tag:theconversation.com,2011:/au/topics/gas-crisis-38018/articlesGas crisis – The Conversation2023-10-12T17:09:52Ztag:theconversation.com,2011:article/2155652023-10-12T17:09:52Z2023-10-12T17:09:52ZUkraine recap: what war in the Middle East means for Putin and Ukraine<p>For some people it was a week when they forgot that the Ukraine war was happening. </p>
<p>As news from the Middle East took up longer and longer slots on news programmes and websites, reports from Ukraine were pushed off the front pages, at least for now. </p>
<p>But as Robert Dover, professor of intelligence and national security at the University of Hull, explains, any reduction <a href="https://theconversation.com/israel-gaza-conflict-an-opportunity-for-putin-while-the-world-is-distracted-215479">in the world’s attention</a> on the Ukraine war could be an significant opportunity for President Vladimir Putin. It could easily distract the west and undermine its commitment to financial and military support for Ukraine, he argues. </p>
<p>This could open up time for Russia to regroup, slow the number of battlefield deaths and prolong the conflict. It could also divert military equipment to the Middle East. A longer war is generally seen as being in Russia’s favour as the commitment of allies is potentiallworn away by national political opposition, and worries about cost, potentially.</p>
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Read more:
<a href="https://theconversation.com/israel-gaza-conflict-an-opportunity-for-putin-while-the-world-is-distracted-215479">Israel-Gaza conflict: an opportunity for Putin while the world is distracted</a>
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<p>Meanwhile, on the Baltic coast, a gas pipeline between Estonia and Finland has been hit by an explosion, and nobody is quite sure what or who is behind it. But since both countries are Nato members, and there’s a possibility that it could be an attack by Russia, the incident is coming under intense scrutiny. </p>
<p>Supplies of gas and energy, of course, have become a hugely political issue since the beginning of the war, when European countries realised their overdependence on Russia and suddenly had to make alternative arrangements at speed or risk no heating through the winter. </p>
<p>Thomas Froehlich, a research fellow at King’s College London, who studies the geopolitics of energy, <a href="https://theconversation.com/estonia-finland-pipeline-explosion-whats-the-evidence-that-the-damage-was-deliberate-215480">talks us through</a> the importance of a thorough investigation into the damaged pipeline and why Europe needs to diversify and protect its energy sources.</p>
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Read more:
<a href="https://theconversation.com/estonia-finland-pipeline-explosion-whats-the-evidence-that-the-damage-was-deliberate-215480">Estonia-Finland pipeline explosion: what's the evidence that the damage was deliberate?</a>
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<img alt="" src="https://images.theconversation.com/files/510322/original/file-20230215-22-dna0kj.png?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/510322/original/file-20230215-22-dna0kj.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=600&fit=crop&dpr=1 600w, https://images.theconversation.com/files/510322/original/file-20230215-22-dna0kj.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=600&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/510322/original/file-20230215-22-dna0kj.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=600&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/510322/original/file-20230215-22-dna0kj.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=754&fit=crop&dpr=1 754w, https://images.theconversation.com/files/510322/original/file-20230215-22-dna0kj.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=754&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/510322/original/file-20230215-22-dna0kj.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=754&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<p><em>Since Vladimir Putin sent his war machine into Ukraine on February 24 2022, The Conversation has called upon some of the leading experts in international security, geopolitics and military tactics to help our readers <a href="https://theconversation.com/uk/topics/ukraine-12-months-at-war-134215?utm_source=TCUK&utm_medium=linkback&utm_campaign=Ukraine12Months">understand the big issues</a>. You can also <a href="https://theconversation.com/uk/newsletters/ukraine-recap-114?utm_source=TCUK&utm_medium=linkback&utm_campaign=Ukraine12Months">subscribe to our fortnightly recap</a> of expert analysis of the conflict in Ukraine.</em></p>
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<p>Away from the frontlines, Russians are queueing up to see the latest Hollywood blockbuster Barbie, despite the government suggesting the film does not uphold “Russian values”. No one knows exactly what punters’ motivation might be, a dash of escapism, a desire to see the latest global movie hit, or as a small act of defiance. </p>
<p>Marina Miron, a post-doctoral researcher at King’s College London, studies the power of information and how information is used during conflicts. She points out that the Kremlin likes <a href="https://theconversation.com/the-power-of-pink-how-barbies-popularity-is-pushing-back-against-kremlin-control-of-information-214673">to keep a tight grip</a> on what is said and viewed. After all, this is a country where people are not currently allowed to call the “special military operation” in Ukraine a war and journalists can face up to 15 years in prison for publishing “false” information.</p>
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Read more:
<a href="https://theconversation.com/the-power-of-pink-how-barbies-popularity-is-pushing-back-against-kremlin-control-of-information-214673">The power of pink: how Barbie's popularity is pushing back against Kremlin control of information</a>
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<p>The overuse of the word “tragedy” is <a href="https://theconversation.com/calling-the-war-in-ukraine-a-tragedy-shelters-its-perpetrators-from-blame-and-responsibility-212080">letting Russia off the hook</a>, argues Mariana Budjeryn, a research associate, at the Harvard Kennedy School. The word “tragedy” is used far too often and it suggests that is something that is out of anyone’s control. </p>
<p>If you look at the roots of the word tragedy in its deeper original sense, it implies inadvertence and inevitability, she explains. And therefore masks the responsibility of perpetrators in causing injustices and human suffering through malicious intent and deliberate wrongdoing. </p>
<p>The word that should be used more often, she suggests, is crime. Russia is breaking international law, and therefore should be called to account, and calling what is happening in Ukraine a tragedy is not the way to do it.</p>
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Read more:
<a href="https://theconversation.com/calling-the-war-in-ukraine-a-tragedy-shelters-its-perpetrators-from-blame-and-responsibility-212080">Calling the war in Ukraine a 'tragedy' shelters its perpetrators from blame and responsibility</a>
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<p>When people flee from their homelands they often cling to the few possessions they are able to take with them. There are incredibly poignant images of Ukrainian families holding on to a teddy bear or a favourite book as they jostled for spaces on trains leaving the country as war broke out. </p>
<p>But Ukrainians living away from their homes in foreign lands are choosing another way to commemorate and remember their home, by getting tattoos of Ukrainian symbols or words inscribed on their bodies. Our French edition <a href="https://theconversation.com/vivre-lukraine-en-exil-son-heritage-culturel-dans-la-peau-213587">recently published</a> an article looking at the Ukrainian diaspora in Portugal, and how tattoos are growing in popularity as a mark of resistance against Russian occupation, according to Amandine Desille, a post-doctoral researcher at the University of Lisbonne and an associate member at the University of Bordeaux.</p>
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Read more:
<a href="https://theconversation.com/vivre-lukraine-en-exil-son-heritage-culturel-dans-la-peau-213587">Vivre l’Ukraine en exil, son héritage culturel dans la peau</a>
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<p>And finally for an update on how The Conversation has been covering the Israel-Gaza conflict from all its bureaux around the world, <a href="https://theconversation.com/israel-hamas-war-updates-on-the-conversations-coverage-of-the-conflict-215285">here’s a round-up</a> of coverage, compiled by global editor Stephen Khan.</p>
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<a href="https://theconversation.com/israel-hamas-war-updates-on-the-conversations-coverage-of-the-conflict-215285">Israel-Hamas war: updates on The Conversation's coverage of the conflict</a>
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A selection of the best of our coverage of the conflict from the past fortnight.Rachael Jolley, International Affairs EditorLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1888132022-08-17T05:21:19Z2022-08-17T05:21:19ZScott Morrison’s veto of a gas-drilling plan off Sydney was strange – but it should not be overturned<figure><img src="https://images.theconversation.com/files/479534/original/file-20220817-18-ynmg73.jpg?ixlib=rb-1.1.0&rect=8%2C8%2C5599%2C3724&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">Bianca Di Marchi/AAP</span></span></figcaption></figure><p>Federal parliament has been rocked by extraordinary revelations that Scott Morrison secretly assumed control of numerous ministries, including the resources portfolio, in the last term of government. The then prime minister went further and used his new powers to knock back a gas-drilling proposal off the New South Wales coast.</p>
<p>The proposal is known as “Petroleum Exploration Permit 11” or PEP 11. The company behind the application, Asset Energy, had sought to renew its licence and start exploratory drilling.</p>
<p>Asset Energy is <a href="https://www.theguardian.com/australia-news/2022/aug/16/scott-morrison-accused-of-bias-in-blocking-pep11-gas-project-using-extraordinary-ministerial-powers">challenging</a> Morrison’s decision in the Federal Court, and <a href="https://www.abc.net.au/newcastle/programs/drive/pep-11/101339396">pushing</a> the NSW and federal governments to reconsider the plan.</p>
<p>The company this week said the project was safe and “should be part of the solution to the east coast energy crisis”. But as I explain below, these claims are highly questionable.</p>
<h2>What is PEP 11?</h2>
<p>PEP 11 <a href="https://public.neats.nopta.gov.au/Title/81775e2a-8d46-47f7-91c9-de6f10feca90">covers</a> 4,500 square kilometres of ocean from Newcastle in the north to the Sydney suburb of Manly in the south. Asset Energy holds a <a href="https://assetenergy.com.au/company-profile/">majority stake</a> in the project. </p>
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<img alt="" src="https://images.theconversation.com/files/479520/original/file-20220817-18271-p593qk.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/479520/original/file-20220817-18271-p593qk.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=868&fit=crop&dpr=1 600w, https://images.theconversation.com/files/479520/original/file-20220817-18271-p593qk.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=868&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/479520/original/file-20220817-18271-p593qk.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=868&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/479520/original/file-20220817-18271-p593qk.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=1091&fit=crop&dpr=1 754w, https://images.theconversation.com/files/479520/original/file-20220817-18271-p593qk.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=1091&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/479520/original/file-20220817-18271-p593qk.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=1091&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">Map showing the ocean area covered by PEP 11.</span>
<span class="attribution"><span class="source">NOPSEMA</span></span>
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<p>Exploratory drilling already occurs elsewhere off Australia’s coast. For example, <a href="https://info.nopsema.gov.au/offshore_projects/14/show_public">23 offshore</a> platforms and installations exist in Bass Strait. But PEP 11 is controversial because the drilling would occur alongside an iconic and densely populated section of the Australian coast and may affect fragile marine ecosystems.</p>
<p>The proposal was unpopular with adjacent communities – many of them in Liberal seats where sitting MPs faced an electoral threats from teal independents and Labor. </p>
<p>In April 2020, the National Offshore Petroleum Titles Administrator <a href="https://www.theguardian.com/australia-news/2022/aug/16/scott-morrison-accused-of-bias-in-blocking-pep11-gas-project-using-extraordinary-ministerial-powers">recommended</a> the application be approved. But Morrison reportedly <a href="https://www.theaustralian.com.au/nation/politics/asset-energy-in-push-to-overturn-block-on-pep11-gas-exploration-permit/news-story/b576535fe9912d032a633bc74ed1de00">overruled</a> then resources minister Keith Pitt to knock back the proposal. </p>
<p>The Greens <a href="https://www.nationaltribune.com.au/greens-urge-labor-to-recommit-opposition-to-pep-11/">say</a> the decision was motivated by Morrison’s desire to retain government, rather than genuine concern over the plan. Even as he rejected the proposal, Morrison <a href="https://www.theguardian.com/australia-news/2021/dec/16/morrison-government-says-no-to-controversial-pep11-gas-drilling-project-off-nsw-coast">insisted</a> gas was “an important part of Australia’s current and future energy mix”.</p>
<p>Even before this week’s revelations, Asset Energy was <a href="https://www.theguardian.com/australia-news/2022/aug/16/scott-morrison-accused-of-bias-in-blocking-pep11-gas-project-using-extraordinary-ministerial-powers">challenging</a> Morrison’s decision in the Federal Court, <a href="https://www.comcourts.gov.au/file/Federal/P/WAD106/2022/actions">asking for</a> a judicial review.</p>
<p>Asset Energy’s executive director David Breeze this week said the project could supply 20 years’ worth of gas to NSW, adding:</p>
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<p>In light of significantly changed circumstances in the international energy market following the war in Ukraine, and the prospect of sustained higher energy prices and gas shortages in Australia, we are urging Federal and NSW governments to reconsider their position and allow limited, safe, and sustainable exploration activity.</p>
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<p>But many of the company’s claims about the project simply do not stack up.</p>
<h2>Not an energy solution</h2>
<p>Extending PEP 11 will not resolve the domestic gas supply concerns on the east coast, for several reasons. </p>
<p>First, it usually takes many years for gas to be produced commercially from oil and gas fields. This is particularly true in the <a href="https://www.sciencedirect.com/science/article/pii/S2666278720300106">offshore zone</a>. By the time the field is in production, renewable energy is likely to have progressed extensively and our dependence on gas is likely to have <a href="https://www.csis.org/analysis/how-will-natural-gas-fare-energy-transition">diminished</a>. </p>
<p>Second, the supply crisis on the east coast is not caused by too few gas projects, but by the lack of robust export regulation. </p>
<p>Large gas producers contract to sell <a href="https://www.accc.gov.au/system/files/ACCC%20Gas%20Inquiry%20-%20July%202022%20interim%20report%20-%20FINAL.pdf">almost 90%</a> of extracted gas to countries such as Japan, China and South Korea. Asset Energy <a href="https://www.theaustralian.com.au/nation/politics/asset-energy-in-push-to-overturn-block-on-pep11-gas-exploration-permit/news-story/b576535fe9912d032a633bc74ed1de00">says</a> it would direct all gas from the project to the domestic market, but there is <a href="https://theconversation.com/the-gas-trigger-wont-be-enough-to-stop-our-energy-crisis-escalating-we-need-a-domestic-reservation-policy-188057">no legislative mandate</a> requiring this. </p>
<p>What’s more, Russia’s invasion of Ukraine has triggered a <a href="https://www.washingtonpost.com/world/2022/08/08/oil-companies-profits-inflation/">spike in global gas prices</a>. This creates yet another incentive for producers to sell gas on the international market. </p>
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Read more:
<a href="https://theconversation.com/historic-new-deal-puts-emissions-reduction-at-the-heart-of-australias-energy-sector-188296">Historic new deal puts emissions reduction at the heart of Australia's energy sector</a>
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<span class="caption">Russia’s invasion of Ukraine caused a spike in global gas prices.</span>
<span class="attribution"><span class="source">Joel Carrett/AAP</span></span>
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<h2>An environmental risk</h2>
<p>Advent Energy, which owns Asset Energy, <a href="http://www.adventenergy.com.au/sydney-offshore-basin-pep11.html">says</a> an environmental plan for the proposal was lodged with authorities and must be approved before commencement of any surveys. </p>
<p>But this did not appease community groups that feared the project would destroy the marine environment. Among their concerns was that the project may <a href="https://www.theguardian.com/australia-news/2021/dec/16/morrison-government-says-no-to-controversial-pep11-gas-drilling-project-off-nsw-coast">disrupt</a> one of the world’s largest whale migration routes and endanger marine wildlife such as the <a href="https://manlyobserver.com.au/bird-on-the-brink-manlys-endangered-little-penguin-colony-in-question/">Manly colony</a> of little penguins. </p>
<p><a href="https://www.researchgate.net/publication/326319524_The_Environmental_impacts_of_offshore_oil_drilling_the_case_of_BP_oil_spill">Research</a> <a href="https://www.frontiersin.org/articles/10.3389/fenvs.2016.00058/full">shows</a> offshore drilling for oil and gas in other parts of the world has brought substantial environmental risks. </p>
<p>Oil spills or gas leaks can permanently damage fragile marine and coastal ecosystems. We need only look to BP’s Deepwater Horizon <a href="https://theconversation.com/bp-paid-a-steep-price-for-the-gulf-oil-spill-but-for-the-us-a-decade-later-its-business-as-usual-136905">oil spill</a> in the Gulf of Mexico in 2010, which devastated marine and coastal wildlife. </p>
<p>During the exploration phase, sound, traffic and physical disturbance – from anchor chains, drill cuttings and drilling fluids – can be <a href="https://www.frontiersin.org/articles/10.3389/fenvs.2016.00058/full">extensive</a>. </p>
<p>Oil and gas rigs are large industrial facilities that operate continually. They can <a href="https://theconversation.com/noise-from-offshore-oil-and-gas-surveys-can-affect-whales-up-to-3km-away-82646">disturb</a> species and ecosystems, impacting biodiversity that supports life on our planet.</p>
<p>During the production phase, physical impacts include disruption from installing infrastructure and <a href="https://www.frontiersin.org/articles/10.3389/fenvs.2016.00058/full">possible contamination</a> from the discharge of drilling mud and <a href="https://www.sciencedirect.com/science/article/pii/S0141113613001621">produced water</a> that can <a href="https://www.frontiersin.org/articles/10.3389/fmars.2021.711151/full">damage</a> surrounding ecosystems.</p>
<p>Further, gas and oil extraction undermines global efforts to tackle climate change. As the International Energy Agency has <a href="https://www.iea.org/reports/net-zero-by-2050">warned</a>, no new fossil fuel projects can be approved if the world is to reach net-zero emissions. </p>
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Read more:
<a href="https://theconversation.com/noise-from-offshore-oil-and-gas-surveys-can-affect-whales-up-to-3km-away-82646">Noise from offshore oil and gas surveys can affect whales up to 3km away</a>
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<h2>No social license</h2>
<p>The application to extend PEP 11 attracted vehement community opposition. This included a petition organised by community group Save Our Coast bearing 60,000 signatures, which was <a href="https://www.theguardian.com/australia-news/2021/dec/16/morrison-government-says-no-to-controversial-pep11-gas-drilling-project-off-nsw-coast">presented</a> to federal parliament by Warringah MP Zali Steggall.</p>
<p>Should the PEP 11 extension be approved and production proceeds, residents fear oil rigs and infrastructure will be <a href="https://centralnews.com.au/2021/09/28/oceans-the-next-big-battlefield-as-nsw-awaits-drilling-decision/">visible</a> from shore. This would fundamentally alter the visual amenity of the New South Wales coastline, damaging tourism and real estate values. </p>
