The Council of Australian Government (COAG) Energy Council has decided to implement a new Gas Supply Strategy which aims to increase gas supply, coordinate exploration efforts, and fast track an assessment of a new interconnector between New South Wales and South Australia.
Federal Minister for Environment and Energy Josh Frydenberg said the implementation of the recommendations will be fast tracked by the formation of a new Gas Market Reform Group headed by Dr Michael Vertigan.
“These are the most significant reforms to the domestic gas market in two decades,” Mr Frydenberg said.
“Council recognised the growing importance of gas as a transition fuel as we move to incorporate more renewables into the system.
“The reforms will improve competition, encourage more supply and put downward pressure on prices.”
The Australian Petroleum Production and Exploration Association (APPEA) Chief Executive Dr Malcolm Roberts welcomed the Council’s support for increasing gas supply and the number of gas suppliers.
“The implementation plan for the Gas Supply Strategy is a welcome move to encourage more competition and transparency in the east coast gas market,” Dr Roberts said.
“APPEA supports the establishment of a reform group to drive the changes recommended by the Australian Competition and Consumer Commission and the Australian Energy Market Commission.”
Dr Roberts said it was important that work on these reforms starts quickly but the strategy and market reforms could only achieve so much if some governments maintain or threaten new regulatory restrictions on gas development.
“The essential ingredient for a gas market is gas,” Dr Roberts said.
“The east coast gas market is at a tipping point. Tight market conditions are already inflicting real economic and social costs.
“Governments have been warned by their own agencies that we risk a supply shortfall by 2019 if new gas reserves are not developed urgently. And the states that are the most vulnerable are the ones that have not developed their own resources.”
Dr Roberts said Victoria must lift its onshore gas moratorium for the sake of local customers and industry as there is no environmental justification to prohibit onshore gas exploration and development.
“Without firm action from all states, families and businesses will face higher energy costs, investment in manufacturing will be threatened, and Australia’s transition to a low emissions future will be much more difficult.”
Energy Networks Association (ENA) Chief Executive Officer John Bradley also welcomed the decision by COAG to speed up the assessment of a new interconnector between New South Wales and South Australia.
“Australia’s energy system is changing faster than the regulatory framework can keep up – so we welcome Ministerial support for an early but rigorous assessment of the interconnector,“ Mr Bradley said.
“Early analysis indicates the interconnector could provide substantial benefits to electricity customers – given high prices in South Australia and surplus capacity in New South Wales.”
Mr Bradley also welcomed the decision to review the effectiveness of the regulatory investment test for transmission.
“All infrastructure must demonstrate its benefits, but we know that a cleaner energy future will rely on an efficient and interconnected grid,” Mr Bradley said.
“Greater interconnection in the NEM can improve wholesale market competition and support intermittent renewables with low emission energy sources, like gas-fired generation, and new technologies, like battery and solar thermal storage.”
Mr Bradley said the ENA welcomed the agreement of all Energy Ministers – other than Victoria – on an implementation plan to increase onshore gas supply by addressing regulatory and scientific issues.
“Governments must remove unnecessary barriers to new sources of gas supply,” Mr Bradley said.
“It is surprising Victoria has not joined other States, given it is more exposed with its manufacturing sector, and large household gas consumption.”
The ENA also congratulated Energy Ministers for agreeing to pursue better integration of carbon and energy policies across State boundaries.
“Many of our current challenges are a direct result of narrow policy development without assessing system impacts,” Mr Bradley said.
“We welcome the decision to assess the economic and operational impacts of existing State and Territory emission reduction policies.
“There is strong evidence that poorly coordinated emissions policy will push up costs to households and businesses – and technology neutral policies can save customers over $200 per year from 2020 to 2030.”
Mr Bradley said the meeting was a step in the right direction, but the test would be on-ground outcomes.
“We have seen agreements before to integrate carbon policy, unlock gas supply and reform tariffs. Australia is running out of time to deliver for customers in a rapidly changing market.”