After a week of uncertainty over the gas price crisis, the country’s energy ministers have agreed on a plan to pay suppliers to help cover supply shortages.
Key points:
- Energy prices are rising due to national and international factors
- Ministers have agreed on a plan to safeguard the system
- The market operator will end up with more responsibility in the supply
Federal Energy Minister Chris Bowen and his state and territorial counterparts met on Wednesday to discuss solutions to the market crisis, but there were limited options with deep indebted budgets and no short-term solutions available.
Bowen says the meeting was not a “silver bullet” for the current price hikes, but they would say the market would be in a better position for future crises.
Ministers have agreed to move forward with work on a capacity mechanism, which will require energy retailers to pay energy suppliers to maintain additional capacity if needed.
Mr Bowen says he wants to see a draft of this energy security board plan as soon as possible.
“We have instructed the Australian Energy Market Corporation and the Energy Security Board to proceed with the development of a capacity mechanism.
“I want to see the next draft imminently, and I’d like to get it up and running as soon as possible.
“I don’t set a date at this stage, but it’s a priority for me,” he said.
The Coalition initially proposed a similar policy, but some states resisted because of concerns about payments being used to prop up old technology, such as coal.
Bowen says this is not his plan for the mechanism.
“I think the principles outlined are pretty clear that they should support new technologies and by that I mean I support storage and renewables that are a particular focus of the capacity mechanism in the future,” he said.
The full details of what exactly is included or excluded from the mechanism have not yet been finalized and became a point of contention during negotiations under the previous government.
More responsibility will also be given to the market operator, who will have the power to purchase and store gas for future shortages.
Bowen says the infrastructure already exists to store gas reserves.
“There are storage facilities all over the country, we agreed to work to give that power to AEMO and give them that power quickly,” he said.
“This will not work today, but it will give us the capacity and tools to deal with this crisis in the future and prevent crises like this in the future.”
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The government will also strengthen the regulatory powers of market surveillance, especially with regard to gas, to ensure transparency for consumers.
Ministers have also agreed to launch the wheels of a national energy transition plan, ahead of their next meeting in July.
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