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Read more:
<a href="https://theconversation.com/equinor-has-abandoned-oil-drilling-plans-in-the-great-australian-bight-so-whats-next-132435">Equinor has abandoned oil-drilling plans in the Great Australian Bight - so what's next?</a>
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<figcaption><span class="caption">Warringah independent MP Zali Steggall speaks out against PEP 11.</span></figcaption>
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<h2>An unacceptable plan</h2>
<p>The revelations about Scott Morrison’s secret powers does not suddenly mean PEP 11 has become socially acceptable or environmentally responsible. </p>
<p>Nor should global disruptions caused by sanctions on Russia be used to justify the approval of an offshore gas project that will worsten the climate emergency without resolving the current energy crisis. </p>
<p>Australia’s fossil fuel reserves belong to all of us. Mandates to explore and extract them should be granted only when it’s in the public interest – and this proposal fails that test.</p><img src="https://counter.theconversation.com/content/188813/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Samantha Hepburn does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Scott Morrison secretly assumed control of the resources portfolio, among others. Now a gas company wants one of his captain’s calls to be scrapped.Samantha Hepburn, Professor, Deakin Law School, Deakin UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1879802022-08-04T05:52:15Z2022-08-04T05:52:15ZAvoiding a gas shortage is one thing, but what’s needed is action on prices<figure><img src="https://images.theconversation.com/files/477287/original/file-20220803-24-54pxzf.png?ixlib=rb-1.1.0&rect=0%2C532%2C3567%2C1975&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption"></span> </figcaption></figure><p>The Albanese government <a href="https://www.minister.industry.gov.au/ministers/king/media-releases/government-responds-accc-gas-shortage-report">has accepted</a> the Australian Competition and Consumer Commission’s recommendation to “initiate the first step” to trigger the controversial <a href="https://www.industry.gov.au/regulations-and-standards/securing-australian-domestic-gas-supply">Australian Domestic Gas Security Mechanism</a> to avert a supply crisis in eastern Australia.</p>
<p>What the competition watchdog hasn’t recommended is what to do about the gas price, which has little to do with supply.</p>
<p>In its latest <a href="https://www.accc.gov.au/publications/serial-publications/gas-inquiry-2017-2025/gas-inquiry-july-2022-interim-report">half-yearly report</a> on gas supply, the ACCC predicts that, without action, eastern Australia will suffer a domestic gas shortage in 2023, and is concerned that already-high prices will go even higher. </p>
<p>The report identifies several causes. One is Russia’s war against Ukraine, which has European buyers seeking alternatives to Russian gas. </p>
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<a href="https://images.theconversation.com/files/477284/original/file-20220803-1926-be9jto.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/477284/original/file-20220803-1926-be9jto.png?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/477284/original/file-20220803-1926-be9jto.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=917&fit=crop&dpr=1 600w, https://images.theconversation.com/files/477284/original/file-20220803-1926-be9jto.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=917&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/477284/original/file-20220803-1926-be9jto.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=917&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/477284/original/file-20220803-1926-be9jto.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=1153&fit=crop&dpr=1 754w, https://images.theconversation.com/files/477284/original/file-20220803-1926-be9jto.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=1153&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/477284/original/file-20220803-1926-be9jto.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=1153&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<span class="attribution"><a class="source" href="https://www.accc.gov.au/system/files/ACCC%20Gas%20Inquiry%20-%20July%202022%20interim%20report%20-%20FINAL.pdf">Competition and Consumer Commission</a></span>
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<p>Australian liquefied natural gas (LNG) exporters have been keen to meet this demand and reap the high prices they are willing to pay. </p>
<p>But the report also makes clear there are significant problems with the Australian gas market itself, with ineffective competition between gas producers, poor compliance, and an apparent lack of real commitment by gas exporters to the agreement they made with the federal government to ensure affordable and sufficient gas for domestic users.</p>
<p>Frustratingly though, the report has little to say (beyond expressing concern) about the more immediate issue of escalating domestic prices.</p>
<h2>Looming shortage</h2>
<p>The report identifies an east coast gas supply of 1.98 billion gigajoules in 2023 – well in excess of domestic demand of 571 million gigajoules.</p>
<p>1.3 billion gigajoules of that supply is needed to meet long-term LNG export contracts. The ACCC has identified there will be a shortfall of 56 million gigajoules if the LNG producers export all of the 167 million gigajoules they will have in excess their contract obligations.</p>
<p>To avoid this shortfall, the ACCC has recommended the government take the first step in initiating the <a href="https://www.industry.gov.au/regulations-and-standards/securing-australian-domestic-gas-supply">Australian Domestic Gas Security Mechanism</a>. This involves determining if 2023 will be a “shortfall year”. Federal resources minister has said the government will take this step.</p>
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Read more:
<a href="https://theconversation.com/the-gas-trigger-wont-be-enough-to-stop-our-energy-crisis-escalating-we-need-a-domestic-reservation-policy-188057">The 'gas trigger' won't be enough to stop our energy crisis escalating. We need a domestic reservation policy</a>
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<p>If the government finds it will be a shortfall year, it can require exporters to offer their uncontracted gas to the domestic market first.</p>
<p>Whether the government will need to do that will depend on negotiations with the exporters – in particular the three joint venture exporters and their associates the ACCC says have influence over close to 90% of proven and probable eastern Australian reserves. </p>
<p>The ACCC report expresses concern that some LNG exporters “not engaging with the
domestic market in the spirit” of an <a href="https://www.industry.gov.au/sites/default/files/2021-01/australian-east-coast-domestic-gas-supply-commitment-heads-of-agreement.pdf">agreement</a> they signed:</p>
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<p>Even if the behaviour could be proven to be technically compliant, we consider that some suppliers are not engaging with the domestic market in ways that are likely to result in supply agreements being reached and market conditions noticeably improving </p>
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<p>It is also concerned the joint venture operators might be breaching the Competition and Consumer Act by effectively engaging in joint marketing without ACCC approval. </p>
<p>Another concern is the cost of transmission, with pipeline owners enjoying local monopolies. The ACCC has stopped short of recommending regulating the prices they can charge.</p>
<h2>Few clues on prices</h2>
<p>Where the recommendations fall short is on what to do about rising prices. Even before the looming shortfall, wholesale and retail prices to businesses have been climbing steadily for a year. The report says some prices have been doubled.</p>
<p>The ACCC has been operating on the superficially reasonable basis that domestic gas prices should be no higher than international ones. </p>
<p>It has been using “export parity prices” to indicate what the price would be if the federal government’s agreement with LNG exporters was functioning well.</p>
<p>On that metric, the agreement is functioning well. Domestic prices have largely followed international prices. But those prices have soared from A$3-10 per gigajoule to well above A$40.</p>
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<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/why-did-gas-prices-go-from-10-a-gigajoule-to-800-a-gigajoule-an-expert-on-the-energy-crisis-engulfing-australia-184304">Why did gas prices go from $10 a gigajoule to $800 a gigajoule? An expert on the energy crisis engulfing Australia</a>
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<p>The result is windfall profits to producers and unaffordable prices for domestic users of the kind that cannot be accepted as a well-functioning market.</p>
<p>The report makes no recommendation to address this problem.</p>
<p>While there have been arguments for a <a href="https://theconversation.com/the-gas-trigger-wont-be-enough-to-stop-our-energy-crisis-escalating-we-need-a-domestic-reservation-policy-188057">domestic reservation policy</a>, a better way to address the price problem is a “windfall profit” tax on gas producers.</p>
<p>Even the threat of such a tax should be a brake on unfair domestic prices. The ACCC could set a price threshold to trigger the tax. It could be tailored to the specific circumstances and made defensible against claims of <a href="https://theconversation.com/hey-minister-leave-that-gas-trigger-alone-it-may-fire-up-a-fight-with-foreign-investors-185710">sovereign risk</a>.</p>
<h2>A windfall profits tax would be a start</h2>
<p>Most of the findings of the latest gas inquiry report are neither new nor surprising. Yet their impact on gas users is heavy, and will get worse if further action is not taken. </p>
<p>The government has most of the tools it needs. It should act on the ACCC’s recommendations to meet the possible 2023 shortfall and on joint marketing. </p>
<p>It should go further on pipeline regulation, and it should implement a windfall profit tax to avoid catastrophic consequences for Australian gas users.</p><img src="https://counter.theconversation.com/content/187980/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Tony Wood owns shares in several energy and resource companies via his superannuation fund </span></em></p>Even with enough supply, local gas prices have been skyrocketing. The ACCC has squibbed on possible reforms such as a windfall profits tax.Tony Wood, Program Director, Energy, Grattan InstituteLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1880572022-08-02T06:25:31Z2022-08-02T06:25:31ZThe ‘gas trigger’ won’t be enough to stop our energy crisis escalating. We need a domestic reservation policy<figure><img src="https://images.theconversation.com/files/477084/original/file-20220802-15-zh7acj.jpg?ixlib=rb-1.1.0&rect=209%2C11%2C3618%2C2393&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">Shutterstock</span></span></figcaption></figure><p>Australia’s east coast gas crisis is set to sharply worsen. A new report from the Australian Competition and Consumer Commission (ACCC) notes supply conditions will <a href="https://www.accc.gov.au/system/files/ACCC%20Gas%20Inquiry%20-%20%20July%202022%20interim%20report%20-%20FINAL.pdf">deteriorate significantly</a> in 2023 if no action is taken. The 56 petajoule shortfall is huge – equivalent to around 10% of domestic demand. </p>
<p>So what’s been done? You would have heard about the “gas trigger” the government is considering pulling. This trigger – formally known as the Australian Domestic Gas Mechanism – is designed to increase gas supply by limiting gas exports during periods of shortfall. </p>
<p>The problem is, it’s too weak and much too slow to respond to fast-moving energy crises like the one we are now in. It hasn’t been used once since being introduced in 2017, as Australia’s LNG exporters can easily avoid the threat of the trigger by putting the bare minimum of gas back into domestic supply. </p>
<p>As it stands, the gas trigger is a wholly inadequate measure to tackle our uncertain energy future in a globally disrupted market. It’s unfathomable why a country with abundant and diverse gas resources <a href="https://www.afr.com/policy/energy-and-climate/gas-reservation-is-not-a-bogyman-20200520-p54un3">does not protect</a> its domestic market more effectively. Remember – this gas crisis is an east coast problem. Western Australia put in place a domestic reservation policy years ago, which has worked exceedingly well. Over west, there is no crisis. </p>
<h2>How did we get into this mess?</h2>
<p>The price of gas in Australia continues to surge, which in turn has helped push up wholesale energy prices by <a href="https://www.sbs.com.au/news/article/australias-gas-prices-are-%20surging-how-did-we-get-here-and-what-is-being-done-about-it/7p3io6e7w">141%</a> in the first quarter of 2022 compared with last year. </p>
<p>This is driven by huge increases in global demand for gas following shortages in Europe caused by the Russian war on Ukraine, coupled with rising domestic demand for gas-fired power as coal power becomes less reliable with outages from ageing and retired generators. </p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/why-did-gas-prices-go-from-10-a-gigajoule-to-800-a-gigajoule-an-expert-on-the-energy-crisis-engulfing-australia-184304">Why did gas prices go from $10 a gigajoule to $800 a gigajoule? An expert on the energy crisis engulfing Australia</a>
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<p>The likely result will be much higher domestic energy prices, causing pain on the home front and resulting in more manufacturers closing. The ACCC report makes it clear a shortfall of this magnitude represents a “substantial risk to Australia’s energy security”.</p>
<p>It seems bizarre Australia – one of the world’s largest fossil fuel exporters – is in this situation. Next year, the east coast LNG market is forecast to produce 1981 petajoules of natural gas. Most of this will supply long term contracts. </p>
<p>The excess is often sold by LNG exporters on the international market. In the past, some of this excess has flowed to domestic supply. But the ACCC predicts in 2023, most excess gas will be sold on the international market – taking advantage of high prices – even though our domestic market is likely to need a lot more of it than in previous years. </p>
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<a href="https://images.theconversation.com/files/477089/original/file-20220802-15-uiuh2c.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="Hand with fertiliser" src="https://images.theconversation.com/files/477089/original/file-20220802-15-uiuh2c.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/477089/original/file-20220802-15-uiuh2c.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/477089/original/file-20220802-15-uiuh2c.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/477089/original/file-20220802-15-uiuh2c.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/477089/original/file-20220802-15-uiuh2c.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/477089/original/file-20220802-15-uiuh2c.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/477089/original/file-20220802-15-uiuh2c.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<span class="caption">Gas is currently used for manufacturing products such as fertiliser, as well as generating power.</span>
<span class="attribution"><span class="source">Shutterstock</span></span>
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<h2>It’s our gas – isn’t it?</h2>
<p>Given the gas is being extracted from under Australian soils and waters, there’s a big question we’re facing. Can – or will – the government compel LNG exporters to direct more of this excess gas to domestic use? </p>
<p>On the east coast, we’re hindered by the lack of a legally binding supply mandate. By contrast, Western Australia has laws forcing LNG exporters to reserve 15% of their gas for the domestic market. These laws have kept their market <a href="https://www.smh.com.au/business/companies/it-s-ridiculous-architect-of-wa-policy-calls-for-national-gas-reservation-20220616-p5au8q.html">relatively immune</a> to the wild rises of the globally disrupted market. </p>
<p>Australia’s east coast does not have a reservation mandate. Instead, it has an agreement between the government and LNG exporters who have committed not to sell uncontracted gas to the international market unless they first offer it to the domestic market at a competitive price. This commitment expires on January 1 next year and at this stage has not been extended. </p>
<p>That brings us to the gas trigger, introduced in 2017 as a measure of last resort but never actually used. Instead, it’s lingered in the background. Federal resources minister Madeleine King <a href="https://www.afr.com/policy/energy-and-climate/king-readies-gas-%20trigger-as-exporters-lose-social-licence-20220801-p5b690">has argued</a> the trigger can be used as a security mechanism, but that remains to be seen.</p>
<h2>How does the trigger work?</h2>
<p>The gas trigger has to be activated to have any effect. This is quite a lengthy process. To pull the trigger, the federal minister must notify the industry they are considering making a determination the following year will amount to a gas “shortfall year”. There is big delay between making a determination and imposing export restrictions. </p>
<p>Worse, the minister has to consult with the industry and other agencies. To date, the LNG industry has <a href="https://australiainstitute.org.au/wp-content/uploads/2020/12/Australia-Institute-ADGSM-Submission-1.pdf">been able to stop</a> the trigger by putting the barest amount of gas back into domestic supply to prevent a shortfall determination. </p>
<p>If a determination is made, LNG producers exporting more than they produce domestically will be subject to pro-rata volume restrictions during the shortfall year. The amount depends upon the shortfall volume the minister believes will be required.</p>
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<em>
<strong>
Read more:
<a href="https://theconversation.com/4-reasons-our-gas-and-electricity-prices-are-suddenly-sky-high-184303">4 reasons our gas and electricity prices are suddenly sky-high</a>
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<h2>The slow-motion trigger</h2>
<p>There are many concerns with this trigger.</p>
<p>First, it’s extremely slow. In practice, export restrictions could take up to eight months to have any effect. As the new ACCC report indicates, this must change so the trigger becomes more responsive to immediate energy concerns. </p>
<p>Second, the estimated shortfall volume may not generate enough gas to alleviate the shortfall because export restrictions can only apply to exporters drawing more gas from the market than they put in. </p>
<p>Third, the gas trigger has never actually been used. At the first hint of a shortfall, the LNG industry has stepped in to supply the minimum amount of gas necessary to avoid a shortfall year being declared. </p>
<p>As a result, the gas trigger is basically ineffective. It’s had no real impact on domestic gas prices and has never functioned as a substantive export control capable of creating stronger domestic gas reserves. That’s precisely why the east coast gas market finds itself in this mess. </p>
<p>It’s time for a rethink. The gas trigger is an inadequate way of tackling a very uncertain energy future in our globally disrupted market. So why keep it? We don’t need to reinvent the wheel. Western Australia’s domestic reservation policy shows us very clearly what does work: laws, with teeth. </p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/want-a-solution-for-the-energy-crisis-gripping-australias-east-look-west-185124">Want a solution for the energy crisis gripping Australia's east? Look west</a>
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<img src="https://counter.theconversation.com/content/188057/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Samantha Hepburn does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>There’s been a lot of talk about pulling the gas trigger. The problem is, the trigger is too slow and too easy to avoid.Samantha Hepburn, Professor, Deakin Law School, Deakin UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1852252022-06-17T01:14:15Z2022-06-17T01:14:15ZPolitics with Michelle Grattan: Tony Wood on the unprecedented energy crisis<p>As the energy crisis continues to grip Australia’s east coast with consumers told to limit their consumption and warnings of blackouts Tony Wood, director of the energy program at the Grattan Institute, speaks with Michelle Grattan about why this has happened and what can be done to fix the system. </p>
