Australia’s reliance on natural gas for domestic electricity production could cause consumer electricity prices to soar.
Dr. Jenny Riesz, senior consultant in Energy Strategic Advisory at AECOM, delivered the message during Clean Energy Week, hosted by the Clean Energy Council.
“If Australia invests heavily in gas-fired generation for bulk electricity production while simultaneously developing its LNG export market, electricity prices could be increasingly exposed to international gas markets in the same way domestic petrol prices are linked to global fuel markets,” Riesz said. “In addition, because these markets comprise long lived assets with long development time-frames, any exposure of consumers to high electricity prices would likely occur for an extended period of time until more competitive generation assets were developed and implemented.”
Riesz said the successful separation of electricity and gas prices, and the increase of energy price security, could occur through a continued focus on achieving the 20 per cent Renewable Energy Target (RET) by 2020. That, she said, would promote investment in renewable generation, which would diversify Australia’s generation portfolio and reduce the risks associated with its gas market, such as international price influences.
Riesz also warned of the additional risk of natural disasters and geo-political strife.
“This was demonstrated by Hurricane Katrina’s damaging of US gas refining capacity and recent extreme weather conditions in Queensland’s Bowen and Surat Basins, as well as conflicts such as that in Libya which reduced exports of Libyan oil and increased oil and gas prices world-wide,” she said.
Riesz went on to say the current concerns should be seen as an opportunity to recognise this potential threat to Australia’s energy price security and learn from international experience.
“Delivering energy price security in an age of uncertainty outlines the potential materiality of these issues and highlights the need for further quantitative analysis to ensure an affordable electricity future for Australian consumers,” she said. “Our analysis suggests that at moderate additional expense, Australia’s energy prices can be made more resilient against international market volatility and that achieving the RET targets is likely to be of high value for maintaining a diverse generation portfolio and protecting Australia’s economy.”