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The Australian Energy Market Operator (AEMO) has acted to prevent a shortage of gas, due in part to depletion rates at Victoria’s Iona gas storage facility, by introducing the Gas Supply Guarantee mechanism and drawing upon northern producers.

An ongoing energy crisis has seen challenging conditions in the National Energy Market (NEM), resulting in a larger than expected deficit at Iona.

In response, AEMO has issued two ‘threat to system security notifications’ (11 July and 18 July) to reduce the depletion rates at Iona.  

This included an initial request for participants to cease purchasing gas from Victoria’s Domestic Wholesale Gas Market (DWGM) for supply to other jurisdictions, and then a second request to cease purchases for Victorian electricity generation. 

At this stage, there is no impact to gas supply in Victoria. 

AEMO expects the gas supply guarantee and threat to system security mechanisms will need to remain in effect until 30 September 2022 or until gas supplies are sufficient and the threat to gas supply caused by Iona storage inventory depletion has subsided.

Australian Petroleum Production & Exploration Association (APPEA) Acting Chief Executive, Damian Dwyer, said the industry has ‘come together’ to solve the ongoing market pressures.

“The Gas Supply Guarantee (GSG) is a mechanism developed by the gas industry to ensure gas is available to meet peak demand periods in the National Electricity Market,“ Mr Dwyer said.

“The Australian Energy Market Operator’s (AEMO) decision to activate the GSG is one of several measures available that have been designed to respond to situations like this in a coordinated manner.

“The industry has come together and is working to get the gas to where it needs to go, as it has done during the energy system pressures we have seen in recent months.“

However, Mr Dwyer maintained that the measure was a short-term tool and secondary to increased investment in the sector.

“As we have noted before, the causes of the pressures are coal outages, relatively low levels of renewable power generation due to the weather, a colder winter increasing power demand on the east coast and global market pressures arising from the Russian invasion of Ukraine. This has all caused a huge increase in demand for gas,“ Mr Dwyer said.

“The GSG is a short-term measure. The real and enduring answer is more investment to bring more supply into the market.

“Market participants are responding to AEMO’s requests and directions to maintain a secure operating state for Victoria’s gas system.“

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