Powering out of pandemic: Unleashing the potential of gas

A COMPETITIVE AND TRANSPARENT EAST COAST GAS MARKET UNBURDENED BY REGULATION AND SYNCHRONISED TO THE GLOBAL COMMODITY MARKET WILL POWER US OUT OF THE PANDEMIC AND ENABLE US TO REACH OUT ENVIRONMENTAL GOALS SOONER.

Australia is fortunate to possess abundant reserves of almost every conceivable energy source. It is home to 14 per cent of the world’s proven coal reserves, 30 per cent of known uranium resources and 18 per cent of lithium. In addition, Australia has made the world’s largest per capita investment in wind and solar generation.

And then there is natural gas, Australia’s third largest energy resource after coal and uranium. For now, Australia is the world’s number one supplier of liquid natural gas (LNG) on the international market. It provides a quarter of the nation’s energy and is essential to powering industry.

The innovations of hydraulic fracturing, horizontal drilling and the bulk transportation of LNG have broadened its ubiquity and utility this century. International demand for LNG grew more than three times faster than demand for coal between 2009 and 2019. Australian exports quadrupled over this period to 3.6 trillion cubic feet (Tcf).

Yet domestic supply in eastern Australia remains tight, particularly in our two most populous states, where government policy, regulatory inertia and red tape are preventing gas achieving its true potential.

The Menzies Research Centre commissioned one of Australia’s most experienced energy and climate economists, Dr Brian Fisher AO PSM, to report on the supply of gas in the Australian domestic market and its potential contribution to Australia’s energy mix.

The findings are clear: a competitive and transparent East Coast Gas Market, unburdened by unnecessary restrictions and synchronised to the global commodity market would facilitate manufacturing, increase employment and enable us to reach our environmental goals sooner.

These conclusions are in keeping with the recommendations in the MRC’s 2017 report Power Off Power On: Rebooting the National Energy Market, in which we sought to map out a pathway from a market corrupted by government failure to one energised by competition and investment opportunity.

While a more competitive energy market would favour consumers, there is no ‘pure’ free-market solution in a market so grievously distorted by ill-considered government intervention and corporate opportunism.

To realise the full potential of gas, governments will be required to make strategic decisions.

The Government’s role in facilitating an expansion in the supply of gas will be hotly contested, as indeed it should be. We are not recommending that governments should try to pick winners; quite the opposite in fact.

The Government must remain agnostic about the energy sources and technology best suited to delivering an affordable and reliable energy supply.

Government intervention should be motivated by a desire to increase competition, not the concept that governments know best.

This is the measure against which government policy will be judged.

Nick Cater

Executive Director  

Menzies Research Centre