PERTH (miningweekly.com) – The Australian Petroleum Production and Exploration Association (Appea) said this week that the Australian Energy Market Operator’s (AEMO's) decision to activate the Gas Supply Guarantee (GSG) would only be a short-term measure, and that real change in the Australia gas supply struggle would only be brought about by further investment.

The AEMO this week activated the GSG to secure additional gas supplies from Queensland-based gas producers to support gas-powered electricity generation in the National Electricity Market (NEM).  

The producers and pipeline operator have responded positively to the request for additional gas supply, the AEMO said in a statement, adding that it would continue to work with the parties to understand gas supply availability. 

“Challenging generation conditions experienced from early June continue in the NEM. This has resulted in a greater reliance on gas-powered generation and larger than forecast inventory reduction at the Iona gas storage facility in Victoria,” the AEMO said.

In response, AEMO has issued two ‘threat to system security notifications’ to reduce the depletion rates at Iona. This included an initial request for participants to cease purchasing gas from Victoria’s Domestic Wholesale Gas Market for supply to other jurisdictions, and a second request to cease purchases for Victorian electricity generation. 

“Market participants are responding to AEMO’s requests and directions to maintain a secure operating state for Victoria’s gas system. At this stage, there is no impact to gas supply in Victoria,” the AEMO said.

The AEMO expects the gas supply guarantee and threat to system security mechanisms needing to remain in effect until the end of September 2022, or until gas supplies are sufficient and the threat to gas supply caused by Iona storage inventory depletion has subsided. 

Appea acting CEO Damian Dwyer reiterated that the causes of the current pressure on the East coast electricity market were the result of coal outages, relatively low levels of renewable power generation owing to the weather, a colder winter increasing power demand on the east coast and global market pressures arising from the Russian invasion of Ukraine.

“The GSG is a short-term measure. The real and enduring answer is more investment to bring more supply into the market,” he added.