- 13 Nov, 2020

Morrison’s ‘gas-led recovery’ – will it really save households money?

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Prime Minister Scott Morrison is rolling out a new recovery plan for gas and energy but there is a lot of debate happening around how well it will deliver on its promises.

The Morrison government recently announced the federal government is willing to fund new gas infrastructure projects if the private sector doesn’t step up. It’s proven to be a controversial move for the general public and those working it the energy and renewables sectors. A key debate being whether it actually will lower a household’s outgoings.


What is the Morrison government proposing?

The Government plan is to reset the east coast gas market and create a more competitive and transparent Australian gas hub by unlocking gas supply, delivering an efficient pipeline and transportation market, and empowering gas customers.

In a September media release, Prime Minister Morrison said the move will help re-establish a strong economy under the Government’s JobMaker plan, making energy affordable for families and businesses and supporting jobs as part of Australia’s recovery from the COVID-19 recession.

One of the project objectives is to explore options for a prospective gas reservation scheme to ensure Australian gas users get the energy they need at a reasonable price.

To better empower gas consumers, the Government will also:

  • Establish an Australian Gas Hub at Australia’s most strategically located and connected gas trading hub at Wallumbilla in Queensland to deliver an open, transparent and liquid gas trading system.
  • Level the negotiating playing field for gas producers and consumers through a voluntary industry-led code of conduct, to be delivered by February 2021.
  • Ensure Australians are paying the right price for their gas by working with the ACCC to review the calculation of the LNG netback price which provides a guide on the export parity prices
  • Use the (National Gas Infrastructure Plan) NGIP to develop customer hubs or a book-build program that will give gas customers a more transparent and competitive process for meeting their needs.

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“We’ll work with industry to deliver a gas hub for Australia that will ensure households and businesses enjoy the benefits of our abundant local gas while we hold our position as one of the top global liquefied natural gas (LNG) exporters,” Morrison said.

Minister for Energy and Emissions Reduction Angus Taylor says a gas-fired recovery will “help Australia’s economy bounce back better and stronger while supporting our growing renewable capacity and delivering the reliable and affordable energy Australians deserve.”

Low gas prices also drive down electricity prices, benefiting all Australian households and businesses, the release noting gas complements our world leading renewables sector by keeping the lights on when the sun isn’t shining and the wind isn’t blowing.

The Federal Government would also work with state governments to help put downward pressure on prices.

“Our plan for Australia’s energy future is squarely focused on bringing down prices, keeping the lights on and reducing our emissions and these interconnectors bring us a step closer to that reality” said Mr Morrison.

The Government’s plan will hold the energy companies to account and maintain downward pressure on electricity prices while simultaneously developing the backbone of a reliable, lower emissions National Electricity Market for the next decade and beyond.

The plan is being touted as a transitional measure until renewable energy sources have found their feet and can deliver ongoing, reliable power, which Morrison believes will be as early as the next decade.

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What do the experts think?

Unfortunately, even as a ‘transitional’ renewable – keeping the lights on until renewable sources of power are reliable enough to fly solo, the plan has its naysayers – and for those still reading along to see how it will affect their bills, they believe the likelihood of any significant saving is minimal.

The Sydney Morning Herald reported Australian Energy Council’s chief executive Sarah McNamara said: “There are no material reliability concerns that would warrant this kind of interventionist approach, and there are already mechanisms in place to address any shortfall identified.”

Industry and government bodies have seen no evidence that the projects need to be pushed through – by government or private sector, in order to meet our power needs. Lisa Zembrodt, Director of energy markets in the Pacific region for Schneider Electric, one of the world’s largest electricity technology companies, wrote in a note to clients (including Australia’s biggest energy users) that the government’s own Liddell Task Force report said the infrastructure was simply not needed. She further noted markets currently predicted gas prices would be lower after Liddell’s closure.

“In other words, market participants believe that prices will be lower in 2022 when the first Liddell unit closes than they will be in 2021 when all units are operating. The remaining three units are slated for closure in 2023,” she wrote. “Put simply, the generation capacity already committed is sufficient to keep price increases post the Liddell closure, ceteris paribus, to less than $5.”

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It remains to be seen if the industry will decline coming to the party, or if the Government will find the support it needs to push the budget to find it.

However with renewable sources of power expected to be fully self-sufficient and up to the challenge within the decade, it is certainly debatable that the investment is a soon-to-be redundant source of power is a wise move.

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Words by Melanie Hearse

Sources

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