<p>The crisis is unprecedented, Wood says. “We’ve certainly seen situations where things have got very tight[…] But this sort of extended period when we’ve had major power outages and real stress on the entire system for such a long time has never been seen before.”</p>
<p>He says the crisis could have been minimised if past governments had worked to “address climate change” and “bring on more renewables” as well as all the technology to support a renewables industry. </p>
<p>That being said, Wood points out there are other factors also driving the crisis. </p>
<p>“We still would have had the weather patterns we had in the south, on the east coast of Australia, that caused all the rain and caused all the flooding of the coal mines that interrupted power supply. And of course, we wouldn’t have prevented the Ukraine war and we probably would have had real stress on the gas supply system.”</p>
<p>Wood argues that “things became very complicated very quickly”, as the crisis developed. </p>
<p>On whether the crisis is in part a result of power companies playing the system, he says: “I don’t honestly think the companies were trying to game the system, but I think the commercial arrangements were so complicated [that the Australian Energy Market Operator taking over the system] was the only solution.”</p>
<p>Some have suggested the crisis has been worsened because many assets have been privatised. Wood disagrees. “I don’t think this is a fundamental failure of privatisation […] I do think it’s a fundamental physical problem and government ownership wouldn’t have made much difference.”</p>
<p>“Transitions are always difficult things […] I think we can see where we’re going. It’s got to be a system which is overwhelmingly dominated by renewable energy.”</p>
<p>“In the short term, we are going to manage this transition carefully, which means as we adopt more and more renewables, we’re going to need some of these coal-fired power stations and gas-fired power stations to maintain the stability and the reliability of the system. They should only be there as necessary to support that transition.”</p>
<p>“I have no doubt we can move to net zero by 2050. But remember, it will be net zero. It won’t be absolute zero. And of course, the sooner we start really seriously creating momentum in that direction, the more likely we are to get there and the more likely it is we’ll get there without too much cost.”</p><img src="https://counter.theconversation.com/content/185225/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Michelle Grattan does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Michelle Grattan speaks to the Grattan Institute's Tony Wood about the factors that have lead to the crisis, previous governments' failure to plan for transition to renewable sources and the way out.Michelle Grattan, Professorial Fellow, University of CanberraLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1302582020-01-22T17:28:57Z2020-01-22T17:28:57ZThe consequences of Qasem Suleimani’s death on the global energy market<p>UOn January 3, 2020, the decades-long conflict between the United States and Iran almost turned into a full-scale confrontation when a US drone <a href="https://theconversation.com/qassem-soleimani-air-strike-why-this-is-a-dangerous-escalation-of-us-assassination-policy-129300">assassinated Iranian major general Qasem Suleimani</a> as well as Commander Abu Mahdi al-Muhandis. </p>
<p>Iran and its allies vowed revenge and global markets, fearing a military escalation, anxiously awaited their reprisals. On January 8, however, Iran’s military chose to target two American military bases located in Iraq with missiles that caused material damage rather than human losses. With the United States’ answer limited to imposing new sanctions rather that resorting to the military option, the <a href="https://theconversation.com/iran-and-us-step-back-from-all-out-war-giving-trump-a-win-for-now-129615">situation cooled down</a> despite the continued exchange of fiery words.</p>
<p>In this article, we analyse the impact of this conflict on energy markets, especially should a military confrontation result in the closing of Hormuz strait. Who would be the economic winners and losers? What are Iran’s pressure options?</p>
<h2>The immediate effects of January’s skirmishes</h2>
<p>Up to 21% of the world’s oil flows through the Strait of Hormuz, making it a <a href="https://www.csis.org/analysis/oil-markets-oil-attacks-and-strategic-straits">strategic chokepoint</a> – over the course of 2018, an average of 20.7 million barrels of oil passed through it per day. The strait is also crucial for liquefied natural gas (LNG) exports, as more than 25% of the world’s supply, mostly from Qatar, passes through it annually.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/310915/original/file-20200120-69531-ecqydm.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/310915/original/file-20200120-69531-ecqydm.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=374&fit=crop&dpr=1 600w, https://images.theconversation.com/files/310915/original/file-20200120-69531-ecqydm.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=374&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/310915/original/file-20200120-69531-ecqydm.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=374&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/310915/original/file-20200120-69531-ecqydm.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=470&fit=crop&dpr=1 754w, https://images.theconversation.com/files/310915/original/file-20200120-69531-ecqydm.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=470&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/310915/original/file-20200120-69531-ecqydm.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=470&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption"></span>
<span class="attribution"><span class="source">CSIS</span>, <span class="license">Author provided</span></span>
</figcaption>
</figure>
<p>The short-term effect of January 3 strike was a rise in the price of oil, which was expected. Brent crude hit US$70.73 per barrel, its highest level since September 14, 2019, when it was US$72.</p>
<p>Goldman Sachs and UBS analysts <a href="https://www.theguardian.com/business/2020/jan/06/oil-prices-70-a-barrel-suleimani-retaliation-petrol-price">doubt whether oil prices will keep rallying beyond US$70</a> because of strong production from outside the Middle East – primarily the United States and Norway – which would prevent prices from surpassing US$70.</p>
<p>Following Iran’s strikes and US decision not to hit back, tensions eased, which resulted in a further drop in oil prices and by January 10, when fell to around US$65.</p>
<h2>Possible winners and losers</h2>
<p>According to <a href="https://www.independent.co.uk/news/business/news/oil-price-latest-iran-us-war-trump-middle-east-a9272651.html">Capital Economics</a>, a war would lead to oil prices more than doubling.</p>
<blockquote>
<p>“While the price of Brent could soar to as much as $150 per barrel, the rally may prove short-lived as supply networks adjust and demand falters in the wake of higher prices.”</p>
</blockquote>
<p>Defining the winners and losers from this conflict is directly based on their status as oil importers or exporters.</p>
<p><strong>Persian Gulf</strong>: Iran, Kuwait, Qatar and Bahrain oil exports pass entirely through Strait of Hormuz, and Qatar also uses it to export LNG. Were the strait closed, they would be hit hard. As for Iraq, 90% of its oil transits through it. The UAE can send part of its production (1.5 million b/d) via a pipeline to the port of Fujairah on the Gulf of Oman. Saudi Arabia has the greatest ability to divert flows, by using a mega-pipeline to an export terminal on the Red Sea. Saudi Aramco said the capacity of that line would be increased to 6.2 million barrels per day by the end of 2019.</p>
<p><strong>Asia</strong>: China, India, Japan and South Korea rely heavily on Middle Eastern oil, as shown in the graph below and their economic performance would suffer in the short term.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/310922/original/file-20200120-69563-12t7wd.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/310922/original/file-20200120-69563-12t7wd.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=329&fit=crop&dpr=1 600w, https://images.theconversation.com/files/310922/original/file-20200120-69563-12t7wd.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=329&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/310922/original/file-20200120-69563-12t7wd.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=329&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/310922/original/file-20200120-69563-12t7wd.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=413&fit=crop&dpr=1 754w, https://images.theconversation.com/files/310922/original/file-20200120-69563-12t7wd.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=413&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/310922/original/file-20200120-69563-12t7wd.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=413&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption"></span>
<span class="attribution"><span class="source">US Energy Information Administration</span>, <span class="license">Author provided</span></span>
</figcaption>
</figure>
<p>However, since the United States re-imposed sanctions on Iran, and the waivers the US administration provided to certain countries to continue importing Iranian oil ended in May 2019, Asian nations have been <a href="https://blogs.platts.com/2019/12/10/asia-crude-oil-buyers-pivot-us/">pivoting to US imports</a>. The graph below shows a spectacular increase.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/310923/original/file-20200120-69555-q7qkwa.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/310923/original/file-20200120-69555-q7qkwa.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=372&fit=crop&dpr=1 600w, https://images.theconversation.com/files/310923/original/file-20200120-69555-q7qkwa.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=372&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/310923/original/file-20200120-69555-q7qkwa.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=372&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/310923/original/file-20200120-69555-q7qkwa.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=468&fit=crop&dpr=1 754w, https://images.theconversation.com/files/310923/original/file-20200120-69555-q7qkwa.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=468&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/310923/original/file-20200120-69555-q7qkwa.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=468&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption"></span>
<span class="attribution"><span class="source">US Energy Information Administration</span>, <span class="license">Author provided</span></span>
</figcaption>
</figure>
<p><strong>European Union</strong>: Oil accounts for 35% of the EU’s energy mix. It imports only 20% of its oil needs from the Middle East and therefore its dependence on this source is limited. However, Qatar is Europe’s largest LNG exporter (35%), and any disruption of supplies could leave <a href="https://www.politico.eu/article/eu-oil-market-buffer-iran-crisis/">important consequences</a> for the EU.</p>
<p><strong>United States</strong>: According to <a href="https://moneyweek.com/520428/us-vs-iran-threat-of-war-shakes-the-world/">MoneyWeek Review</a>: </p>
<blockquote>
<p>“The fracking revolution means that finding hydrocarbons and getting them out of the ground has never been easier, particularly in North America. When prices jump the frackers are happy to start pumping.”</p>
</blockquote>
<p>This being the case, the United States would be an obvious winner of such a crisis.</p>
<p><strong>Russia</strong>: The country’s commitment to the OPEC+ deal has allowed it to gain huge amounts of additional revenue. However, that deal resulted in Russia having a spare production capacity of up to half a million barrels per day. Should prices jump, Russia could be tempted to use such an opportunity to fill in its coffers and boost its GDP performance to match President Putin’s desired GDP growth rates.</p>
<h2>Iran’s options</h2>
<p>Tehran’s economic woes can still make its behaviour unpredictable especially if the harsh sanctions continue. So far, it seems to have used a fraction of the means at its disposal. A measured military response saved face and halted a potential escalation had they incurred human losses on the US military.</p>
<p>Iran still has the following ways that it can strengthen its position, among others:</p>
<ul>
<li><p>Encouraging its allies to attack US interests, allowing Iran to avoid the blame. Attacks could spread to US allies such as Israel.</p></li>
<li><p><a href="https://theconversation.com/how-real-is-the-threat-of-cyberwar-between-iran-and-the-us-129573">Cyber-attacks</a> against US and allied companies and administrations.</p></li>
<li><p>Attacks on or seizure of oil tankers (such as in 2019) or the use of drones against neighbours’ energy facilities.</p></li>
<li><p>Iran’s fleet can pursue commercial shipments in the Gulf of Oman, Indian Ocean and elsewhere.</p></li>
<li><p>The country’s Houthi allies can target ships in the Red Sea, thus threatening the Suez Canal’s economic viability.</p></li>
</ul>
<p>Despite significant loses since the waivers were terminated, Iran chose to not close the Hormuz strait. Why? Because Tehran noticed that relying on “precise, quick and short” actions, especially through allies, proved more profitable. It does not have the capacity for a full-scale war with the United States and finally it does not wish to be seen as an unreliable partner in the post-sanction times.</p>
<p>With the US presidential elections approaching, Iran’s internal troubles mean that both countries need the current “ceasefire”. Perhaps following the short-lived skirmishes, both sides could go back to the negotiation tables and find the necessary compromises to reinstate the nuclear deal. Only time will tell.</p>
<hr>
<p><em>This article was written with Ahmad Ismail, an Abu Dhabi–based research consultant specialising in political-economy analysis and geopolitics.</em></p><img src="https://counter.theconversation.com/content/130258/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Hassan Obeid is a member of Ebs-Paris / INSEEC U Research Center. He's a professor of Finance at European Business School- Paris.</span></em></p>The assassination of the Iranian general could have lasting effects on energy markets. Which countries could benefit from it and which could be negatively affected?Hassan Obeid, Professor of Finance, European Business School, EBS Paris Licensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1251302019-10-21T19:01:15Z2019-10-21T19:01:15ZAustralia has plenty of gas, but the price is extreme. The market is broken<figure><img src="https://images.theconversation.com/files/297836/original/file-20191021-56215-14jl1lf.jpg?ixlib=rb-1.1.0&rect=8%2C5%2C1907%2C1258&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Gas burning at Victoria's Longford Gas Conditioning Plant. Australia is the world's largest exporter but intends t import gas to shore up local supplies. </span> <span class="attribution"><span class="source">Joe Castro/AAP</span></span></figcaption></figure><p>Right now, two projects have been proposed to import gas from overseas to supply eastern Australia. This is an absurd prospect. Australia is a resource-rich country, and <a href="https://www.reuters.com/article/us-australia-qatar-lng-idUSKBN1O907N">exports more gas than any other nation</a>. Why then, would we need to ship it in? </p>
<p>The rate of liquified natural gas (LNG) exports from Australia has skyrocketed over the past two decades. In the past ten years, this coincided with a <a href="https://www.afr.com/companies/energy/agl-to-buy-gas-from-esso-after-lng-imports-delayed-20190925-p52une">trebling</a> in the price of gas on the east coast.</p>
<p>The situation points to a dramatic failure of management and regulation. The result is that households are struggling with soaring gas bills, and the future of Australia’s manufacturing sector is at risk.</p>
<p>It is unconscionable that Australian governments have allowed LNG producers untrammelled export growth without credible safeguards for the domestic market. The crisis could be de-escalated with stronger export controls and a regulatory regime more focused on the public interest.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/297841/original/file-20191021-56215-uqkva1.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/297841/original/file-20191021-56215-uqkva1.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=396&fit=crop&dpr=1 600w, https://images.theconversation.com/files/297841/original/file-20191021-56215-uqkva1.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=396&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/297841/original/file-20191021-56215-uqkva1.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=396&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/297841/original/file-20191021-56215-uqkva1.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=497&fit=crop&dpr=1 754w, https://images.theconversation.com/files/297841/original/file-20191021-56215-uqkva1.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=497&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/297841/original/file-20191021-56215-uqkva1.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=497&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Prime Minister Scott Morrison during a visit to a Queensland manufacturing plant during the 2019 federal election campaign. The manufacturing sector is a major user of Australian gas supplies.</span>
<span class="attribution"><span class="source">Mick Tsikas/AAP</span></span>
</figcaption>
</figure>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/nice-try-mr-taylor-but-australias-gas-exports-dont-help-solve-climate-change-122715">Nice try Mr Taylor, but Australia's gas exports don't help solve climate change</a>
</strong>
</em>
</p>
<hr>
<h2>Gas users are hurting</h2>
<p>Between 2000 and 2015, Australia’s LNG exports tripled. Between 2015 and 2019 they <a href="https://www.tai.org.au/content/high-carbon-land-down-under-quantifying-co2-australia-s-fossil-fuel-mining-and-exports">tripled again</a>.</p>
<p>But Australia must keep plentiful gas supplies for itself. Gas-fired power is vital in meeting the fluctuating demands of our national energy market as ageing coal power stations close. Gas also firms up the intermittent energy generated by renewables. </p>
<p>Almost <a href="https://www.appea.com.au/oil-gas-explained/benefits/gas-and-manufacturing/">one-third of the gas consumed in Australia</a> is used by manufacturers - as both an energy source and raw material to make metals, chemicals, plastic and building materials.</p>
<p>Since around 2015, when <a href="https://www.abc.net.au/news/rural/2015-01-06/first-lng-from-csg-ship-leaves-queensland/6002446">LNG exports began at Gladstone in Queensland</a>, gas prices have <a href="https://www.abc.net.au/news/2019-05-17/gas-exports-blamed-for-electricity-price-rises-job-losses/11121120">spiralled by more than 130%</a>. This has had a huge effect on industry and communities.</p>
<p>Australian steel giant Bluescope recently invested in a A$1 billion US expansion – where energy prices are <a href="https://www.afr.com/companies/manufacturing/cheap-us-energy-leads-bluescope-to-1b-ohio-mill-expansion-20190816-p52hxu">one-third of those in Australia</a>.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/297840/original/file-20191021-56228-17ij75s.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/297840/original/file-20191021-56228-17ij75s.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=399&fit=crop&dpr=1 600w, https://images.theconversation.com/files/297840/original/file-20191021-56228-17ij75s.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=399&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/297840/original/file-20191021-56228-17ij75s.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=399&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/297840/original/file-20191021-56228-17ij75s.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=502&fit=crop&dpr=1 754w, https://images.theconversation.com/files/297840/original/file-20191021-56228-17ij75s.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=502&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/297840/original/file-20191021-56228-17ij75s.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=502&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">East coast gas prices have trebled over the past decade.</span>
<span class="attribution"><span class="source">Dan Peled/AAP</span></span>
</figcaption>
</figure>
<p>Sydney-based polystyrene cup maker RemaPak <a href="https://www.afr.com/companies/energy/east-coast-gas-crisis-claims-victim-as-remapak-goes-under-20190119-h1a8s4">went into administration</a> earlier this year after its energy costs increased by 400% over three years.</p>
