Gas supply warning as summer tipped to be hotter than normal

Gas supplies across the east coast must be “carefully managed” if the fuel source is needed to support higher electricity demands over a hotter-than-average summer, the energy market operator warns.

AEMO’s executive general manager of operations, Michael Gatt, says gas supply on the east coast – particularly in Victoria – will need to be carefully managed over summer.

Gas supplies across the east coast must be “carefully managed” if the fuel source is needed to support higher electricity demands over a hotter-than-average summer, the energy market operator has warned, conceding it may have to cancel maintenance work on transmission lines to make the grid more reliable.

The caution on gas came as opposition climate change and energy spokesman Ted O’Brien ramped up the pre-election climate wars by attacking Chris Bowen for “rejecting always-on power”.

The Climate Change and Energy Minister’s spokeswoman on Monday pointed to Australian Energy Market Operator advice highlighting “how Australia’s energy grid is increasingly decentralised and able to draw on household solar, which is fundamentally incompatible with an expensive, always-on power like nuclear”.

Mr O’Brien said Mr Bowen was being “completely delusional”.

“In rejecting ‘always-on’ power, Minister Bowen is conceding his plan for Australia is to have a part-time energy system which works only some of the time,” he said.

“With limited natural capacity for hydro in Australia, our only option is to introduce zero-emissions nuclear energy to replace our retiring coal-fired power stations so we can have always-on 24/7 power.

“Chris Bowen fails to mention that when renewables are peaking Australia can at times waste around 25 per cent of its solar and wind energy to protect the grid from being overloaded. The biggest threat to the profitability of renewables isn’t nuclear, it’s too many renewables.”

Federal parliament’s nuclear inquiry visited Traralgon in Victoria on Tuesday, in the Nationals-held electorate of Gippsland, where Voices of the Valley president Wendy Farmer said the Coalition would consult with the community on its nuclear plan but then not give the community any veto rights.

Mr O’Brien said: “So regardless of plans to actually have this (nuclear reactors) studied, community engagement, you don’t want any of that? It’s just a no?”

Ms Farmer responded: “How can we trust the Coalition to have an independent study when you say ‘proposal’ but where’s the proposal? The community has not seen a proposal, our community has not seen a plan.”

With above-average temperatures forecast for most of the country, coupled with potential above-average rainfall and possible flooding in parts of South Australia, Queensland, Victoria and Western Australia, AEMO executive general manager of operations Michael Gatt said fuel storage levels across the National Electricity Market were normal.

But he added: “Gas supply levels need to be carefully managed if used to support peak electricity demand periods on the east coast, particularly in Victoria (Australia’s most gas-dependent state). Synchronous generation availability, coal, gas and hydro, is expected to be similar to previous summer periods, noting the return of Callide C in Queensland and some reduced capacity in NSW, Tasmania and South Australia, including the mothballing of Snuggery and Port Lincoln power stations.”

AEMO had also prepared for sunny days with mild temperatures and low demand, when so-called minimum system load conditions can occur.

“AEMO will work with businesses to manage planned transmission and generation outages for necessary maintenance. Should high electricity demand coupled with unplanned transmission and generation outages threaten reliability, recalling outages may be required,” Mr Gatt said.

Gas is primarily used as a so-called peaker, with power plants fired up during periods of unusually high demand or low supplies. But gas can be used for longer periods, which is particularly important should a coal power station suffer an unplanned outage.

Should such an event occur, Australia’s electricity grid will be strained – stoking warnings of blackouts or future price increases.

NSW and Queensland indicated on Tuesday they wouldn’t accelerate the development of emergency measures to deal with excess power in the grid from rooftop solar, after AEMO said state-run network operators may need to take over and restrict household solar in very rare circumstances.

AEMO has pushed for emergency backstop mechanisms across SA, Queensland, Victoria, NSW and the Australian Capital Territory “as soon as possible” to maintain system security, which would allow the states to curtail rooftop solar.

When Queensland Premier David Crisafulli was pressed on how advanced his state’s emergency backstop plans were to deal with excess solar and a potentially more unstable grid, the Liberal leader said his priority was maintaining the five government-owned coal-fired power stations to ensure reliable baseload power.

“They’re not going to be fixed overnight, but the starting point is to make sure that the assets the state owns at the moment get back to their capacity, as we bring on more assets that can also be part of that energy mix,” he said.

The NSW Climate Change and Energy Department said it was still planning on introducing such measures late next year, following work with AEMO and state electricity distributors, despite the operator forecasting the whole east coast may need to use emergency backstop measures on rare occasions as early as 2025.

“The NSW government will begin public consultation in early 2025 on proposed measures to restrict solar exports during emergencies to prevent blackouts and improve reliability,” a departmental spokesman said.

“These measures are part of the recently announced NSW consumer energy strategy. The consultation will explore technical details of implementing a backstop mechanism for small-scale solar, intended as a last-resort solution.”

The NSW government was also offering incentives worth up to $2400 for home batteries, which are needed across the country to minimise the amount of electricity being exported back into the grid and to help temper demand during peak evening periods.

Mr Crisafulli was open to offering inducements to households to purchase batteries in a bid to soak up excess supply from rooftop solar, saying his government would look at anything to help firm the system.

Victoria and South Australia have already implemented their backstop mechanisms as a last resort, when AEMO has used all other levels to maintain system security.

In Victoria, AEMO can direct electricity distribution providers to remotely turn down or switch off rooftop solar systems during an energy oversupply emergency, when more solar is being generated than the state can use.

Victorian Premier Jacinta Allan said AEMO had advised her it was not forecasting blackouts for the state this summer.

“Their advice is that there is enough reserve capacity,” she said.

“We do know that when there are extreme weather events, like we saw in Sydney last week, that there will need to be additional advice, but that is the advice that I have right now from AEMO.”

Energy Edge managing director Josh Stabler said a drawdown on gas over summer would hurt the readiness of the country in winter when states such as Victoria really needed the fuel source.

“Gas supply conditions in Victoria have materially declined since the end of winter 2024 with the decommissioning of Exxon’s Longford Gas Plant 1, which has likely been the driver behind AEMO’s comments,” Mr Stabler said.

“While reduced supply will be primarily felt in peak capacity needs of winter 2025, there is a risk that lower supplies and higher utilisation of the gas generation fleet will draw down on Iona Gas Storage facility, which has only partially refilled since the end of winter. There are complexities managing the short-term needs of the coming summer against the future requirements of next winter.”

Longford is the dominant supplier of gas to Australia’s east coast but supplies are rapidly depleting.

Squadron energy chief executive Rob Wheals said importing gas was now necessary.

Squadron, owned by billionaire Andrew Forrest, is close to completing work on its NSW LNG import facility.

“Squadron Energy’s Port Kembla Energy Terminal will open Australia up to new sources of gas supply as we transition to renewable energy,” Mr Wheals said.

“Without LNG imports the forecast gas market outlook is dire. PKET is the only solution that stands ready to ensure reliability and stability in the energy market from 2026 to guarantee supply and avoid short-term gas shortages.”

Additional reporting: Lydia Lynch