Scott Morrison’s promise of a gas-fired recovery is a shambles. Far from powering Australia’s economic recovery, soaring gas and power prices are now the single biggest threat to the viability of manufacturers.
In September 2020, Morrison promised to deliver a gas-led recovery from the economic woes caused by the pandemic, and put the revival of manufacturing at the centre of that promise. His hand-picked commission – led by former Dow boss Andrew Liveris – targeted a domestic price of $4-$6 a gigajoule. But for a market cap, the gas price in Sydney and Melbourne would be trading at more than $40 a gigajoule.
External factors including Russia’s invasion of Ukraine have played a part, but the Coalition’s promised pathway to cheap gas never eventuated. Energy Minister Chris Bowen is dealing with a gas crisis and effectively starting again from scratch on building a national energy policy.
Rather than accepting some responsibility for their part in the current market crisis, Coalition figures are now lining up to push the barrow of the other great energy market boondoggle – a nuclear power plant that would cost billions of dollars, would take a decade to build and generate power at crisis-level prices.
Bowen faces demands to engineer both an urgent short-term fix to soothe markets and the not insubstantial task of formulating a smooth journey as coal plants exit and renewables boost their share in the power grid.
Nutting out a capacity market – requiring energy retailers to lock in contracts with power companies in advance – is a sensible move to ensure less volatility.
That will take time to get over the line given the tensions between states over including coal and gas in the mix and the need to ensure any mechanism does not prop up one source over others.
On the gas side, a new rule allowing AEMO to step in, buy gas and have an element of control over storage also appears a practical fix to the current crisis.
The actual mechanics of how AEMO will intervene in the market, what price it would pay for gas and how it would work with privately owned storage facilities is still to be worked out. But gaining an extra element of control to guarantee fuel holds merit.
For Queensland LNG producers, Labor’s noises about tightening a gas trigger and doing so post haste has big players on edge.
The crisis, landing in the opening weeks of the Albanese government, has handed the ministers a licence for action.
That has some in the industry nervous. The gas-fired recovery is now history – getting the energy market back on track also looks a rocky road.
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