<p>Chief executive of Incitec Pivot Jeanne Johns, whose company produces chemicals and fertilisers, this month said the A$38 billion gas-based manufacturing sector in Australia may be destroyed by high gas prices, <a href="https://www.afr.com/companies/energy/incitec-pivot-ceo-warns-of-38b-in-destruction-20191009-p52yw">describing the market as “dysfunctional”</a>.</p>
<h2>We can fix this mess</h2>
<p>LNG exporters have entered long-term contracts to provide defined amounts of gas to various overseas markets. When Australian gasfields do not provide enough gas to satisfy their obligations, the domestic market can suffer. Gas that could have been available to the domestic market is sold on international markets, and Australian gas users are starved of supplies. This has kept domestic prices high. </p>
<p>As more and more gas went offshore, domestic prices soared. In 2014 east coast gas prices were A$4 a gigajoule. In 2017 they spiked at <a href="https://theconversation.com/canavan-offers-to-fund-gas-exploration-but-what-do-we-get-in-return-79767">A$20 a gigajoule</a> and they are now <a href="https://www.forbes.com/sites/woodmackenzie/2019/10/15/gas-prices-are-falling-but-australias-east-coast-gas-market-shouldnt-get-too-comfortable/#2f906b806f1f">sitting at roughly A$10 a gigajoule</a>. </p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/297839/original/file-20191021-56220-1wzyi10.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/297839/original/file-20191021-56220-1wzyi10.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=388&fit=crop&dpr=1 600w, https://images.theconversation.com/files/297839/original/file-20191021-56220-1wzyi10.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=388&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/297839/original/file-20191021-56220-1wzyi10.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=388&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/297839/original/file-20191021-56220-1wzyi10.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=488&fit=crop&dpr=1 754w, https://images.theconversation.com/files/297839/original/file-20191021-56220-1wzyi10.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=488&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/297839/original/file-20191021-56220-1wzyi10.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=488&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">A kitchen gas stove burner. Consumers and industry are hurting under rising gas bills.</span>
<span class="attribution"><span class="source">Dan Peled/AAP</span></span>
</figcaption>
</figure>
<p>To alleviate concern over domestic gas supplies, there are plans to import gas back from Japan to terminals at <a href="https://www.abc.net.au/news/2018-06-04/nsws-first-lng-terminal-to-drive-down-power-prices/9832486">Port Kembla in New South Wales</a> and <a href="https://www.theage.com.au/politics/victoria/agl-delays-victorian-gas-import-hub-over-environmental-concerns-20190628-p5228a.html">Crib Point in Victoria</a>. The gas would be sourced from Asia, the US and elsewhere. These proposals are expensive and bad for the climate. They are also strategically absurd.</p>
<p>That such plans are even being contemplated shows the weakness of Australia’s regulatory measures. The existing <a href="https://www.industry.gov.au/regulations-and-standards/australian-domestic-gas-security-mechanism">Australian Domestic Gas Security Mechanism</a> allows the federal energy minister to bring in export restrictions if there are forecast gas shortages for Australian users.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/gas-prices-will-stay-historically-high-the-governments-moves-while-welcome-wont-achieve-much-121494">Gas prices will stay historically high. The government's moves, while welcome, won't achieve much</a>
</strong>
</em>
</p>
<hr>
<p>The mechanism was <a href="https://www.smh.com.au/politics/federal/malcolm-turnbull-intervenes-in-gas-market-to-tackle-surging-domestic-prices-20170426-gvsuyb.html">established by the federal government</a> with much fanfare in July 2017, but has never been used. This is largely because it is triggered by a shortfall in supply, not rising prices. </p>
<p>A much stronger mechanism, based on gas pricing, is vital. This should be overseen by a domestic board that monitors prices and acts on behalf of the public. Fair pricing could be ensured by using benchmarks set by the Australian Competition and Consumer Commission. The board would have power to enact export controls so that gas could be removed from the export market and returned to the domestic market. </p>
<p>Australia must also introduce a domestic gas reservation policy to ensure a proportion of gas is set aside for the domestic market. Such a policy has existed for a decade in Western Australia, where 15% of LNG is taken from the export market and <a href="https://www.jtsi.wa.gov.au/economic-development/economy/domestic-gas-policy">compulsorily reserved for domestic consumers</a>. This has led to a <a href="https://www.abc.net.au/news/2019-07-11/calls-for-gas-reservation-policy-to-bring-prices-down/11299032">much lower domestic price</a> in that state, where gas supplies also exceed forecast demand over the next ten years. By contrast on the east coast, shortfalls have been predicted from 2024. </p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/297843/original/file-20191021-56215-1w67322.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/297843/original/file-20191021-56215-1w67322.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=390&fit=crop&dpr=1 600w, https://images.theconversation.com/files/297843/original/file-20191021-56215-1w67322.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=390&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/297843/original/file-20191021-56215-1w67322.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=390&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/297843/original/file-20191021-56215-1w67322.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=490&fit=crop&dpr=1 754w, https://images.theconversation.com/files/297843/original/file-20191021-56215-1w67322.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=490&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/297843/original/file-20191021-56215-1w67322.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=490&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">An LNG tanker leaves the Port of Gladstone in 2016.</span>
<span class="attribution"><span class="source">Dan Peled/AAP</span></span>
</figcaption>
</figure>
<h2>Looking to the future</h2>
<p>Australia is soon expected to <a href="https://www.afr.com/companies/energy/australia-reaches-for-lng-crown-as-us200b-boom-ends-20190612-p51x06">export 80 million tonnes of gas each year</a>. Without strong regulatory change this expansion will continue to drive up domestic energy prices. </p>
<p>It will also drive up emissions. Producing LNG requires large amounts of electricity and fugitive emissions (from gas leaks, venting and equipment purging) can <a href="https://www.climatecouncil.org.au/australia-worlds-largest-gas-exporter/">occur at any stage of the gas supply chain</a>. </p>
<p>In the US, the export of LNG is regulated by laws that require exports to be in the public interest. Strong protections also exist in Canada. In Norway, Qatar, Russia, Malaysia and Algeria many LNG producers are controlled by the state to ensure a balanced approach to resource growth. </p>
<p>The rich resources of Australia belong to the public. They should only be exploited when it is firmly in our interests.</p><img src="https://counter.theconversation.com/content/125130/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Samantha Hepburn does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>If Australia is the biggest gas exporter in the world, why are we shipping it back in? Because the gas market is dysfunctional - and it means consumers are suffering.Samantha Hepburn, Professor, Deakin Law School, Deakin UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/893682017-12-20T03:29:13Z2017-12-20T03:29:13ZTurnbull has politicked himself into irrelevance on energy and climate in 2018<figure><img src="https://images.theconversation.com/files/200079/original/file-20171220-5004-14c3iro.png?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">Marcella Cheng/The Conversation</span></span></figcaption></figure><p>As we approach the end of the year, it’s useful to look back and forward. Now is an auspicious time, as two major energy-related reports have been released this week: the federal government’s review of their <a href="http://www.environment.gov.au/climate-change/review-climate-change-policies">climate change policies</a>, and a discussion paper from the Australian Energy Market Operator (AEMO) on <a href="http://www.aemo.com.au/-/media/Files/Electricity/NEM/Planning_and_Forecasting/ISP/2017/Integrated-System-Plan-Consultation.pdf">future energy paths</a>.</p>
<p>The difference between the two is striking. The AEMO paper is practical, direct and realistic. On the other hand, the climate policy review relies essentially on Australia buying <a href="https://theconversation.com/the-federal-climate-policy-review-a-recipe-for-business-as-usual-89372">lots of international carbon permits</a> to meet our Paris target (and, implicitly, on state governments taking up the challenge their Canberra colleagues have largely abanondoned). </p>
<p>It’s amusing to read a document that plays with numbers in such creative ways. But it is a fairy story, and it’s no way to drive national climate policy.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/the-federal-climate-policy-review-a-recipe-for-business-as-usual-89372">The federal Climate Policy Review: a recipe for business as usual</a>
</strong>
</em>
</p>
<hr>
<p>I almost feel as though I could just change the dates and reprint my article reviewing prospects for <a href="https://theconversation.com/2017-will-be-a-big-year-for-australias-energy-system-heres-what-to-look-out-for-71703">energy in 2017</a>:</p>
<blockquote>
<p>2017 is the year when many long-festering energy policy problems must be addressed. Our outdated energy market model is falling apart. The <a href="https://theconversation.com/heading-north-how-the-export-boom-is-shaking-up-australias-gas-market-52963">gas industry</a> is lining its pockets at the expense of Australian industry. Climate policy is urgent, but <a href="http://theconversation.com/australias-energy-sector-is-in-critical-need-of-reform-61802">controversial among key decision-makers</a>. Our <a href="http://www.afr.com/business/energy/gas/trumps-americafirst-energy-policy-looms-as-lng-threat-20170122-gtw87d">fossil fuel exports</a> are under threat from global forces.</p>
</blockquote>
<p>But things have in fact shifted a long way – the revolution is accelerating and unstoppable. The federal government is almost irrelevant; the public statements and policies it presents are simply aimed at getting “something” through the Coalition party room, or trying to throw blame on others. It’s very sad. </p>
<p>The real games are being played out within state governments; in battles between energy policy agencies and regulators; by emerging industry players who do not even have formal roles in energy legisation; and by business and the community as they defend themselves from the failures around them by implementing “behind the meter” solutions and working together.</p>
<h2>The real heavy lifters</h2>
<p>Medals of Valour should be awarded to Chief Scientist Alan Finkel, AEMO chief executive Audrey Zibelman, and South Australian Premier Jay Weatherill.</p>
<p>The government’s response to this year’s <a href="https://theconversation.com/the-finkel-review-at-a-glance-79177">Finkel Review</a> showed that <a href="https://theconversation.com/energy-solutions-but-weak-on-climate-experts-react-to-the-finkel-review-79178">no amount of compromise</a> would allow a sensible energy and climate policy to pass through the minefield of the Coalition party room. Prime Minister Malcolm Turnbull and Environment and Energy Minister Josh Frydenberg, both of whom know what they need to do, simply have too little political capital within that place to drive realistic energy policy. </p>
<p>But the Finkel Review also successfully recommended many changes that will help to fix the physical operation of the grid. Innovation and the laws of physics have finally begun to triumph over market politics and ideology. </p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/the-finkel-review-at-a-glance-79177">The Finkel Review at a glance</a>
</strong>
</em>
</p>
<hr>
<p>AEMO worked out a way to get around the glacial and obstructive tactics of the Australian Energy Market Commission on demand-side action by setting up a “pilot project” to <a href="https://www.aemo.com.au/Media-Centre/AEMO-and-ARENA-demand-response-trial-to-provide-200MW-of-emergency-reserves-for-extreme-peaks">drive demand response</a>. It has been clear for decades that this is a <a href="https://theconversation.com/turnbulls-right-we-need-cheap-clean-and-reliable-power-heres-how-71561">very cost-effective tool</a>. Zibelman has been a voice of practical reality and clear understanding of the future of energy, including the demand side, and AEMO’s <a href="http://www.aemo.com.au/-/media/Files/Electricity/NEM/Planning_and_Forecasting/ISP/2017/Integrated-System-Plan-Consultation.pdf">future energy paths</a> reflects that.</p>
<p>Weatherill has weathered a storm of abuse over his state’s innovative energy strategy. His government has shown how a diversified approach can transform an energy system in little more than a year. But he needs to put more effort into long term energy efficiency and energy productivity improvement measures integrated with renewables and storage, to reduce pressure on electricity systems over time. For example, home cooling comprises a third of South Australia’s peak electricity demand, but could be slashed by efficient buildings and cooling equipment.</p>
<h2>What lies ahead</h2>
<p>Looking forward, the coming year will be shaped by some key issues, some of which are already playing out at a frenetic pace. Consider a small sample of many recent events:</p>
<ul>
<li><p>As mentioned, AEMO has released a discussion paper framing a very different electricity future, and including a low-carbon scenario.</p></li>
<li><p>The <a href="https://theconversation.com/yes-sas-battery-is-a-massive-battery-but-it-can-do-much-more-besides-88480">new battery</a> in South Australia has delivered remarkable outcomes, helping to <a href="http://reneweconomy.com.au/tesla-big-battery-outsmarts-lumbering-coal-units-after-loy-yang-trips-70003/">stabilise the grid</a> in ways that few imagined.</p></li>
</ul>
<hr>
<p><em><strong>Read more:</strong> <a href="https://theconversation.com/yes-sas-battery-is-a-massive-battery-but-it-can-do-much-more-besides-88480">Yes, SA’s battery is a massive battery, but it can do much more besides</a></em></p>
<hr>
<ul>
<li><p>The Victorian Essential Services Commission has proposed a new “time of day” <a href="https://www.esc.vic.gov.au/document/energy/56095-minimum-feed-tariff-2/">feed-in price for rooftop solar</a> that reaches 29 cents per kilowatt-hour in afternoons and evenings. If approved, this will be a game-changer, as adding battery storage to rooftop solar will become far more attractive.</p></li>
<li><p>The Energy Networks Association, not the gas industry, has released a <a href="http://www.energynetworks.com.au/gas-vision-2050">zero emission gas strategy</a> at last.</p></li>
<li><p>The annual report on the <a href="http://www.coagenergycouncil.gov.au/sites/prod.energycouncil/files/publications/documents/NEPP%20Annual%20Report%202017-web.pdf">National Energy Productivity Plan</a> (<a href="https://theconversation.com/australias-energy-productivity-plan-promises-more-bang-for-our-buck-but-lacks-commitment-53734">remember that</a>?) shows we’re falling behind even the government’s weak target: not surprising given the miniscule resources allocated.</p></li>
</ul>
<p>Meanwhile the federal government has released <a href="http://www.smh.com.au/environment/climate-change/flaying-a-neg-modelling-points-to-an-emissions-intensity-scheme-after-all-20171121-gzqbl3.html">energy modelling</a> to underpin ongoing negotiation on the National Energy Guarantee (NEG) that is simply <a href="https://theconversation.com/energy-ministers-power-policy-pow-wow-is-still-driven-more-by-headlines-than-details-87943">irrelevant and embarrassing</a>. The Energy Security Board’s involvement in this has undermined perceptions of its independence, especially when it is contrasted with the vision AEMO is discussing in its paper.</p>
<p>While the states have agreed to continue discussion on the NEG in April, there are some major hurdles. Primarily, states must be allowed to set and achieve their own energy targets: the federal energy minister has put the blame for problems on the states, and they now have to be seen by their voters to act.</p>
<p>Second, the design must ensure it does not give the dominant energy companies even more power to distort markets. Some members of the Energy Security Board seem to understand the challenges, and are optimistic they can be overcome. Time will tell.</p>
<p>As Turnbull has <a href="http://www.huffingtonpost.com.au/2016/03/05/malcolm-turnbull-tax_n_9387400.html">said</a>, we live in exciting times.</p><img src="https://counter.theconversation.com/content/89368/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span> Alan Pears has worked for government, business, industry associations public interest groups and at universities on energy efficiency, climate response and sustainability issues since the late 1970s. He is now an honorary Senior Industry Fellow at RMIT University and a consultant, as well as an adviser to a range of industry associations and public interest groups. His investments in managed funds include firms that benefit from growth in clean energy. He has shares in Hepburn Wind.</span></em></p>At the end of 2017, Australia is starting to (slowly) address our energy problems. But it’s also clear the federal government has abdicated leadership and responsibility.Alan Pears, Senior Industry Fellow, RMIT UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/892282017-12-15T03:59:16Z2017-12-15T03:59:16ZA gas shortage next year is unlikely, but that’s the only good news<p>It’s official: Australia’s gas market is still a mess. This week, the Australian Competition and Consumer Commission (ACCC) released its <a href="https://www.accc.gov.au/system/files/Gas%20inquiry%20December%202017%20interim%20report.pdf">latest report into the gas market</a>. It was a case of “rinse and repeat” following their <a href="https://www.accc.gov.au/system/files/1074_Gas%20enquiry%20report_FA_21April.pdf">2016 inquiry</a> and <a href="https://www.accc.gov.au/system/files/Gas%20Inquiry%20-%20Interim%20Report%20-%20September%202017.pdf">September 2017 report</a>: although government intervention may have caused some slight improvements, high prices persist and the risk remains that gas-dependent companies could go out of business. </p>
<p>This week’s publication is the latest reporting step in the ACCC’s Gas Inquiry, which is due to run until 2020. The Commonwealth government ordered the <a href="https://www.accc.gov.au/system/files/Gas%20market%20transparency%20measures%20Terms%20of%20reference.pdf">inquiry</a> this year, after some gas users reported <a href="http://www.abc.net.au/news/2017-04-20/accc-to-investigate-gas-markets-lack-of-transparency/8457368?WT.mc_id=newsmail&WT.tsrc=Newsmail">prices increasing by 500%</a> and the <a href="https://www.aemo.com.au/-/media/Files/Gas/National_Planning_and_Forecasting/GSOO/2017/2017-Gas-Statement-of-Opportunities.pdf">Australian Energy Market Operator (AEMO) warned of imminent gas shortages</a>. </p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/to-avoid-crisis-the-gas-market-needs-a-steady-steer-not-an-emergency-swerve-84701">To avoid crisis, the gas market needs a steady steer, not an emergency swerve</a>
</strong>
</em>
</p>
<hr>
<p>As well as launching the inquiry, the government has spent a lot of time talking, and making deals with, the perceived culprit: the three big gas exporters. Opening up Australia’s gas market may have delivered export dollars, but it has linked Australian prices to historically higher international ones. Gas exporters are also accused of <a href="http://www.theaustralian.com.au/business/mining-energy/santos-filling-export-orders-with-domestic-gas/news-story/7698843e5cbb21ec9ef7b7fa0b2d11c1">buying up “domestic” gas for export</a>, leaving Australian consumers short and having to pay even higher prices. </p>
<p>After <a href="https://www.aemo.com.au/-/media/Files/Gas/National_Planning_and_Forecasting/GSOO/2017/2017-Gas-Statement-of-Opportunities---Update.pdf">AEMO’s September warning</a> that there might be a gas shortage during the 2017-18 summer, the government dragged the gas exporters to the negotiating table. The exporters agreed to provide “<a href="http://www.theaustralian.com.au/business/mining-energy/secure-and-affordable-gas-supply-promised-as-turnbull-strikes-deal/news-story/bfbd5db37e9013876f06495210dc151d">secure and affordable</a>” gas to make up the potential shortfall. So has the deal worked? </p>
<h2>Mixed news</h2>
