Australia’s energy ministers met this afternoon to discuss the confronting rise in energy prices and the effect continued rises will have on consumers.
While east coast electricity markets and gas suppliers will continue to work constructively with regulators and governments on a way forward, there is a lot of work to be done to ease growing pressures.
The Australian Petroleum Production & Exploration Association (APPEA) said it was important the whole energy system was considered given recent pressures on gas supply were caused by coal-powered generation outages and the inability of renewables to input power as required.
“These are highly complicated regulatory matters and we look forward to continuing consultation with regulators and governments to resolve them," APPEA acting chief executive Damian Dwyer said.
“Today’s meeting recognised the critical role the gas sector plays in meeting the energy security needs of the nation.
“We are doing everything we can to look after customers and fill the energy void left by coal-fired power generators in particular.
“Gas companies have already acted to ensure gas flows to where it is needed using the mechanisms put in place to help us do so – mechanisms which provide the market with transparency, affordability and supply.
“As today’s meeting reaffirmed, gas is delivering energy security to Australia and the current situation highlights the critical role gas will play in decades to come, replacing higher emission coal and as a stabliser for renewables when the wind doesn’t blow and the sun doesn’t shine.
“But to do that needs more investment certainty. Natural gas gives the energy system stability. But the industry needs an investment environment that supports stability.
“Years of needless state moratoriums, bans and delays have only contributed to the situation the east coast energy market is now in. The industry has invested more than $20 billion on supply in the past 18 months. More can be invested under the right investment settings.”
Federal and state ministers have agreed to 11 key measures, one of which was giving the AEMO extra powers regarding gas supply.
“AEMO's discretion is something that would have been useful in recent times and something that will be useful in coming times,” Energy Minister Chris Bowen said.
One measure agreed upon is to progress the capacity mechanism, where energy retailers pay power providers to maintain extra capacity where needed.
“The previous government had said that they would work towards it coming into place in 2025. We need to do better than that,” he says. “I am encouraging the Energy Security Board to expedite their work and get it out for further consultation as soon as possible.”
Bowen said nuclear was not an option to fix the current energy crisis.
Nuclear is the most expensive form of energy. We have a cost of living crisis,” he says. “Energy prices going through the roof. And what’s the big bright idea? They say ‘let’s have the most expensive form of energy we can possibly think of?’”
As for short- and longer-term solutions, ensuring the domestic security gas mechanism, which diverts exports for domestic use, will be in focus beyond its January expiration date.
Resources Minister Madeleine King said, “We will move as quickly as possible to make sure that gas security mechanism for domestic supplies is renewed as soon as possible through regulation.
“At the same time, we will be conducting an urgent review of the Domestic Gas Security to make it actually work.”
Perrottet calls for local supply security
The NSW Premier Dominic Perottet wants Australia to be less reliant on energy imports and secure domestic supply.
“I think it’s incredibly important that nations become more self-sufficient and less reliant on other countries. And I think we need to make sure that we preserve our own energy supplies here in our state,” he said.
Gas reservation supply should be one solution on the table.
“We need to ensure that we have consistent gas supply now and into the future, and all options to be on the table.”
What happened in the market?
The ASX was lower today. The S&P/ASX200 dropped 83.40 points or 1.17% to 7,037.70. Over the last five days, the index has lost 1.93% and sits 4.14% above its 52-week low.
Bottom-performing stocks were Appen Ltd down 7.09% and Lifestyle Communities Ltd down 6.70%.
Crown Resorts Ltd gained 2.04%, trading its highest share price in nearly three years, after the NSW and Victorian state governments gave their blessing to the $8.9 billion Blackstone takeover.
“The Victorian Gambling and Casino Control Commission (VGCCC) has approved the Blackstone Group as a suitable associate of Melbourne’s casino operator and its takeover of Crown as a major change in the state of the casino operator’s affairs,” the regulator said in a statement released on Thursday morning.
Speaking of the risks, the NSW Independent Liquor & Gaming Authority chairperson Philip Crawford said “The probity assessment has also resulted in certain persons being approved to become 'close associates' of Crown Sydney.”
Conditions will apply.
“These conditions will apply on top of the strict requirements that currently apply to the casino operator,” the regulator’s statement said.
Melbourne will become the flagship.
“In reaching this decision, our specialist team put in many months of work investigating the suitability of the Blackstone Group to become an associate of the Melbourne casino operator,” said VGCCC chairperson Fran Thorn.
“Our approval comes with stringent conditions, which balance delivering stronger controls on the casino and ensuring it continues to be the flagship casino in Australia.
“We will take action should any of these conditions not be met by either Blackstone or Crown.”
On the small cap front
The S&P/ASX Small Ordinaries was down 1.77% today and is 12.62% lower on the year. There were a few small caps that made it into the green.