Today the AEMC released a draft report on the review of the Gas Supply Guarantee.
The nation’s energy ministers asked the AEMC to carry out the review during 2021 and report back to the ministers in the first quarter of 2022.
The draft report recommends:
- the Australian Government extend the term of the Gas Supply Guarantee another three years to March 2026.
- that an assessment on the long term need of the Gas Supply Guarantee be carried out prior to the conclusion of the extended period.
In making its draft recommendation, the AEMC considered the outlook for gas-powered generators in the national electricity market (NEM) as well as the outlook for the east coast gas market.
The AEMC has also looked at the various tools available to support managing reliability in the NEM as well as the tools that enable gas market participants to actively manage their gas usage. Our view – and the broad view of stakeholders – is that overall, there is likely to be enough near-term supply for gas-powered generators to get what they need during electricity peak demand periods.
The Guarantee was set up four years ago as a safety net mechanism to encourage gas producers and pipeline operators to make gas available in times of peak electricity demand.
Since then, there have been several new tools and more transparency introduced into the NEM and the east coast gas market to manage potential gas supply shortages.
But we are recommending a precautionary approach to keep the Guarantee for another three years – acknowledging that the market is in transition and the mechanism is a low-cost option to help manage the risk of any potential shortage.
The draft report also explores potential improvements for the NEM and east coast gas market, focusing on two key areas:
- potential amendment of the definition of a gas supply shortfall
- how the work of the planned maintenance coordination forum run by the Australian Energy Market Operator (AEMO) can be best acknowledged.
We have consulted widely to date but welcome any further views on the draft recommendation. Submissions on the draft report are due on Thursday 9 September 2021.
For more information and contact details, visit the Review of the Gas Supply Guarantee project page.