<p>It has probably delivered all that could realistically have been expected. It now looks highly unlikely – although not impossible – that there will be a gas shortage in 2018. And prices appear to have come down from the ridiculous highs of earlier this year. But that’s pretty much all the good news that can been gleaned from this week’s report. </p>
<p>The problem is that although prices have fallen, they are still pretty high – averaging about A$10 a gigajoule in Victoria and South Australia. As far as the ACCC is concerned, this is still higher than they should be, and certainly a lot higher than the historical A$3 to A$4 per GJ. Any business that had got used to paying those prices is going to struggle. </p>
<p>Nor is the market working in the way it should. Some business customers can only get offers from one or two retailers, and some claim that retailers are telling them they have no gas to supply. As the ACCC says, this puts those businesses in “a difficult position in respect of their ongoing operations into 2018, potentially creating significant effects in local economies and beyond”.</p>
<p>There are also problems with transporting the gas, via the pipelines that run from Queensland to South Australia. Southern states can’t currently get enough gas from local sources, so they have to get it from Queensland. But it is becoming harder to get access to the pipelines. And when customers can get access, the transportation costs can be high: between A$2 and A$4 per GJ.</p>
<p>It is understandable that the Australian gas market is facing some difficulties. It is in transition, with producers, pipeline operators and consumers having to get used to Australia now being linked to the international market. Many commentators – <a href="https://theconversation.com/pain-and-gain-as-gas-export-boom-is-set-to-drive-up-domestic-bills-33179">myself included</a> – concluded that, although prices would go up when gas exports began from the east coast, efficient outcomes would be achieved. We were wrong. </p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/gas-crisis-why-japan-pays-less-than-australians-for-australian-gas-74438">Gas crisis? Why Japan pays less than Australians for Australian gas</a>
</strong>
</em>
</p>
<hr>
<p>Instead, the transition has exposed some underlying failings in the gas market: it is opaque, there is market concentration, and access to pipelines can be difficult and expensive. </p>
<p>These have always been issues with Australia’s gas market. But the existence of plentiful, cheap gas that was geographically close to the market effectively kept these problems hidden. Now those resources are being depleted and the failings of the market can be plainly seen. </p>
<p>To be fair to the ACCC, it tried to deal with many of these issues back in 2016. But progress has been painfully slow, with some of its recommendations – such as the creation of a transparent gas price index – disappearing into the ether.</p>
<p>The government’s handshake with the exporters has bought time and prevented an immediate plunge off the cliff. But market reforms need to be pushed through more urgently. </p>
<p>Finding a feasible, political solution to the gas bans imposed by the Victoria and NSW state governments will be tricky, but it has to be done. Anything that can release more gas for domestic users would be welcome, whether that means gauging the true extent of <a href="http://www.ga.gov.au/aera/gas">gas under Gippsland</a>, or further developing Victoria’s <a href="https://theconversation.com/memo-to-coag-australia-is-already-awash-with-gas-80960">offshore reserves</a>. </p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/memo-to-coag-australia-is-already-awash-with-gas-80960">Memo to COAG: Australia is already awash with gas</a>
</strong>
</em>
</p>
<hr>
<p>Here’s the rub: these reforms will take time. A drastic reversal in the gas market is highly unlikely. Gas prices may ease, but not in a hurry. And until they do, Australians will have to hope that all those gas-dependent businesses can keep clinging on to the top of that cliff.</p><img src="https://counter.theconversation.com/content/89228/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>David Blowers does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The government’s handshake deal with gas suppliers may have stopped the market plunging off a cliff, but it’s not doing much more.David Blowers, Energy Fellow, Grattan InstituteLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/851752017-10-05T19:05:12Z2017-10-05T19:05:12ZThe government’s new gas deal will ease the squeeze, but dodges the price issue<figure><img src="https://images.theconversation.com/files/188927/original/file-20171005-2140-liopt8.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">The government has so far refrained from putting a legal limit on LNG leaving our shores.</span> <span class="attribution"><a class="source" href="https://commons.wikimedia.org/wiki/File%3AAlto_Acrux_Departs_Darwin_in_June_2012_(7501108978).jpg">Ken Hodges/Wikimedia Commons</a>, <a class="license" href="http://creativecommons.org/licenses/by/4.0/">CC BY</a></span></figcaption></figure><p>The <a href="https://theconversation.com/price-still-up-in-the-air-as-gas-producers-sign-supply-deal-85082">deal signed this week</a> by the federal government and the nation’s biggest three gas producers will ease Australia’s gas supply squeeze, but it will do nothing to address the current high prices.</p>
<p>Under the contract, Shell, Origin and Santos have agreed to supply more domestic gas to avert the <a href="https://theconversation.com/big-gas-shortage-looming-but-government-stays-hand-on-export-controls-84610">predicted shortfall for 2018</a>. </p>
<p>In so doing, the government seemingly sidestepped the need to trigger its own powers to forcibly restrict gas exports. </p>
<p>Sighs of relief all round, then. But here’s the thing: neither the new deal, nor the legislation that governs export controls, actually addresses the issue that is arguably most important to consumers – the high prices Australians are paying for their gas. </p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/to-avoid-crisis-the-gas-market-needs-a-steady-steer-not-an-emergency-swerve-84701">To avoid crisis, the gas market needs a steady steer, not an emergency swerve</a>
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</em>
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<hr>
<p>Australia has vast gas resources, and yet somehow we find ourselves with <a href="source%20link">rising prices</a> and a forecast shortfall of <a href="https://www.aemo.com.au/-/media/Files/Gas/National_Planning_and_Forecasting/GSOO/2017/2017-Gas-Statement-of-Opportunities---Update.pdf">up to one-sixth of demand</a> in the east coast gas market in 2018.</p>
<p>This is partly understandable, given that <a href="https://www.iea.org/publications/freepublications/publication/WorldEnergyOutlook2016ExecutiveSummaryEnglish.pdf">rising global demand</a> has fuelled a lucrative export market. The primary destination is Asia, which will assume <a href="https://www.iea.org/publications/freepublications/publication/WorldEnergyOutlook2016ExecutiveSummaryEnglish.pdf">more than 70% of global demand</a>. In geographical terms this puts Australian exporters in a very strong position, and by 2019 Australia is forecast to supply 20% of the global market – up from 9% today.</p>
<p>However, the strong global demand for liquefied natural gas (LNG) does not in itself provide the full explanation for rising gas prices in Australia’s east coast gas market. This is caused by a weak regulatory environment. </p>
<h2>Policy levers</h2>
<p>The <a href="https://industry.gov.au/resource/UpstreamPetroleum/AustralianLiquefiedNaturalGas/Pages/Australian-Domestic-Gas-Security-Mechanism.aspx">Australian Domestic Gas Security Mechanism</a>, which took effect in July 2017, gives the federal resources minister the power to restrict exports of LNG in the event of a forecast shortfall for the domestic market in any given year. </p>
<p>This five-year provision was designed as a short-term measure to ensure domestic gas supply. If triggered, it would require LNG exporters either to limit their exports or to find new sources of gas to offset the impact on the domestic market.</p>
<p>To trigger the mechanism, the minister must follow three steps: </p>
<ol>
<li><p>formally declare that the forthcoming year has a domestic shortfall, by October 1 of the preceding year;</p></li>
<li><p>consult relevant market bodies, government agencies, industry bodies and other stakeholders to determine their view on the existing and forecast market conditions; and</p></li>
<li><p>make a determination by November 1 on whether to implement the measures. </p></li>
</ol>
<p>Any export restriction implemented under the ADGSM would potentially apply to all LNG exports nationwide, including those from areas with no forecast gas shortage, such as Western Australia. The minister does have the ability to determine the type of export restriction that is imposed. An unlimited volume restriction does not impose a specific volumetric limitation and can be applied to LNG projects that are not connected to the market experiencing the shortfall. A limited volume restriction imposes specific limits on the amount of LNG that may be exported and may be applied to an LNG project that is connected to the market experiencing the shortfall.</p>
<p>Non-compliance with the export limits imposed on gas projects would have a range of potential consequences for gas companies. These include revocation of export licence, imposition of different conditions, or stricter transparency requirements.</p>
<h2>The new deal</h2>
<p>The agreement signed with the big three gas producers effectively relieves the government of the need to consider triggering the ADGSM. As such, 2018 has not been officially declared to be a domestic shortfall year. </p>
<p>But the agreement is not grounded upon any specific legislative provision. Therefore it is essentially only enforceable against the gas companies that are parties to it. And in accordance with the private terms and conditions that those companies agree to. </p>
<p>The broad agreement is that contractors will sell a minimum of 54 petajoules of gas into the east coast domestic market (the lower limit of the forecast shortfall) and keep more on standby in case the eventual shortfall turns out to be bigger.</p>
<h2>But what about prices?</h2>
<p>The deal contains no specific provision regarding domestic pricing. So, although there will be more gas in the domestic market, this does not necessarily mean that the current high prices will drop.</p>
<p>In the short term, the provision of additional supply may curtail dramatic increases in domestic gas prices. However, the gas deal does not address the core problem, which stems from our enormous commitment to LNG exports and the connection of domestic gas prices to the global energy market. </p>
<p>Indeed, the commitments are so great that many LNG operators have had to take conventional gas from South Australia and Victoria to fulfil their export contracts. This has put significant pressure on domestic prices. </p>
<p>The unequivocal truth is that gas prices were much cheaper before the LNG export boom. The only way to achieve some level of protection for domestic gas prices is to implement stronger regulatory controls on the export market. This should involve taking account of the public interest when assessing whether export restrictions should be imposed. </p>
<p>The ADGSM legislation does not incorporate any explicit public interest test, despite the fact that gas is a public resource in Australia and gas pricing is a strong public interest issue. </p>
<p>Compare that with the United States, where public interest is a key principle in assessing whether to approve any LNG exports to countries with no US free trade agreement (such as Japan). Public interest tests in the United States involve a careful determination of how exports will affect domestic supply and the potential impact that a strong export market will have upon domestic prices.</p>
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Read more:
<a href="https://theconversation.com/want-to-boost-the-domestic-gas-industry-put-a-price-on-carbon-76517">Want to boost the domestic gas industry? Put a price on carbon</a>
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<p>The Australian government’s decision to broker a deal with gas suppliers, rather than extend the long arm of the law, means that regulators will need to keep a close eye on the gas companies to check that they are holding up their end of the bargain. </p>
<p>That job will fall to the <a href="https://www.accc.gov.au/">Australian Competition and Consumer Commission</a> (ACCC). ACCC chair Rod Simms this week warned gas suppliers to ensure that their “<a href="http://www.dailytelegraph.com.au/news/nsw/accc-puts-gas-companies-on-notice-as-pm-gets-gas-supply-guarantee/news-story/2241b1d9144d8a4a2ebeccef185fe873">retail margins are appropriate</a>”. </p>
<p>In the absence of any explicit rules compelling gas producers that signed the deal to provide clear and accurate information and adopt stronger transparency protocols, the ACCC may face a very onerous task.</p><img src="https://counter.theconversation.com/content/85175/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Samantha Hepburn does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>By signing an agreement with the big three producers, the government has effectively made the east coast gas shortage evaporate. But there’s no guarantee the price pain will go away too.Samantha Hepburn, Director of the Centre for Energy and Natural Resources Law, Deakin Law School, Deakin UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/847012017-09-26T20:07:05Z2017-09-26T20:07:05ZTo avoid crisis, the gas market needs a steady steer, not an emergency swerve<p>Rising gas costs are “<a href="http://www.smh.com.au/federal-politics/political-news/gas-crisis-three-times-bigger-than-thought-turnbull-says-20170925-gyo418.html">the single biggest factor in the current rise in electricity prices</a>”.</p>
<p>What is most noteworthy about this statement is not the fact that it is <a href="http://www.tai.org.au/content/gas-exports-and-latest-electricity-price-hikes-audit-electricity-update">true</a>, but that it was made by Prime Minister Malcolm Turnbull, many of whose party colleagues remain <a href="http://www.abc.net.au/news/2017-07-13/renewable-energy-killing-people-this-winter,-liberal-mp-says/8703836">convinced that renewable energy is the real bogeyman</a>.</p>
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Read more:
<a href="https://theconversation.com/big-gas-shortage-looming-but-government-stays-hand-on-export-controls-84610">Big gas shortage looming, but government stays hand on export controls</a>
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<p>Turnbull’s comments were made in response to a <a href="https://www.aemo.com.au/Gas/National-planning-and-forecasting/Gas-Statement-of-Opportunities">report released this week</a> by the Australian Energy Market Operator (AEMO), which yet again warns of impending gas shortages. </p>
<p>I argue below that renewables are a solution to the problem, rather than its cause. But first, is there actually a gas crisis?</p>
<h2>A gas crisis?</h2>
<p>Although AEMO has predicted a potential gas shortfall for the east coast, there is <a href="https://theconversation.com/we-dont-have-a-gas-shortfall-worth-worrying-about-77857">no shortage of gas</a>. Unprecedented amounts are being produced and exported as liquified natural gas (LNG) from terminals in Queensland, while at the same time the domestic market is being starved, driving prices sky-high. </p>
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Read more:
<a href="https://theconversation.com/memo-to-coag-australia-is-already-awash-with-gas-80960">Memo to COAG: Australia is already awash with gas</a>
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<p>Without government action there could indeed be a domestic shortfall next year, but the government has already set in place a system of <a href="https://industry.gov.au/resource/UpstreamPetroleum/AustralianLiquefiedNaturalGas/Pages/Australian-Domestic-Gas-Security-Mechanism.aspx">export restrictions</a> to ensure domestic supply. These restrictions have not yet been invoked, but the crisis for the government is that they may have to be, and the decision must be made before November 30.</p>
<p>Emergency export restrictions are an intervention of last resort for a governing party built on free-market principles. They are necessary because the government has failed to champion a longer-term and less interventionist strategy, such as the reservation of a certain percentage of gas produced from new gas fields for domestic use. <a href="http://www.jtsi.wa.gov.au/what-we-do/advise-on-economic-policy/domestic-gas-policy">Western Australia</a> has had a policy of 15% reservation for many years and other states are following suit.</p>
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Read more:
<a href="https://theconversation.com/our-power-grid-is-crying-out-for-capacity-but-should-we-open-the-gas-valves-72355">Our power grid is crying out for capacity, but should we open the gas valves?</a>
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<p>Not only is there plenty of gas being produced, but it would be relatively painless to divert some of it to the domestic market. AEMO notes several times in its report that producers have some flexibility in where they send their gas. In particular, a significant proportion of the exported gas is not under long-term contract but is destined for the overseas <a href="https://theconversation.com/baffled-by-baseload-dumbfounded-by-dispatchables-heres-a-glossary-of-the-energy-debate-84212">spot market</a>, where surplus energy is traded for immediate delivery. This gas could easily be diverted to the east coast market. </p>
<p>On current projections, <a href="https://www.accc.gov.au/media-release/interim-gas-report-finds-substantial-shortfall-for-east-coast-likely-in-2018">63.4 petajoules</a> of gas is destined for the spot market in 2018. To put this in context, the <a href="https://www.aemo.com.au/Gas/National-planning-and-forecasting/Gas-Statement-of-Opportunities">projected shortfall is 54PJ in 2018 and 48PJ in 2019</a>. In other words, the uncontracted gas destined for the spot market is more than enough to make up the expected shortfall.</p>
<p>Turnbull is also arguing that the potential shortage is due to state bans on gas exploration and production. However, the <a href="https://theconversation.com/memo-to-coag-australia-is-already-awash-with-gas-80960">production costs</a> associated with as-yet-untapped reserves and resources in those states are much higher than for Queensland. Thus, even in the absence of bans it would still make sense to target untapped Queensland resources first.</p>
<h2>Moving the gas south</h2>
<p>The extra gas released in Queensland for domestic use would need to be transported to the southern states by pipelines that are already close to capacity. This is a potential problem. However, it could be resolved by means of “gas swaps”. </p>
<p>Gas produced in the southern states that has been contracted for sale through the Queensland terminals could be swapped for gas released by Queensland producers for distribution to the southern states. This would avoid bottlenecks and gas transportation costs.</p>
<p>In the longer term, the problem could be solved by <a href="https://www.accc.gov.au/media-release/interim-gas-report-finds-substantial-shortfall-for-east-coast-likely-in-2018">AGL’s proposal</a> to establish a liquid natural gas (LNG) import terminal (a <a href="http://www.theaustralian.com.au/business/mining-energy/agl-gas-import-terminal-plan-draws-global-interest/news-story/0081a103d4242b7b5eac174bd7650706">regasification plant</a>) at Western Port in Victoria. </p>
<p>This facility could process LNG either from Queensland or from further afield. The terminal would have the potential to provide all of Victoria’s household and business customer gas needs. If all goes to plan, AGL will begin construction in 2019 and <a href="https://www.accc.gov.au/media-release/interim-gas-report-finds-substantial-shortfall-for-east-coast-likely-in-2018">bring the terminal into operation by 2020–21</a>.</p>
<p>Our free-market government is now firmly in interventionist mode, with gas export restrictions and plans to fund a <a href="https://theconversation.com/turnbull-unveils-snowy-plan-for-pumped-hydro-costing-billions-74686">Snowy pumped hydro scheme</a>. There is even a proposal to <a href="http://www.theaustralian.com.au/business/mining-energy/agl-gas-import-terminal-plan-draws-global-interest/news-story/0081a103d4242b7b5eac174bd7650706">subsidise</a> the continued operation of the AGL’s Liddell coal-fired power station beyond its scheduled closure in 2022. </p>
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<strong>
Read more:
<a href="https://theconversation.com/baffled-by-baseload-dumbfounded-by-dispatchables-heres-a-glossary-of-the-energy-debate-84212">Baffled by baseload? Dumbfounded by dispatchables?
