“A lot more gas is going to be needed”: RISC on Victoria

Original article posted on Energy News Bulletin – Friday 13  September 2019

VICTORIA is about to ‘walk off a cliff’, according to RISC Advisory principal analyst Joe Collins, who blamed policy settings that favour wind, discourage brown coal and do not favour gas as a backup at the RIU Good Oil conference in Perth this week.

Wind power is set to increase by 80% over the next 12 months, but on days when the wind doesn’t blow large amounts of gas-fired power is needed as a  back-up – and the southeast Australian market simply doesn’t have that capacity, Collins warned.

“A general undersupply (of gas) is emerging in the market for the first time in my lifetime,” he said.

“The supply side is really hurting.  The market is very uncertain there,” he said, predicting demand destruction on the horizon as large gas users struggle to secure enough supply at a survivable price.

But it is the electricity sector that is really the one to watch.

When the wind doesn’t blow in South Australia gas demand shoots up fast.

Similarly, on high power demand days in Victoria, gas-fired power demand spikes, and the state saw two of the highest demand days in its history in 2019.

“This is what’s driving it and it will continue to drive the gas shortage and it will get worse.”

Victoria is now headed down the same path as SA, he warned.Collins suggests as brown coal could be out of Victoria’s power mix by 2030, and the state has a 50% renewable target by 2030. He sees wind providing 40%-50% of the state’s power, with gas providing much of the remainder, which totals about 600 terrajoules per day more than what is being used now. “If there’s a high power demand day or a high gas demand day and no wind they’ have a major problem,” he said, pointing to a probable supply gap by the mid-2020s.

One stop-gap will be LNG import terminals, but gas buyers won’t like the prices any better even if there is more supply, but the flexibility could meet peak day demand at least.