https://en.wikipedia.org/wiki/Energy_density

    Gasoline was quickly recognized as nature’s ideal fuel for cars: it has a very high energy density by both weight and volume–around 500 times that of a lead-acid battery–and it was plentiful, inexpensive, and seemingly unlimited in supply. By the 1920s electric cars were no longer commercially viable and disappeared from the scene. They did not reappear until late in the 20th century as gasoline became expensive, supplies no longer seemed unlimited, and concerns over the possible effect of combustion of fossil fuels on global climate reached public awareness.

    https://www.aps.org/publications/apsnews/201208/backpage.cfm

    Will Batteries Ever Match Gasoline’s Energy Density?
    http://www.menloenergy.com/?p=535

    Battery technologies showed a reduction from a range of €100-700/MWh in 2015 to €50-190/MWh in 2030

    http://www.world-nuclear.org/information-library/current-and-future-generation/electricity-and-energy-storage.aspx

  5. This is what happens when Governments privatize. Essential services such as power, banking, phone, etc should remain under Government control, if not in Government hands. Imagine for a minute if the Federal Government had modernized the Commonwealth Bank but retained majority ownership. 10 billion a year in revenue for a start. Imagine again if we still had the State Electricity Commission generating our power and the Sydney County Council selling it to the public. Call me old fashioned, call me a socialist, but also tell me we as Australians were much safer and better off.

    Cheers,

    John

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