Here's a glossary of the energy debate</a>
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<p>But rather than continuing to badger AGL about keeping Liddell open, the government would be wiser to press the firm to bring its regasification plant online as soon as possible. Not only does it make economic sense, but it is greatly preferable from an environmental point of view.</p>
<h2>The renewables solution</h2>
<p>Another way to deal with the predicted gas shortfall is to reduce demand. According to <a href="https://www.aemo.com.au/Gas/National-planning-and-forecasting/Gas-Statement-of-Opportunities">AEMO figures</a>, gas-powered electricity generation in 2018 is expected to require 176PJ of gas, dropping to 135PJ in 2019. The lower demand in 2019 is due to increased renewable energy generation, as well as increased consumer energy efficiency. </p>
<p>Recalling that the shortfall in gas for 2018 is 48PJ, it is apparent that this shortfall would be wiped out by a 30% reduction in gas used for gas-fired power generation. <a href="http://www.environment.gov.au/system/files/resources/1d6b0464-6162-4223-ac08-3395a6b1c7fa/files/electricity-market-review-final-report.pdf">Based on 2016 figures</a>, that would require an increase of roughly 30% in power generation from renewables. </p>
<p>Given the relatively short time it now takes to build new renewable generators, this is a very promising path. Coupled with <a href="https://theconversation.com/explainer-what-can-teslas-giant-south-australian-battery-achieve-80738">battery storage</a> or <a href="https://theconversation.com/want-energy-storage-here-are-22-000-sites-for-pumped-hydro-across-australia-84275">pumped hydro</a>, these new generators would provide dispatchable power exactly as gas does. All that is required is for the government to implement the right policy settings.</p>
<p>Finally, state government policies may already be taking us in this direction. The Queensland government recently announced a <a href="https://www.dews.qld.gov.au/electricity/powering-queensland-plan">major program of incentives</a> for solar power. This will significantly increase renewable power generation and dampen the demand for gas-fired power. AEMO notes this development but states explicitly that this has not been taken into account in its projections.</p>
<p>For whatever reason, AEMO’s final conclusion is not as gloomy as its analysis might suggest. It states that the gas situation in eastern and south eastern Australia “is expected to remain tight”. Rather than calling for action, it considers that the situation “warrants continued close attention and monitoring”. Amid all the talk of impending crisis, what we need is steady pressure on the steering wheel, rather than a sharp swerve.</p><img src="https://counter.theconversation.com/content/84701/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Andrew Hopkins does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Prime Minister Malcolm Turnbull has blamed gas exports for rising energy costs, breaking with a party room determined to find renewables guilty.Andrew Hopkins, Emeritus Professor of Sociology, Australian National UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/781732017-05-24T20:17:19Z2017-05-24T20:17:19ZManaging demand can save two power stations’ worth of energy at peak times<p>The management of Australia’s looming energy crisis has so far focused almost exclusively on the supply side of the equation: <a href="https://theconversation.com/the-solution-to-australias-gas-crisis-is-not-more-gas-63443">exploiting new gas reserves</a>, expanding the <a href="https://theconversation.com/turnbull-unveils-snowy-plan-for-pumped-hydro-costing-billions-74686">Snowy Mountains hydro scheme</a>, and <a href="http://www.theaustralian.com.au/business/mining-energy/libs-looking-to-asia-to-build-new-coalfired-power-station-in-north/news-story/3eb3b84db35f98e8821c146e4091e575">building new infrastructure</a>. </p>
<p>Meanwhile, the huge potential of improving efficiency and demand management, which could save vast amounts of energy, has largely been ignored. </p>
<p>One promising development is the recent announcement of a trial of <a href="http://www.joshfrydenberg.com.au/guest/mediaReleasesDetails.aspx?id=358">demand response incentives</a> in Victoria and South Australia.</p>
<p>Next summer, households and businesses who sign up for the trial will be paid when they agree to be on standby to reduce their energy use during times of increased peak demand or natural disaster. They’ll be paid again if their electricity is actually reduced.</p>
<p>ClimateWorks Australia’s research shows that initiatives to better manage energy use could reduce <a href="http://climateworks.com.au/sites/default/files/documents/publications/climateworks_industrial_demand_side_response_potential_feb2014.pdf">peak demand on the national grid</a> by more than 10% – or 3.8 gigawatts – the output of two Hazelwood power stations over peak times.</p>
<p>Harnessing the huge demand-side opportunities is critical to addressing the “energy trilemma”: ensuring energy security and affordability, while reducing emissions.</p>
<h2>Ensuring security</h2>
<p>Our electricity market struggles to handle energy demand in times of extreme stress, as we saw in the recent <a href="http://www.abc.net.au/news/2017-02-09/australia-south-and-east-sweltering-through-heatwave/8254302">South Australian and New South Wales heatwaves</a>. And the Australian energy market operator has forecast little change in <a href="http://forecasting.aemo.com.au/">overall or peak electricity demand</a> over the next few years.</p>
<p>Demand response measures can reduce blackouts by significantly easing peak demand on these extreme days. For example, companies could be incentivised to turn off non-essential power during peak periods, freeing up more electricity for households, hospitals and emergency services.</p>
<p>This already occurs in Western Australia, where the electricity market regulator operates a “<a href="http://www.aemo.com.au/Electricity/Wholesale-Electricity-Market-WEM/Reserve-capacity-mechanism">capacity market</a>” allowing businesses to be paid to reduce or shift their electricity use out of peak times.</p>
<p>ClimateWorks’ research into the industrial sector found that demand response measures could reduce commercial electricity demand on Australia’s east coast <a href="http://climateworks.com.au/sites/default/files/documents/publications/climateworks_industrial_demand_side_response_potential_feb2014.pdf">by as much as 42% during peak periods</a>, which would reduce the overall peak demand by 10%.</p>
<p>Mechanisms to unlock this potential could improve Australia’s energy security considerably, while avoiding building costly infrastructure that may only be needed on a handful of days a year.</p>
<h2>Energy affordability</h2>
<p>At the same time, we also need to ramp up energy efficiency measures to reduce the cost of energy for households and business. ClimateWorks’ modelling, as part of the <a href="http://www.climateworksaustralia.org/project/national-projects/pathways-deep-decarbonisation-2050-how-australia-can-prosper-low-carbon">Pathways to Deep Decarbonisation in 2050</a> report, shows that Australia can potentially halve the amount of final energy it uses per dollar of GDP by 2050.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/170739/original/file-20170524-25592-177p25u.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/170739/original/file-20170524-25592-177p25u.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/170739/original/file-20170524-25592-177p25u.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=295&fit=crop&dpr=1 600w, https://images.theconversation.com/files/170739/original/file-20170524-25592-177p25u.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=295&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/170739/original/file-20170524-25592-177p25u.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=295&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/170739/original/file-20170524-25592-177p25u.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=371&fit=crop&dpr=1 754w, https://images.theconversation.com/files/170739/original/file-20170524-25592-177p25u.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=371&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/170739/original/file-20170524-25592-177p25u.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=371&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<span class="caption">ClimateWorks modelling shows the cost of making houses more energy efficient is offset by the money saved on energy and transport.</span>
<span class="attribution"><a class="source" href="http://deepdecarbonization.org/wp-content/uploads/2016/02/DDPP_SupplementaryMaterial.pdf">ClimateWorks Australia, Pathways to Deep Decarbonisation Report</a></span>
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<p>We won’t see single new technology or policy acting as a silver bullet. Instead, there are many different ways to improve our energy efficiency. Our research shows if all these opportunities are pursued, household net energy costs could be <a href="http://deepdecarbonization.org/wp-content/uploads/2016/02/DDPP_SupplementaryMaterial.pdf">decreased by around 15% by 2030</a> (after taking into account capital costs). </p>
<p>If we used these savings to offset the cost of decarbonising the electricity sector and transitioning away from gas, household energy bills would still be reduced by about 8% by 2030. </p>
<p>There are huge savings to be made in industry as well, especially as gas prices continue to rise. We’ve identified a broad range of cost-effective efficiency options, and calculated that companies most exposed to energy prices could <a href="http://www.climateworksaustralia.org/sites/default/files/documents/publications/climateworks_doi_emcc_final.pdf">improve their overall performance by at least 5%</a> if they adopted best-practice energy improvements. </p>
<p>But many of these opportunities are unlikely to be taken up under current policy and market settings. Our research shows that in particular, companies face <a href="http://www.climateworksaustralia.org/sites/default/files/documents/publications/climateworks_trackingprogress_special_report_full_report_july2013.pdf">significant financial barriers</a>, such as the payback period and the opportunity cost of the investment, or the availability of internal capital.</p>
<p>Electric vehicles, which use <a href="http://climateworks.com.au/sites/default/files/documents/publications/climateworks_pdd2050_technicalreport_20140923.pdf">less energy than traditional petrol cars</a>, are another key component of cheaper – and more secure – power. <a href="http://www.energynetworks.com.au/electricity-network-transformation-roadmap">Research from CSIRO</a> argues that increased uptake of electric vehicles, combined with a proactive <a href="https://theconversation.com/the-infrastructure-australia-needs-to-make-electric-cars-viable-40368">development of charging infrastructure</a>, could deliver energy system cost savings large enough to offset the cost of decarbonising Australia’s electricity generation. </p>
<h2>Reducing emissions</h2>
<p>Energy use accounts for more than 65% of Australia’s greenhouse gas emissions; reducing energy use is a vital aspect of achieving our emissions reduction goals.</p>
<p>Our research shows that pursuing multiple avenues to energy efficiency could diminish our emissions by <a href="http://climateworks.com.au/story/media-release/australia-can-reduce-emissions-50-cent-2030">130 million tonnes of carbon dioxide equivalent by 2030</a>. </p>
<p>That’s nearly half the reduction required to meet the government’s <a href="http://www.environment.gov.au/climate-change/publications/factsheet-australias-2030-climate-change-target">emissions reduction target</a>, and one third of the reductions required to meet the Climate Change Authority’s <a href="http://climatechangeauthority.gov.au/chapter-11-recommended-emissions-reduction-goals-australia">recommended emissions trajectory</a>.</p>
<p>On top of this, increased adoption of electric vehicles could deliver about 9 million tonnes of carbon dioxide equivalent of abatement by 2030, while better using our energy capacity. Finally, demand-side measures can also support increasing renewable energy, reducing emissions by an additional 125 million tonnes of carbon dioxide equivalent by 2030.</p>
<p>Policy makers need to ensure that the transformation of our energy system includes moving to renewable energy supply <em>and</em> managing demand. </p>
<p>If we improve energy efficiency, better manage commercial and domestic demand and actively encourage electric vehicles, we can avoid serious increases in energy prices, avoid building largely unproductive infrastructure and and address dangerous climate change.</p>
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<p><em>This article was updated on May 25. The original version incorrectly gave potential emissions reductions figures of 130, 9 and 125 metric tonnes of carbon dioxide equivalent respectively; in each case ‘metric’ should have read ‘million’.</em></p><img src="https://counter.theconversation.com/content/78173/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Amandine Denis receives funding from the Department of Industry for research on energy efficiency and demand-side response.</span></em></p>Better energy management could reduce peak demand by the equivalent of two Hazelwood power stations. It’s time to get serious about demand response solutions to our energy crisis.Amandine Denis-Ryan, Head of Research, ClimateWorks Australia, Monash UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/778632017-05-21T20:10:21Z2017-05-21T20:10:21ZPoliticians: please ease off on ‘announceables’ until after the electricity market review<figure><img src="https://images.theconversation.com/files/170068/original/file-20170519-12254-c3w5l8.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Current political intervention in the energy market is haphazard and disconnected. </span> <span class="attribution"><a class="source" href="https://www.flickr.com/photos/chriscrowder/12350135075/">chriscrowder_4/Flickr</a>, <a class="license" href="http://creativecommons.org/licenses/by-nc-sa/4.0/">CC BY-NC-SA</a></span></figcaption></figure><p>A series of dramatic events over the past year, most notably the September <a href="https://theconversation.com/what-caused-south-australias-state-wide-blackout-66268">statewide blackout in South Australia</a>, have revealed an electricity system under strain, and left many Australians worried about the reliability of their power supply.</p>
<p>In response, state and federal politicians have announced a series of uncoordinated and potentially expensive interventions, most notably the Turnbull government’s <a href="http://www.smh.com.au/federal-politics/political-news/snowy-hydro-20-malcolm-turnbull-announces-plans-for-2-billion-expansion-20170315-guyozj.html">Snowy Hydro 2.0</a> proposal and the South Australian government’s <a href="http://ourenergyplan.sa.gov.au/">go-it-alone power plan</a>. </p>
<p>Yet all of these plans pre-empt the <a href="http://www.environment.gov.au/energy/national-electricity-market-review">Finkel Review</a>, to be released early next month. Commissioned by state and federal governments and led by Australia’s chief scientist Alan Finkel, the review is expected to provide a new blueprint for the National Electricity Market (NEM).</p>
<p>Clearly, Australia is struggling to manage the transition to a zero- or low-emission electricity grid, and some commentators have concluded that <a href="http://www.afr.com/opinion/columnists/laura-tingle/malcolm-turnbull-needs-to-show-he-can-fix-broken-energy-market-20170316-guzmwh">the NEM is broken</a>. </p>
<p>In our report <a href="https://grattan.edu.au/report/powering-through/">Powering Through</a>, released today, we argue that it is too early to give up on the market. But what we really need is substantial market reforms, rather than piecemeal government investments in various energy projects.</p>
<h2>Australia’s troubled transition</h2>
<p>The problems are everywhere. Consumers have been hit with a <a href="https://grattan.edu.au/report/price-shock/">70% hike in real-terms electricity bills over the past decade</a>, and there is more to come. Wholesale prices for electricity in most eastern states were <a href="https://www.aer.gov.au/wholesale-markets/wholesale-statistics/quarterly-volume-weighted-average-spot-prices">twice as high last summer</a> as the one before. </p>
<p>New vulnerabilities continue to emerge. The headline-grabber was South Australia’s blackout – the first statewide blackout since the NEM was formed in 1998 – but there have been other smaller blackouts and incidents too. </p>
<p>Poisonous politics means Australia is also <a href="https://grattan.edu.au/report/climate-phoenix-a-sustainable-australian-climate-policy/">failing to stay on track to hit its 2030 climate targets</a>. The <a href="https://theconversation.com/turnbull-government-rules-out-an-emissions-intensity-scheme-70039">mixed messages</a> on climate policy; the seemingly ad hoc public investment announcements; the threat of direct intervention in the activities of the <a href="https://www.aemo.com.au/">market operator</a> – all of this has created <a href="https://theconversation.com/australias-biggest-emitters-opt-to-wait-and-see-over-emissions-reduction-fund-77160">enormous uncertainty for private investors</a>. </p>
<p>Meanwhile, the clock is ticking: Australia has enough electricity generation capacity for now, but <a href="can%20we%20link%20to%20relevant%20demand%20projection%20here?">more will be needed in the decade ahead</a>.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/170070/original/file-20170519-12242-1v0tt1t.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/170070/original/file-20170519-12242-1v0tt1t.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/170070/original/file-20170519-12242-1v0tt1t.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=450&fit=crop&dpr=1 600w, https://images.theconversation.com/files/170070/original/file-20170519-12242-1v0tt1t.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=450&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/170070/original/file-20170519-12242-1v0tt1t.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=450&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/170070/original/file-20170519-12242-1v0tt1t.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=566&fit=crop&dpr=1 754w, https://images.theconversation.com/files/170070/original/file-20170519-12242-1v0tt1t.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=566&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/170070/original/file-20170519-12242-1v0tt1t.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=566&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">The energy market is in a difficult transition.</span>
<span class="attribution"><a class="source" href="https://www.flickr.com/photos/klangbug/482848561/">georg_neu/Flickr</a>, <a class="license" href="http://creativecommons.org/licenses/by-nc/4.0/">CC BY-NC</a></span>
</figcaption>
</figure>
<h2>First, do no harm</h2>
<p>There is currently an acute danger of politicians panicking and rushing into decisions that will only push electricity prices higher, and make the task of reducing Australia’s emissions harder.</p>
<p>Already, federal and state governments are committing taxpayers’ money to <a href="https://theconversation.com/with-gas-and-hydro-plans-the-government-is-looking-at-the-whole-picture-76976">new energy investments</a>. This is premature, with the Finkel Review’s recommendations not yet released. Stampeding white elephants loom ominously on the horizon. </p>
<p>Given the current uncertainties, it is vital not to grasp for expensive “solutions” or to lock in plans too soon. We do not yet know what technology mix will be needed in the future. Maintaining flexibility through the transition will ensure we can take advantage of the best solutions as they emerge.</p>
<h2>‘No regrets’ short-term reforms</h2>
<p>There are some “no regrets” moves that can and should be made, to address the short-term risks to the electricity system and buy time to resolve the longer-term ones. Australia should build on existing low-cost mechanisms before making major capital investments or redesigning the market.</p>
<p>The immediate challenge is to reduce the risk of blackouts next summer, in South Australia and Victoria especially. Most blackouts happen because something in the system breaks. Some simple changes to the market rules, <a href="http://www.theage.com.au/business/energy/businesses-households-to-be-paid-to-use-less-electricity-next-summer-20170518-gw840k.html">like the recent AEMO and ARENA announcement to pay consumers to cut their electricity use</a>, would make a big difference to managing equipment failures when they inevitably arise. </p>
<p>To ensure reserves are on hand, some mothballed generators should be recalled to service. Pleasingly, Origin Energy and Engie have already <a href="http://www.afr.com/business/energy/electricity/origin-energy-to-provide-gas-to-pelican-point-plant-in-sa-20170328-gv8nau">struck a deal</a> to enable the restart of the second turbine of the Pelican Point generator in South Australia. </p>
<h2>The longer-term task</h2>
<p>The cheapest and most effective way to reduce long-term risks is to rebuild investor confidence. That requires Australia to agree, finally, on a credible climate policy. A carbon price is the best such policy, but any bipartisan policy that works with the electricity market and is capable of hitting Australia’s emissions targets will be a vast improvement on what we have now. </p>
