The Australian Energy Market Operator (AEMO) has revised its outlook for the east coast gas market – tempering previous warnings of imminent shortages as gas consumption continues to fall.
The latest report indicates that seasonal supply shortfalls, which were previously expected to emerge as early as this winter, are now unlikely in the near term.
With the shift towards renewable energy accelerating, some analysts suggest that reliance on gas will continue to diminish, reducing the need for new supply investments.
Gas consumption falls
According to AEMO, a combination of factors has driven the drop in gas demand. A milder winter reduced household heating needs, while higher gas prices have discouraged consumption across residential, commercial and industrial sectors.
The transition towards electrification has also played a role, as more households and businesses switch from gas to electricity for heating and other energy needs.
The revised projections show that gas consumption among commercial, residential and industrial users is expected to decline steadily through to 2044, with industrial demand falling due to plant closures and disruptions.
The downward trend in gas usage has freed up supply for major industrial users, helping sustain manufacturing activity in Australia.
Long-term supply risks
Despite the improved short-term outlook, AEMO has reiterated that structural supply risks remain, particularly beyond 2028, when production from the Bass Strait is expected to drop off.
The Longford gas plant in Victoria, which has historically supplied two-thirds of the gas used on the east coast, is set to wind down as reserves in the Bass Strait are depleted.
AEMO has warned that, without further investment, peak-day supply shortfalls could emerge from 2029.
The agency has suggested several potential solutions, including new gas field developments, expanded storage and transportation capacity, or even importing liquefied natural gas (LNG) to offset domestic declines.
Future gas investment
While AEMO maintains that gas will remain critical for firming power supply as coal-fired generation phases out, some energy analysts dispute the need for further gas investment.
They point to the continued decline in gas demand, with residential and commercial usage falling 13% over the past two years and gas-fired electricity generation dropping 60% over the last decade.
Critics also argue that past AEMO forecasts have overestimated demand, leading to warnings of shortages that have yet to materialise.