Gas crunch a hurdle for coal shutdown

Almost a quarter of the state’s gas needs could be unmet by 2032, the Australian Energy Market Operator has warned, while a small shortage looms as soon as 2023.

The warning comes at a crucial point in energy markets, with the federal government pushing a major intervention to cap gas and coal prices.

In recent weeks, New South Wales Treasurer Matt Kean had led calls for Western Australian gas to be sent across the country to fill the shortage looming in the east coast market.

But a new report by AEMO shows the west is facing its own supply deficit in 2023, two years earlier than previously predicted.

While that is expected to be manageable, longer term numbers are bleak.

By 2032, WA’s gas market is projected to be in a deficit peaking at almost 23 per cent, AEMO’s gas market statement of opportunities forecasts.

That is partly driven by closures of coal power generation announced by the state government earlier this year.

“From 2030 onwards, the gas market is forecast to move into a larger deficit, with shortfalls over 200 (terajoules per day) between 2030 to 2032,” the report said.

“This is driven by planned coal retirements increasing the need for gas generation and a decline in production from existing gas fields.”

To put the impact of coal closures into perspective, AEMO predicts gas demand for power generation will more than double from 127Tj/d now, to be about 300Tj/d in 2032.

Increasing uptake of renewables will be insufficient to fully compensate for the planned coal-fired power closures, AEMO said.

“The strong linkages between WA’s gas and electricity sectors mean that changes occurring in one sector will have an impact on the other,” AEMO executive general manager WA Kate Ryan said.

“This reiterates the importance of timely investment in new gas developments, firming technology and storage solutions to maintain a secure and reliable energy system.”

Right here, right now

The small gas shortage starting next year could require WA to draw down most of its gas currently in storage.

AEMO estimates WA will have a deficit of 15 terajoules a day next year, or about 1.4 per cent of the market.

That will rise to 4.5 per cent of the market in 2024.

The state will need an extra 45 petajoules to cover the gap between 2023 and 2026, AEMO expects, with the most likely candidate to be using almost all of the 49Pj currently in storage.

Ms Ryan said drawing from storage, or developing new gas fields such as South Erregulla and Lockyer Deep, would be potential solutions.

There are a range of variables in play behind the forecast.

For example, if Bluewaters coal power station were forced to shut next year due to a lack of coal supply, more gas would be needed to keep the electricity grid online.

The numbers in the forecast factor in gas from Strike Energy’s Walyering project.

Between 2027 and 2029, Woodside Energy’s Scarborough project is expected to pump enough gas into the domestic system to temporarily put the market back into surplus.