<p>The transition to a zero-emissions electricity sector will be difficult. Even given a credible climate policy, there are still questions as to whether the current electricity market will be able to meet our future needs. And that’s without even mentioning the gas market, which is <a href="https://theconversation.com/the-australian-gas-market-enters-the-red-zone-as-predicted-74314">frankly a mess</a>. </p>
<p>Politicians should begin by adopting pragmatic market reforms and giving clear direction on climate and energy policy. At the very least, they should wait until Finkel delivers his recommendations. </p>
<p>Hopefully the Finkel Review will define Australia’s energy security and emissions reduction needs, and provide a strong platform for politicians to work from. If so, a competitive market will find the cheapest path to a reliable and low-emissions electricity future. </p>
<p>The danger is that partisan politics will make the best policies untenable. If that happens, we can expect the blame to be shifted onto the market, which will be described as having “failed” – but the truth is that it will have been systematically (if not quite intentionally) destroyed.</p>
<p>More likely still is that governments give up on the market without giving it a chance. Scott Morrison’s budget promise of new <a href="https://theconversation.com/budget-2017-government-goes-hard-on-gas-and-hydro-in-bid-for-energy-security-77398">federally owned power generation</a> set a worrying precedent. If recent announcements deter private investors, still more government investment will be needed, which will shift yet more risk and cost onto taxpayers.</p>
<p>There’s a real danger of politicians focusing on “announceables” and shying away from the market reforms that will make the biggest difference to the affordability, reliability and sustainability of our electricity supply.</p><img src="https://counter.theconversation.com/content/77863/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>The authors do not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The energy security crisis has politicians leaping to unveil various schemes. But we don’t need piecemeal action – the Finkel review, due in June, aims to create a coherent new energy blueprint.David Blowers, Energy Fellow, Grattan InstituteKate Griffiths, Associate, Grattan InstituteLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/778572017-05-18T04:17:41Z2017-05-18T04:17:41ZWe don’t have a gas shortfall worth worrying about<p>Australia was warned earlier this year that a shortage of gas could create an energy crisis. A report from the <a href="https://www.aemo.com.au/Gas/National-planning-and-forecasting/Gas-Statement-of-Opportunities">Australian Energy Market Operator</a> (AEMO) suggested a shortfall could occur in 3 of the next 13 years.</p>
<p>This report was <a href="http://www.abc.net.au/news/2017-03-09/looming-gas-shortage-%20will-threaten-nations-power-supplies/8337204">widely reported</a> in the national media, with sensational headlines like “<a href="http://at.theaustralian.com.au/link/7698843e5cbb21ec9ef7b7fa0b2d11c1?domain=theaustralian.com.au">AEMO warns of blackouts as gas runs out</a>”.</p>
<p>A couple of weeks ago, in a dramatic intervention, Prime Minister Malcolm Turnbull declared that there was a shortage of gas supplies for eastern Australia and that <a href="https://theconversation.com/gas-export-restrictions-imposed-to-ensure-domestic-supply-76740">certain restrictions</a> may be placed on gas exports. </p>
<p>But do we really need “<a href="http://www.abc.net.au/am/content/2016/s4632879.htm">more gas supply and more gas suppliers</a>”? In a report published <a href="http://climate-energy-college.org/short-lived-gas-shortfall">today</a>, my colleague <a href="https://theconversation.com/profiles/tim-forcey-104740">Tim Forcey</a> and I review AEMO’s initial report and its results and recommendations. Our work finds there is a shortage of “cheap” gas, but not a gas supply “shortfall”. Moreover, high gas prices combined with falling renewable and storage costs mean that there are cheaper options than developing new gas resources.</p>
<h2>What gas shortfall?</h2>
<figure class="align-right zoomable">
<a href="https://images.theconversation.com/files/169757/original/file-20170517-6030-1j6gziq.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/169757/original/file-20170517-6030-1j6gziq.png?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/169757/original/file-20170517-6030-1j6gziq.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=913&fit=crop&dpr=1 600w, https://images.theconversation.com/files/169757/original/file-20170517-6030-1j6gziq.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=913&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/169757/original/file-20170517-6030-1j6gziq.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=913&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/169757/original/file-20170517-6030-1j6gziq.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=1147&fit=crop&dpr=1 754w, https://images.theconversation.com/files/169757/original/file-20170517-6030-1j6gziq.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=1147&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/169757/original/file-20170517-6030-1j6gziq.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=1147&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">AEMO forecast of electricity generated by fuel source, showing AEMO’s forecast supply gap as a thin red line at the top of the stack.</span>
<span class="attribution"><span class="source">Author</span></span>
</figcaption>
</figure>
<p>The AEMO report suggests that eastern Australia face a shortfall in 3 of the next 13 financial years – 2018-19, 2020-21 and 2021-22. The largest gap modelled by AEMO is equal to only 0.19% of the annual electricity supply, or 363 gigawatt hours.</p>
<p>In gas supply terms, this is equivalent to only 0.2% of the annual gas supply. But AEMO’s modelling considers a range of possible scenarios, with a variation of roughly plus or minus 5%, far larger than the possible shortfall.</p>
<p>Just 11 days after the report warning of a supply gap, AEMO published <a href="https://www.aemo.com.au/Electricity/National-Electricity-Market-NEM/Planning-and-forecasting/National-Electricity-Forecasting-Report">updated electricity demand forecasts</a>. In this update, AEMO reduced its forecast electricity demand by roughly 1%. This reduction in demand is more than four times greater than the largest forecast shortfall. </p>
<p>A day later, Shell announced it would proceed with <a href="https://www.i-q.net.au/main/project-ruby-to-see-161-well-push-in-surat-basin">Project Ruby</a>, a gas field with 161 new wells. This was not included in the AEMO modelling process. </p>
<h2>Alternatives to gas</h2>
<p>Gas has historically been characterised as a <a href="https://theconversation.com/ipcc-changes-its-tune-on-gas-as-way-to-mitigate-climate-change-25635">transition fuel</a> on the pathway to a zero-emissions power system. The falling costs of renewable energy and storage technologies combined with rising gas costs means this pathway and may indeed be a detour, particularly when taking into account Australia’s climate commitments.</p>
<p>This is also a sentiment increasingly reflected by the industry, with gas producer <a href="http://www.asx.com.au/asxpdf/20170502/pdf/43hyq45t7r3mps.pdf">AGL suggesting</a> that:</p>
<blockquote>
<p>the National Electricity Market […] here in Australia could transition
directly from being dominated by coal-fired baseload to being dominated by storable renewables.</p>
</blockquote>
<p>Gas generation generally falls into two categories: open cycle gas turbines (OCGT) and combined cycle gas turbines (CCGT). These two technologies effectively play different roles in the energy sector. Open cycle turbines are highly flexible, and are used occasionally over the year to provide peak capacity. Combined cycle turbines, on the other hand, operate continuously and provide large amounts of energy over a year. </p>
<p>Each of these technologies is now under competitive threat from renewable generation and storage. Flexible capacity can also be provided by energy storage technologies, while bulk energy can be provided by renewable energy. These are compared below.</p>
<h2>Energy: renewables vs gas</h2>
<p>The chart below compares the cost of providing bulk energy with gas and renewable technologies. We’ve represented the price of new CCGT, PV (which stands for <a href="https://theconversation.com/explainer-what-is-photovoltaic-solar-energy-12924">photovoltic solar</a>) and wind as the cost of providing energy over the lifetime of the plant. </p>
<p>The other two gas generation costs illustrated, CCGT and Steam, represent the cost of energy from existing plants, at their respective thermal efficiencies. The steam thermal efficiency is similar to that of a highly flexible open cycle gas turbine.</p>
<p>Surprisingly – and depending somewhat on gas price and capital cost assumptions – <em>new</em> renewable energy projects provide cheaper energy than <em>existing</em> gas generators. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/169760/original/file-20170517-2399-oylfli.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/169760/original/file-20170517-2399-oylfli.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/169760/original/file-20170517-2399-oylfli.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=385&fit=crop&dpr=1 600w, https://images.theconversation.com/files/169760/original/file-20170517-2399-oylfli.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=385&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/169760/original/file-20170517-2399-oylfli.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=385&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/169760/original/file-20170517-2399-oylfli.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=484&fit=crop&dpr=1 754w, https://images.theconversation.com/files/169760/original/file-20170517-2399-oylfli.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=484&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/169760/original/file-20170517-2399-oylfli.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=484&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Comparison of energy cost from new and existing gas with new renewable energy generation. The range of solar (PV) and wind costs reflect different capital cost assumptions, while the range of gas costs reflects gas price assumptions. CCGT refers to Combined Cycle Gas Turbine.</span>
<span class="attribution"><span class="source">Author</span></span>
</figcaption>
</figure>
<h2>Flexible capacity: storage vs gas</h2>
<p>The next chart compares the cost of providing flexible capacity from gas and storage technologies (again, taking the cost over the lifetime of the plant). </p>
<p>In this analysis we compare the cost of capacity from OCGT with that from diesel and various storage technologies, including battery and Pumped Hydro Energy Storage (PHES). As can be seen, storage technologies can compete with OCGT in providing flexible capacity, depending on technology and capital cost. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/169761/original/file-20170517-24725-7uvhdg.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/169761/original/file-20170517-24725-7uvhdg.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/169761/original/file-20170517-24725-7uvhdg.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=369&fit=crop&dpr=1 600w, https://images.theconversation.com/files/169761/original/file-20170517-24725-7uvhdg.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=369&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/169761/original/file-20170517-24725-7uvhdg.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=369&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/169761/original/file-20170517-24725-7uvhdg.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=463&fit=crop&dpr=1 754w, https://images.theconversation.com/files/169761/original/file-20170517-24725-7uvhdg.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=463&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/169761/original/file-20170517-24725-7uvhdg.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=463&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Comparison of flexible capacity cost from gas (OCGT), diesel and storage technologies generation, including battery and Pumped Hydro Energy Storage (PHES) . The range of costs reflect different capital cost assumptions.</span>
<span class="attribution"><span class="source">Author</span></span>
</figcaption>
</figure>
<p>Another option, not shown here, is demand response. This is the strategy of giving consumers incentives to reduce their energy use during critical times, and is cheaper again. </p>
<p>What is clear is AEMO’s forecast gas shortfall is very small, and that it may have already been made up by revised demand forecasts and new gas field developments. But the question of how Australia should deal with any future shortfall invites a larger debate, including the role of gas in our electricity system, and whether the falling costs of renewable energy and storage technology mean we’ve outgrown gas.</p>
<p><br></p>
<hr>
<p><em><a href="http://climate-energy-college.org/short-lived-gas-shortfall">The short-lived gas shortfall: A review of AEMOs warning of gas-supply ‘shortfalls’</a> was prepared by Tim Forcey and Dylan McConnell.</em></p><img src="https://counter.theconversation.com/content/77857/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Dylan McConnell has received funding from the AEMC's Consumer Advocacy Panel and Energy Consumers Australia.</span></em></p>Earlier this year Australia’s energy market operator warned of a gas shortage, sparking fears of an energy crisis. But new research shows the projected shortfall is so small, it may already be closed.Dylan McConnell, Researcher at the Australian German Climate and Energy College, The University of MelbourneLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/773982017-05-09T11:45:28Z2017-05-09T11:45:28ZBudget 2017: government goes hard on gas and hydro in bid for energy security<figure><img src="https://images.theconversation.com/files/168585/original/file-20170509-11008-rrdcn2.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Gas infrastructure and exploration attracted the lion's share of new energy announcements in the 2017 federal budget</span> <span class="attribution"><span class="source">Sean Heatley/Shutterstock.com</span></span></figcaption></figure><p>The budget contains several measures designed to boost energy security, including:</p>
<ul>
<li><p>A$90 million to expand gas supplies, partly through increased unconventional gas exploration</p></li>
<li><p>a potential Commonwealth buyout of an expanded Snowy Hydro scheme</p></li>
<li><p>up to A$110 million for a solar thermal plant at Port Augusta</p></li>
<li><p>monitoring of gas and electricity prices by the Australian Competition and Consumer Commission.</p></li>
</ul>
<p>Below, our experts react to the measures.</p>
<h2>Gas price problem far from solved</h2>
<p><strong>Roger Dargaville, Deputy Director, Melbourne Energy Institute, University of Melbourne</strong></p>
<p>The budget contains a broad range of funding in energy-related areas, with a significant focus on gas resources, making A$78 million available for onshore unconventional gas exploration and reform in the gas markets, and A$7 million for studies into new gas pipelines to South Australia, from both Western Australia and the Northern Territory. </p>
<p>Interestingly, there is A$110 million in equity available (but not guaranteed) for a solar thermal plant in Port Augusta. And most notably, the government has proposed purchasing the Snowy Hydro Scheme from the New South Wales and Victorian governments, ensuring that the scheme stays in public hands. </p>
<p>The budget also includes A$13 million for CSIRO to improve energy forecasting tools, and A$8 million for the ACCC to investigate consumer energy pricing issues. </p>
<p>Overall, the budget highlights the government’s desire to do something about gas prices, but offers little to make a significant difference to a very difficult problem. Gas market reform and new pipelines are unlikely to reduce the exposure of the domestic market to price rises driven by international exports. </p>
<p>Importantly, there is little new funding in the budget directly relating to reducing carbon emissions and meeting the pledges made in the Paris Agreement (a 26-28% emission reduction relative to 2005 levels by 2030). Also noteworthy is the fact that funding for the carbon capture and storage flagship ceases in 2018-19.</p>
<h2>‘On energy this budget is small fry’</h2>
<p><strong>Tony Wood, Energy Program Director, Grattan Institute</strong></p>
<p>The budget does little more on energy than endorse the government’s <a href="https://theconversation.com/company-tax-compromise-is-limited-but-works-for-both-turnbull-and-xenophon-75564">deal with Senator Nick Xenophon on corporate tax cuts</a>, complemented by modest commitments to energy security, more gas and better regulation.</p>
<p>Government facilitation of gas development and beefing up the energy capability of the Australian Energy Regulator and the ACCC are simple logic, and the one- off payment to pensioners to help with electricity bills will be welcomed by them.</p>
<p>Major public funding for further feasibility studies is a little more questionable. If the gas crisis can’t galvanise support from pipeline companies and gas consumers for pipelines, why would governments reach a different conclusion?</p>
<p>And finally, one can only speculate as to why the federal government is contemplating buying out the NSW and Victorian governments’ share of Snowy Hydro. Presumably it is because the feds are concerned about securing support for the proposed expansion. </p>
<p>In summary, on energy this budget is small fry ahead of major policy decisions that rest on the forthcoming <a href="https://theconversation.com/chief-scientists-report-lays-a-solid-foundation-for-reforming-australias-electricity-network-70268">Finkel Review</a> of the National Electricity Market next month, and the climate change policy review later in the year.</p>
<h2>A step towards radical energy reform?</h2>
<p><strong>Hugh Saddler, Honorary Associate Professor, Centre for Climate Economics and Policy, Australian National University</strong></p>
<p>Few announcements in the budget speech are more emblematic of complete policy reversal than the announcement that the Commonwealth would buy the shareholdings in Snowy Hydro Limited of the governments of NSW (58%) and Victoria (29%), to add to the 13% currently owned by the Commonwealth. This comes almost exactly 11 years after Prime Minister John Howard, responding to vociferous public opposition, pulled the plug on plans by all three governments for a public float of their entire shareholdings. What is more, Treasurer Scott Morrison has now announced that, once owned by the Commonwealth, Snowy Hydro would remain in public ownership.</p>
<p>This announcement of course accompanies the government’s <a href="https://theconversation.com/turnbull-unveils-snowy-plan-for-pumped-hydro-costing-billions-74686">Snowy 2.0 proposal</a>, for a fivefold increase in the Snowy scheme’s current 500 megawatt pumped storage capacity (at Talbingo). This was used, after commissioning in 1974, to allow inflexible coal fired power stations to operate with constant output levels day and night, but is now almost never used. This presumably reflects commercial decisions by Snowy Hydro, as it trades in the National Electricity Market. </p>
<p>The rationale for Snowy Hydro 2.0 is to facilitate operation of a grid with a high share of renewable generation, by smoothing out variations in wind and solar supply. Does this announcement mean that the government envisages moving away from a strictly commercial approach to using the assets of the Snowy scheme? Is this a first step towards radical restructuring, or even dismantling, of the <a href="https://theconversation.com/australias-electricity-market-is-not-agile-and-innovative-enough-to-keep-up-72870">National Electricity Market</a>?</p>
<h2>Stronger legislation needed</h2>
<p><strong>Alan Pears, Senior Industry Fellow, RMIT University</strong></p>
<p>The detailed A$265 million energy package includes a number of useful measures to strengthen the weak regulatory culture of the energy sector that has allowed our energy crisis to evolve. But it is still limited: strong legislative reform and active support of emerging competitors will also be needed. It is a modest investment compared with recent multibillion-dollar energy cost increases. If it is successful, it will deliver vary large net benefits to the economy by limiting energy price increases. Unfortunately, past efforts to fix the energy situation have largely failed to deliver real outcomes: we need clear objectives for outcomes, and a mechanism to implement contingency strategies if they are not achieved. </p>
<p>In a context of increasing urgency for stronger action on climate, and the reality that the global “burnable carbon” budget is very limited, investment to encourage more gas development seems misplaced. More emphasis on energy efficiency, renewables and smart energy systems would make much more sense. Energy efficiency already saves billions on energy costs and could save much more, while renewable energy is becoming cheaper than fossil fuel alternatives. They also help to achieve our climate targets. And fossil fuels are responsible for almost three-quarters of Australian emissions, so we need strong action to meet our international obligations.</p>
<p>The extension of the A$20,000 tax write-off for small business spending on equipment is a measure that, at least for small businesses, offsets a significant barrier to investment in energy efficiency. Firms will also be able to continue to claim the write-off to improve the economics of investments in on-site renewable energy and storage. Of course, the problem still remains for spending over A$20,000 by small businesses, and for larger businesses.</p>
