New sign Victoria’s energy market is under stress

A winter blast lashing Victoria has been blamed for the spike in gas demand that prompted a drastic move — but the Premier has hosed down fears.

Australia’s gas supply guarantee has been triggered for the first time in a sign of the increasing stress on the energy market.

Households and businesses have been assured there is adequate gas supply to keep their hot water and gas cooking systems operating in coming days.

But the east coast cold snap has caused a spike in gas demand which has been exacerbated by outages at coal-fired power stations.

This prompted the Australian Energy Market Operator to issue a “threat to system security” notice on Wednesday.

It is understood the market responded by freeing up more supply, meaning the operator is now confident forecast demand will be met although the situation remains tight.

But AEMO also moved to trigger the gas supply guarantee mechanism for the first time since it was set up five years ago.

The mechanism – designed to ensure operators will make enough gas available to meet peak demand – was triggered in Victoria, South Australia and Tasmania for Thursday.

The Herald Sun understands the implementation of the gas guarantee mechanism delivered a positive response from gas producers in Queensland.

Increased supplies will flow to the southern states over the coming days, and while the situation remains tight, AEMO is confident there will not be a shortfall at this stage.

Minister for Energy, Environment and Climate Change Lily D’Ambrosio says the government is working closely with AEMO to monitor the situation.

The Herald Sun understands AEMO had been told some market participants were unable to source sufficient gas to supply gas power stations.

By triggering the mechanism, AEMO will identify, assess and confirm a potential shortfall and call for a response from the market to cover it.

Premier Daniel Andrews said Victorians should not be worried about gas supply just yet.

“(AEMO) is obliged to make various warnings,” he said.

Mr Andrews said the situation of a serious gas shortage remains “highly unlikely”.

“But again, they obviously monitor the situation, they’re a national body, they look after the market,” he said.

“We’ve got the coldest start to winter we’ve seen for a long time and that does put some pressure on the system.”

Minister for Energy, Environment and Climate Change Lily D’Ambrosio said the government was working closely with AEMO to monitor the situation.

“While there are obviously some unprecedented conditions impacting the international gas markets, AEMO has said that at the moment the likelihood of a shortfall today is sitting at extremely unlikely”.