Opinion article by Samantha McCulloch in the News Corp publications on critical role of natural gas

Opinion article in News Corp publications by Samantha McCulloch, Chief Executive of Australian Energy Producers.

The Australian Energy Market Operator’s (AEMO) warnings last week about the risk of blackouts this summer were a stark reminder of the fragility of eastern Australia’s electricity network.

As AEMO highlighted in its 2024-25 summer briefing on Tuesday, the National Electricity Market (NEM) – which covers NSW, Victoria, Queensland, South Australia and Tasmania’s power networks – faces a challenging summer, with typically hot summer days expected to stretch the network to the limit.

We’ve already had a glimpse of what this means for households and businesses.

Last month, NSW Premier Chris Minns pleaded with Sydney residents not to turn on their dishwashers, washing machines and swimming pool filters in the afternoon as temperatures in parts of the state hit 40 degrees, and unplanned outages in the state’s coal power stations put pressure on the grid.

Blackouts were avoided for most of the state, thanks to NSW residents and energy-intensive industries doing their part to cut power consumption. But they shouldn’t have to. And the hidden impact of these episodes is still to come when households and businesses get their power bills.

Wholesale power prices hit the $17,500/megawatt-hour cap on Wednesday afternoon, compared with average cost of around $125/MWh.

The fact is that Australians are paying more for less reliable electricity. But this doesn’t have to be the case.

The critical role of natural gas as the reliable back-up to keep the lights (and dishwashers, washing machines and pool filters) on is a key part of the solution. Gas power plants can be switched on or off quickly to meet periods of high demand, including when weather dependant renewables are not available.

And, as more coal power stations – which currently make up around 60 per cent of power generation in the NEM – are retired, gas will play an increasingly important role during these peak periods.

Gas is also needed to put downward pressure on electricity prices. In its 2024 Integrated System Plan for the NEM, AEMO found that “renewable energy, connected by transmission and distribution, firmed with storage and backed up by gas-powered generation is the lowest-cost way to supply electricity to homes and businesses as Australia transitions to a net zero economy”.

In simple terms, as the NEM transitions to more weather-dependent renewables, eastern Australia will need more gas-powered generation capacity to avoid blackouts. We know this, but next to nothing is being done to plan for this future.

AEMO has identified a need for 13 gigawatts of new gas-powered generation capacity to be built between now and 2050. To put that in perspective, that’s more than the combined capacity of every wind turbine installed in Australia today.

In practical terms, this means we will need to build at least 26 new gas power plants on the east coast – a tall ask given only one has been built in the past decade.

Yet the Federal Government has excluded gas from the mechanism aimed at shoring up capacity in Australia’s electricity systems – the Capacity Investment Scheme.

Another challenge is where the gas to supply these plants is going to come from. Eastern Australia is facing structural gas shortfalls from 2027, particularly in NSW and Victoria.

The Australian Competition and Consumer Commission has urged governments at all levels to “focus on removing unnecessary impediments to developing new gas resources”.

These impediments include lengthy regulatory approval processes, market interventions and price controls, moratoriums on new gas developments, vexatious legal challenges and a general apathy about the consequences of gas shortages for Australian households and manufacturers.

Ultimately it is Australians that are paying the price for this inaction – through higher energy bills, grocery bills, housing prices, and being told when they can turn on their appliances.

Australia’s gas producers are doing everything they can to ensure households and businesses have reliable and affordable energy, and the lights stay on.

But without immediate action and support for investment in new gas supply, last month’s episode will become the norm for our summers and winters.