The Australian energy market operator (AEMO) has intervened to prevent a possible gas shortage in Victoria, the state Energy Minister said.
Key points:
- The operator of the energy market AEMO says that the guarantee of gas supply will guarantee transparency in the market
- Victorian government rules out raising wholesale gas price cap in response to supply pressure
- The state opposition is calling for Victoria’s gas exports to be reduced
Victorian Energy Minister Lily D’Ambrosio told ABC Radio Melbourne that the AEMO activated the gas supply guarantee on Tuesday afternoon as reservations at a storage facility in the south west of the state continued to decline.
“This means they will have greater visibility into the sale and supply of gas throughout the market, including Victoria, but in other states, to achieve some transparency here,” he said.
“When you have more transparency in the market, the market starts to change its behavior and frankly the market has been able to come out too much here.
“It should mean more visibility, as it did in April [when the guarantee was last triggered]that gas goes where it’s needed. “
An AEMO spokesman said activating the mechanism means New South Wales will get its gas supply from Queensland instead of Victoria.
On Monday night, the AEMO sent industry participants a warning that gas reserves at the Iona storage near Port Campbell were low.
“The depletion of gas at the Iona storage facility poses a threat to the safe operation of Victoria’s gas system if it continues to drain at the current rate,” AEMO said in a statement.
The market operator said it would intervene if the depletion of reserves does not slow down.
On July 11, a similar warning was issued to industry participants.
Victoria currently has a wholesale gas price cap, which prevents domestic consumers from being affected by large gas bills, but also offers no incentives to reduce use.
“Greed-driven” gas supply problems
Ms D’Ambrosio said Victoria had more than enough gas supply to meet demand and the price cap would not be removed.
“Much of this is due to greed among gas producers. They will follow the dollar, and we take care to protect consumers, making sure they don’t pay more than what is considered a fair price and therefore this limit of pricing is there, ”he said.
“Honestly, gas has to be paid a fair price. We have more than enough supply to be able to cover our needs and it has to be provided at a fair price.”
Lily D’Ambrosio says Victoria’s problems are motivated by the greed of gas producers. (Channel 9)
Victoria had been supplying gas to New South Wales to meet unprecedented demand over the winter.
Victorian opposition leader Matthew Guy called for stricter limits on gas exports outside of Victoria.
“Victoria Gas, there should be an internal reserve figure,” he said.
“They’re in Western Australia, they have 15 per cent, ours will be higher than that, and we will do it to make sure there are domestic reserves for Victorians. Victorian gas for Victorians.”
Gas plant operator says supply problems are “getting tighter”
Lochard Energy, owner of the Port Campbell facility, said it worked “efficiently and the way it was designed.”
The company said customers at the Iona storage plant, mainly energy retailers and industrial users, store gas during periods of low demand and then withdraw it when demand increases, such as in the winter. .
“Iona customers are generally expected to withdraw most of their stored gas during the winter and refill once the season has passed each year,” the company said.
“We are currently at the point of maximum demand in the winter and high withdrawals from Iona are expected.
“Current inventory levels generally meet expectations given the purpose of the facility.”
The Lochard Energy statement said it was one of the main facilities used to manage energy needs in the eastern Australian states.
“It’s the case that the gas supply and winter peaks are getting tighter on the east coast,” he said.
“This year, unplanned outages in coal generation and especially the winter cold have caused Iona customers to start withdrawing gas from storage sooner and in larger quantities than usual.
“Customers have control over their own inventories and can manage their own supply and demand, and Iona supports them in doing so.”
The company said the storage plant was to be expanded by 2023 and in the meantime was working with AEMO and its customers to manage supply.
Last month, AEMO intervened to suspend the energy market on Australia’s east coast after days of volatility put several states at risk of extinction.
It was the first time in its history that AEMO made such an intervention, with the support of the federal government recognizing that the energy market had effectively failed.