Victoria has been warned homes and businesses cannot switch to electricity in time to avoid frequent gas shortages, which the state’s own energy department expects to hit as soon as 2026.
A briefing note from department officials last year – obtained by the state opposition under freedom of information laws – cautioned Energy Minister Lily D’Ambrosio about looming annual gas shortages.
NSW and Victoria face gas supply shortfalls as soon as 2026.Credit: Louie Douvis
The minister was warned “electrification in Victoria cannot occur quickly enough to address these shortfalls”, and that new sources would be needed to “maintain reliable supply to gas consumers and to support increasing utilisation of gas power generation”.
“Shortfalls in 2026/2027 cannot be supplied from New South Wales or South Australia as it is projected that all southern states will be in deficit and there is limited pipeline capacity to import into Victoria,” the July 2023 briefing note compiled by the Department of Energy, Environment and Climate Action said.
“A supply gap will remain even if all currently committed and anticipated southern state projects are developed.”
Last month, the Australian Energy Market Operator warned of gas shortages from 2028 in southern states, including Victoria, as supplies fall faster than demand.
Victorian Energy Minister Lily D’Ambrosio was warned of gas shortages by her own department.Credit: Chris Hopkins
In March, D’Ambrosio said Victoria had more than enough electricity generation to cover the shortfall in gas in the coming years.
“Our electricity system has got more than enough electricity to meet our needs during a winter period,” D’Ambrosio told radio station 3AW.
In January, new gas connections were banned in newly built homes, as well as government buildings including schools and hospitals as part of Victoria’s plan to reach net zero by 2045.
The move was slammed by the gas industry, which said it would fail to reduce emissions in the short term because it would increase the state’s reliance on coal-fired power – a higher-emitting power source on a volume-weighted basis.
In light of the briefing note, opposition energy spokesman David Davis called on D’Ambrosio to explain “why she is telling the community one thing, whilst her department is saying another”.
“Labor has failed to secure Victoria’s energy supplies and is leaving households and businesses to pay the price,” he said.
Opposition energy spokesman David Davis.Credit: Jason South
In response, a government spokesperson said Victoria needed to reduce demand while also work on securing new supply.
“There are four current proposals for gas import terminals in Victoria and interstate that would address supply challenges in the longer term while in the immediate term we are helping Victorian households and businesses switch to all-electric appliances to protect them from the rising cost of gas and potential supply shortfalls,” the spokesperson said.
But the briefing note also warned the government that “investment uncertainty” meant no Victorian gas supply project, regardless of its progression, could be guaranteed.
“All projects face a range of challenges,” the department warned. “There is also little time left to implement solutions.”
The department warned that delays were being caused by long lead times for statutory approvals, including environment effects statements, supply chain and workforce constraints as well as adverse weather conditions.
The briefing note also said one project, that would allow additional gas to be extracted from the Kipper field – a conventional gas field located off the coast of Victoria in the Gippsland Basin – by 2026 could “potentially address 2027 annual shortfall risks” but only if forecast high rates of electrification are achieved.
It also warned the project would not be enough to address seasonal and peak day shortfalls.
Unconventional gas production, known as fracking, is banned in Victoria.
Australian Pipelines and Gas Association chief executive Steve Davies said the department’s warning followed similar interventions from the federal government, the energy market operator and industry that Victoria would require new gas supply.
“It has not occurred,” Davies said. “The gas and electricity bills of Victorian homes and businesses are higher today because of this ideological decision to not prioritise new gas supply. A major course correction is immediately needed.”
Gas Energy Australia chief executive Brett Heffernan told The Age that with coal coming out of the grid, “the gap between rhetoric and reality is widening”.
“Eventually the crunch will come.”
Addressing a conference of oil and gas producers in Perth on Tuesday, federal Resources Minister Madeleine King said new sources of gas supply were needed to meet demand during the economy-wide transition.
She said households would continue to have a choice over how their energy needs were met.
“We need gas – not just to keep the lights on – but to achieve our net-zero goals,” King said. “Right now, we are on the cusp of an opportunity for the sector here in Australia, as the world shifts to clean energy.”
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