<p>The energy security plan, which includes funding for ACCC to police energy industry behaviour is only a small step towards fixing the disastrous failures of energy policy and a transition to a 21st century energy policy framework. Much more will need to be done.</p><img src="https://counter.theconversation.com/content/77398/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Hugh Saddler is a member of the board of the Climate Institute</span></em></p><p class="fine-print"><em><span>Alan Pears has worked for government, business, industry associations public interest groups and at universities on energy efficiency, climate response and sustainability issues since the late 1970s. He is now an honorary Senior Industry Fellow at RMIT University and a consultant, as well as an adviser to a range of industry associations and public interest groups. His investments in managed funds include firms that benefit from growth in clean energy. .</span></em></p><p class="fine-print"><em><span>Roger Dargaville works with the consortium of EnergyAustralia and Arup that have been funded by ARENA to conduct the PHES feasibility study. He has previously received funding from ARENA to undertake energy system modelling studies.</span></em></p><p class="fine-print"><em><span>Tony Wood holds shares in energy and resources companies through his superannuation fund.</span></em></p>The federal budget will pump A$90 million into boosting domestic gas production, as well as investing in pumped hydro and measures to monitor energy prices.Hugh Saddler, Honorary Associate Professor, Centre for Climate Economics and Policy, Australian National UniversityAlan Pears, Senior Industry Fellow, RMIT UniversityRoger Dargaville, Deputy Director, Melbourne Energy Institute, The University of MelbourneTony Wood, Program Director, Energy, Grattan InstituteLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/767902017-04-28T02:59:06Z2017-04-28T02:59:06ZEconomists split over Turnbull’s plan to reserve gas for Australian customers<p>The federal government has pledged to <a href="http://www.abc.net.au/news/2017-04-27/government-to-restrict-gas-exports-to-shore-up-domestic-supply/8474432">bring in legislation</a> that would allow it to restrict gas exports and force Australian producers to reserve supplies for domestic consumers, amid continuing fears of an east coast <a href="https://theconversation.com/turnbull-warns-of-consequences-if-gas-industry-doesnt-keep-its-promises-74637">supply crisis</a>.</p>
<p>The move comes after the <a href="http://www.afr.com/business/energy/gas/gas-summit-fails-to-find-energy-crisis-fix-20170419-gvnv3g">apparent failure</a> of crisis talks earlier this month, aimed at easing the forecast price squeeze.</p>
<p>But experts are split on whether domestic gas reservations are a wise move. In a <a href="http://www.afr.com/business/energy/gas/gas-summit-fails-to-find-energy-crisis-fix-20170419-gvnv3g">survey of 32 economists</a> by Monash Business School and the Economic Society of Australia, 38% agreed with the following statement, whereas 47% disagreed. </p>
<blockquote>
<p>In response to energy shortages around Australia, government policies requiring gas producers to reserve some production for domestic consumption are a good way to ensure that Australian consumers have access to sufficient gas supplies while still allowing for gas exports.</p>
</blockquote>
<p>Weighting the scores by confidence pushed the balance even further towards a negative verdict, as shown below.</p>
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<p>David Prentice, principal economic adviser at Infrastructure Victoria, who <a href="https://business.monash.edu/economics-forum/polls/energy-shortages-reserving-australian-gas/overview-of-poll-results-by-david-prentice">summarised the results</a>, said the forthcoming gas supply problems had “raised a lot of concern” as Australia heads into winter. </p>
<p>Lucrative export contracts have sent huge amounts of Australian gas overseas, meaning it is now <a href="https://theconversation.com/gas-crisis-or-glut-why-japan-pays-less-for-australian-lng-than-australians-do-74438">cheaper to buy Australian gas in Japan than in Australia</a>.</p>
<p>Western Australia <a href="http://onlinelibrary.wiley.com/doi/10.1111/1759-3441.12166/full">already has a domestic gas reservation policy</a> aimed at holding local prices in check amid a boom in liquefied natural gas (LNG) exports. But Prentice said many of the economists arguing against a similar policy for the eastern states feared that it would distort the market, pushing gas prices artificially low.</p>
<p>“A common theme in many of the arguments of those that disagree with the policy is that the appropriate response to rising gas prices overseas is to let the domestic price rise and firms and households work out the best way to adjust to higher prices – that is, let the ‘invisible hand’ work,” he said.</p>
<p>In contrast, several of those who favoured the policy argued that higher prices could pose a risk for many consumers, such as businesses that may struggle to compete internationally if their gas bills are too high.</p>
<p>Read the panel’s full responses below.</p>
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<p><em>The <a href="https://business.monash.edu/economics-forum/polls/energy-shortages-reserving-australian-gas">ESA Monash Forum</a> is a joint initiative between Monash Business School and the Economic Society of Australia.</em></p><img src="https://counter.theconversation.com/content/76790/count.gif" alt="The Conversation" width="1" height="1" />
A survey of leading economists gave a mixed, and overall negative, view on Malcolm Turnbull’s plan to force gas producers to divert exports back into the Australian domestic market.Michael Hopkin, Deputy Chief of Staff, The ConversationEmil Jeyaratnam, Data + Interactives Editor, The ConversationLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/768012017-04-27T12:37:05Z2017-04-27T12:37:05ZGrattan on Friday: Turnbull’s pipe dreams channel ghost of Rex Connor<p>As the government seeks to rein in the excessive expectations of what it can do to make housing more affordable, Malcolm Turnbull is throwing everything at his energy security policy.</p>
<p>Think whatever-it-takes. Think big picture. Oh, and if you are of mature years, think Rex Connor.</p>
<p>This week’s plan to <a href="https://theconversation.com/gas-export-restrictions-imposed-to-ensure-domestic-supply-76740">place controls on gas exports</a> to ensure adequate local supplies is a drastic course that a Coalition government would normally not even contemplate.</p>
<p>Only last month Nationals cabinet minister Matt Canavan, speaking about suggestions that a set proportion of supply should be reserved for the local market, said: “We don’t make sure we have enough scotch fillet in the supermarket by telling farmers they can’t sell their beef or cattle to overseas markets.”</p>
<p>Indeed. But fillet steak, or lack of it, is not a vote-sensitive issue, nor does its price have major implications for individual businesses and the broad economy.</p>
<p>Canavan, the resources minister, will administer the new controls. The gas industry has railed against the intervention. The Australian Petroleum Production and Exploration Association says restricting exports is “almost unprecedented” for Australia, and warns of sovereign risk.</p>
<p>The government responds that the gas market is distorted, excessive prices are affecting the viability of Australian business, and this is a short-term measure. It stresses the long-term aim is to remove state restrictions on exploration and development.</p>
<p>This week’s move has got a tick from some respected economists. Saul Eslake says: “In the particular circumstances I think it’s the right thing to have done – even though it runs against a lot of free market principles”. </p>
<p>John Daley, CEO of the Grattan Institute, agrees: “In a situation where the market manifestly is not working, there’s a strong case for the government to step in. Companies have been given ample opportunity to sort the situation out and they haven’t.”</p>
<p>The government no doubt will hope that producers, with the whip raised over their heads, will move before the lash has to be applied.</p>
<p>The measure will likely go down well with the public – provided it has a noticeable effect on prices.</p>
<p>We remember the Coalition hype that abolishing the carbon tax would be a miracle cure for high electricity costs. Many factors contribute to prices. Even if the gas initiative applies significant downward pressure to wholesale prices, helping businesses, Turnbull has conceded the flow-through to households will be diluted.</p>
<p>As to the big picture energy ideas, it seems a case of the bigger the better. A planned expansion of the Snowy Hydro has been flagged. And now there is talk about possible north-south and west-east gas pipelines.</p>
<p>While he was spruiking hydro in Tasmania last week, Turnbull said the government was “looking very closely at a pipeline opportunity between the Northern Territory and the east coast”, and connecting the huge resources in the north west of Australia to the east was “an option”. In Queensland this week he was enthusiastic about a pipeline from the north of the state.</p>
<p>Energy Minister Josh Frydenberg, appearing with Turnbull last week, said the idea of a west-east pipeline is “appealing, it is nation-building, and it is one that the government is seriously considering”.</p>
<p>“This idea goes back to Rex Connor,” said Frydenberg, who was born in 1971, the year before Connor became minister for minerals and energy in the Whitlam government. </p>
<p>A cross-continent pipeline was among the aspirations of that highly controversial minister, a fierce economic nationalist. Connor was at the centre of the Whitlam government’s loans scandals, as he sought to raise funds for his projects through a dubious Pakistani money man, Tirath Khemlani.</p>
<p>The opposition of the time attacked Connor relentlessly. The irony of the pipeline talk is not being missed by those in the Coalition who know their history. Nor should it be forgotten that Connor’s pipeline didn’t eventuate – there is a long road between idea and achievement.</p>
<p>As Turnbull aspires to get a lift by thinking big, the Coalition searches for hope in the smallest positive sign, as it nervously monitors the polls.</p>
<p>This week’s Newspoll had Labor leading 52-48% on the two-party vote compared with 53-47% three weeks ago; the Coalition primary vote remained unchanged.</p>
<p>The slight movement was seen as a green shoot in some Coalition (and media) circles, when in fact it was effectively a status-quo poll. The green shoots are yet to come. That’s if they ever do. These days, when voters become cynical, they make judgements quickly and brutally, and it’s hard for a government to turn them around.</p>
<p>The Liberal Party is itself a major drag on Turnbull’s prospects of recovery, with the right standing on his neck and bitter factional fighting in key state divisions.</p>
<p>Tony Abbott will remain an established, regularly critical voice, now enjoying access to high-profile media spots. He’s defiant about his right to speak, declaring this week: “Because I am a free citizen of a free country and a member of a party which doesn’t practice Stalinism, which believes in free speech, well, I’ll say my piece”.</p>
<p>When he became leader, Turnbull could have expected that by now Abbott would have faded into relative obscurity, even if he was still in parliament.</p>
<p>That would have happened if Turnbull had lived up to expectations. Instead, with his successor struggling, Abbott is still in the foreground of politics. Some believe he now accepts he won’t get the leadership back but just wants to see Turnbull quit before the election.</p>
<p>One thing that nobody around Turnbull has a big idea for resolving is the debilitating Abbott issue.</p>
<iframe src="https://www.podbean.com/media/player/r88ra-6a1eda?from=yiiadmin" data-link="https://www.podbean.com/media/player/r88ra-6a1eda?from=yiiadmin" height="100" width="100%" frameborder="0" scrolling="no" data-name="pb-iframe-player"></iframe><img src="https://counter.theconversation.com/content/76801/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Michelle Grattan does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>As the government seeks to rein in the excessive expectations of what it can do to make housing more affordable, Malcolm Turnbull is throwing everything at his energy security policy.Michelle Grattan, Professorial Fellow, University of CanberraLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/765172017-04-24T00:24:21Z2017-04-24T00:24:21ZWant to boost the domestic gas industry? Put a price on carbon<figure><img src="https://images.theconversation.com/files/166247/original/file-20170421-12633-1l5nvje.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">With the right power policies, gas can have a brighter future.</span> <span class="attribution"><a class="source" href="https://theconversation.com/drafts/76517/edit#">Steven Bradley</a>, <a class="license" href="http://creativecommons.org/licenses/by-sa/4.0/">CC BY-SA</a></span></figcaption></figure><p>Australia’s gas industry is <a href="http://www.abc.net.au/news/2017-04-20/accc-to-investigate-gas-markets-lack-of-transparency/8457368">under scrutiny from the competition watchdog</a> after apparently <a href="http://www.afr.com/business/energy/gas/gas-summit-fails-to-find-energy-crisis-fix-20170419-gvnv3g">failing to deliver</a> on its pledge to bring down domestic prices and ease the east coast gas supply crisis. </p>
<p>The current domestic supply squeeze will be over soon enough. But other, longer-term factors threaten the role of gas in Australia’s energy mix. </p>
<p>Gas producers <a href="https://www.appea.com.au/media_release/use-more-gas-to-reduce-emissions/">claim</a> that gas is a vital fuel in the transition to a low-carbon economy (although <a href="https://www.climatecouncil.org.au/price-of-gas">not everyone agrees</a>). But to achieve this they need to ensure that coal is replaced by gas in the generation of electricity. It is increasingly unlikely that this will happen in Australia, unless the industry can persuade the government to reinstate a price on carbon.</p>
<p>At the moment, the idea of gas as a transition fuel seems academic anyway. Gas is now in such short supply on the east coast that any policy aimed at increasing demand seems ludicrous. The shortage has driven gas prices to <a href="http://www.abc.net.au/news/2017-03-09/gas-prices-will-rise-and-there-is-not-much-we-can-do-to-stop-it/8340536">unprecedented levels</a>, which has in turn has <a href="https://www.theguardian.com/commentisfree/2017/apr/12/power-prices-are-at-record-highs-but-theres-a-pleasant-solution-to-fix-that">driven up electricity prices</a>. In the gas industry, the talk is mainly about finding new supplies, not new customers.</p>
<p>But the present east coast gas shortage may well be shortlived, because there is currently an <a href="http://www.smh.com.au/business/energy/lng-sector-faces-trading-risks-amid-tidal-wave-of-supply-20160603-gpb8sa.html">oversupply of gas</a> on the international market. With prodding from government, this could bring about a drop in domestic prices in various ways. </p>
<p>For example, the liquid natural gas (LNG) exporters in Queensland who are sucking up so much of Australia’s gas might find it profitable to meet some of their international contract commitments by buying LNG on the international market and shipping it direct to their customers. This would release gas they have contracted to buy in Australia into the local market, thereby saving the (not inconsiderable) cost of liquefaction. This is the strategy of the <a href="http://www.afr.com/business/energy/gas/gas-swaps-emerge-as-swift-remedy-to-gas-market-train-crash-20170308-gutsu0">gas swaps</a> currently being touted as a solution to the domestic supply squeeze. </p>
<p>Alternatively, shiploads of LNG bought on the open market could be brought to southeast Australia, re-gasified, and then fed into the gas transmission system relatively close to the point of consumption, thus reducing transmission costs. This idea has been <a href="http://www.theaustralian.com.au/business/mining-energy/agl-mulls-300m-gas-terminal-to-import-lng-as-prices-rise/news-story/53768003c4721fd23545bebbd34f3987">floated by gas producer AGL</a>.</p>
<p>The government has <a href="http://www.afr.com/business/energy/gas/gas-summit-fails-to-find-energy-crisis-fix-20170419-gvnv3g">not yet prodded hard enough</a> to make these things happen, but a worsening gas crisis may stiffen its resolve. </p>
<p>Finally, extra supplies of Northern Territory gas will become available on the east coast when the <a href="http://www.abc.net.au/news/2017-03-22/northern-gas-pipeline-contractor-axed,-jemena-seeks-new-partner/8377792">Northern Gas Pipeline</a> is completed next year. </p>
<p>None of these strategies depends on increasing the production of unconventional gas on the east coast, although that too, if it happened, might ease the domestic supply problem.</p>
<h2>Crisis over?</h2>
<p>In summary, there are grounds for thinking that in the reasonably short term we will see a significant increase in gas supply on the east coast, and a corresponding drop in price. As soon as that happens, the gas industry will again be interested in stimulating demand, particularly in the electricity sector. But by then it may be too late. Here’s why.</p>
<p>Without a national strategy that puts a price on carbon, the states will continue to go it alone with renewable energy targets. As the new renewable energy generators come online, they will <a href="http://greenmarkets.com.au/images/uploads/Research%20Notes/2017/Policy_paper/Overcoming_ideology_in_energy_emissions.pdf">push the most expensive generators out of business</a>. Unfortunately for gas, even with more reasonable gas prices, coal-fired electricity will remain cheaper. </p>
<p>So, to the extent that the market can rely on renewables and coal alone, gas will be out of business. As large-scale battery storage becomes a reality, gas may not even be needed to cope with spikes in demand. Meanwhile, the current high price of power means the quiet revolution in rooftop solar panels is set to continue. The most recent data shows new installations are <a href="http://reneweconomy.com.au/rooftop-solar-installs-43-2017-back-power-market-woes-61166/">up 43% on a year ago</a>.</p>
<p>There is, however, hope for gas in the medium term if the government legislates to impose a price on carbon in the electricity sector. One way to do this has already been widely proposed: an <a href="https://theconversation.com/emissions-trading-for-electricity-is-the-sensible-way-forward-70137">emissions intensity scheme</a>. </p>
<p>Such a scheme would impose penalty payments on the most carbon-intensive emitters, such as coal-fired power stations and pay subsidies to lower-emitting industries such as renewables and gas. </p>
<p>This would put gas in a much better position to compete with coal, especially if the penalties were ratcheted up over time. Under <a href="http://climatechangeauthority.gov.au/sites/prod.climatechangeauthority.gov.au/files/files/SR%20Modelling%20reports/Jacobs%20modelling%20report%20-%20electricity.pdf">modelling done for the Climate Change Authority</a>, this would see brown coal power stations disappear within three years, while black coal would follow suit in little more than a decade. </p>
<p>Coal’s place would be taken mainly by wind and by new, efficient, gas-fired power stations. If by that time gas-fired power stations are able to capture and store their carbon dioxide emissions, then we would truly have arrived in a golden age for gas. If not, the gas industry will at least have had some profitable years before going into decline.</p>
<p>A price on carbon would let gas win the battle with coal and step in to take its place. Eventually, however, renewables will sweep away all fossil fuel power generation, so of course the long-term future for gas in this sector is bleak (as befits a transition fuel). But without a price on carbon, coal will be around for longer, undermining whatever market there may be for gas.</p>
<p>It is therefore in the gas industry’s interest to lobby hard for a price on carbon in the electricity sector, as part of the <a href="https://www.environment.gov.au/system/files/pages/64722841-01ab-4067-a978-40d63174d4c7/files/tor-climate-change-review.pdf">upcoming government review of climate policy</a>. Other industry groups are virtually unanimous in their support for carbon pricing, but the oil and gas industry’s peak body, the <a href="https://www.appea.com.au/">Australian Petroleum Production and Exploration Association</a>, has been <a href="https://www.appea.com.au/wp-content/uploads/2016/02/APPEA-Submission-190216-climate-policy-options.pdf">rather more equivocal</a>. While in theory it supports a carbon price, it qualifies this support so extensively that in practice it opposes every pricing proposal that is placed on the table. </p>
<p>If the peak oil and gas body could be persuaded to join with the rest of industry on this matter, it might just make the difference. Pricing carbon is not only good for the environment, in the medium term it is good for gas too.</p><img src="https://counter.theconversation.com/content/76517/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Andrew Hopkins is a financial contributor to the Climate Council and a member of the Citizens' Climate Lobby.</span></em></p>The current domestic gas crisis will pass. But if the industry wants to surpass coal and fulfil its role as a ‘transition fuel’, it should lobby for a carbon price to help it on its way.Andrew Hopkins, Emeritus Professor of Sociology, Australian National UniversityLicensed as Creative Commons – attribution, no derivatives.