Gas cartel wrecks Australian electricity grid

Via Matthew Warren, former chief executive of the Australian Energy Council, the Energy Supply Association of Australia and the Clean Energy Council, at the AFR:

Wholesale spot electricity prices are now regularly trampolining in Queensland, NSW and Victoria, with prices hitting zero or entering negative territory, and then rocketing back up once the sun has set.

This price volatility is the result of putting gigawatts of intermittent solar and wind on top of gigawatts of inflexible coal generators.

…The reason for this gradually escalating crisis is simple. For the past decade Australia’s national electricity policy has consisted solely of one populist idea: build lots of renewables. We’ve ended up with two national schemes and a host of additional measures by state governments.

But there is nothing else: no policy to ensure there is adequate and flexible storage or peaking capacity to complement the gigawatts of intermittent generation. No scheme for the orderly exit of coal and its timely and complete replacement.

Not quite true. There was a plan. It was for gas-fired generation, which is eminently dispatchable, to stabilise the grid until storage had caught down in price. It’s the same plan underway worldwide.

Sure, we stuffed around with less than optimal policy levers to get renewables up. But that failure pales next to the disaster of gas. It’s role in the plan was destroyed by the emergence of an east coast gas export cartel which priced that fuel out while making it cheap everywhere else, leaving us with no base load stabiliser.

It is one of the greatest policy screw ups in the history of energy. Matched in scale only by the ease of the fix: forcing the gas export cartel to leave more gas here so that gas “peaker” plants can provide the power needed at short notice when renewables fail.

But that kindergarten level answer to the entire energy crisis and transformation has been so beyond our deeply corrupt political economy that when I tell this story at dinner parties nobody believes me.

David Llewellyn-Smith

David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal.

He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.

Latest posts by David Llewellyn-Smith (see all)


  1. They knew….I remember it well, all the new gas tubrine plants there were a few HRSG expansion plans on existing also planned were dumped exactly the same time as the construction crews we being mobilised for the Gladstone gas trains. My company was in the front row seat as EPC to build at least 3 of these plants on the East Coast, then the redundancies came, The only gas turbine plants built since have been a couple in the Pilbara for the mining sector, the APPALLINGLY project managed Inpex power plant in the NT, and a couple of smaller gas engine plants at Newcastle and Torrens Island in South Australia. I think the idea of government and big business was to ram thru coal seam gas in NSW and Victoria as what was done in QLD, so the East Coast would get its supply, they never explained these plans before the public and low and behold backtracked after public opinion turned 1000% against it after seeing gas fires in QLD creeks on TV’s 60 Minutes and coal seam gas became a hot potato.

    • Good input, I’d just add the whole Gloucester Coal seam Gas fiasco.
      The gas is there, the development price is right but WE (yea us, you an me) created an environment where the development of new gas resources became impossible (and not developing became very profitable) so the companies involved simply said F’it. I’m not going to develop these gas resources.
      But that’s all over and it’s too late now to go that route. Truth is we’re actually better off examining other paths that integrate renewables and storage solution (especially distributed storage solutions) and perfecting these systems.
      Lets get fully on board with a true 21st century Electricity solution and leave behind all these out-dated Fossil fuel based generator “solutions”.

  2. Doesn’t this situation just build a stronger business case for storage? Buy cheap spare capacity during the day and charge a higher premium at night. Sure over time it will go down but should balance out.

  3. A neo-liberal policy was adopted. The NEM was and is the policy. Oligopolistic behaviour of participants was inevitable given the relatively small size of the Aust market and the limited capacity of State-grids interconnections. H&H is right to point to LNG exports as the source of market failure and blatant profiteering in the domestic market. The policy failure was to allow LNG exports from CSG fields in Qld.; but then LNP/Qld politics….and corruption!!!

  4. But it wasn’t just coal seam gas from fields in Queensland. Because the cartel controls the pipe lines and the non-CSG fields as well, they sucked up the cheap easily ex-tractable gas from everywhere in Eastern Australia, including Bass strait.
    Disgrace on top of disaster.

  5. The Western Australian domestic gas reservation policy is serving WA rather well in these turbulent times !! All Scummo needs to do is replicate that policy, scale it, tweak it and LEGISLATE it for Australia’s East coast domestic gas market…

    To not take this course of action would be Fvcking TREASONOUS!!
    …just like allowing the CCP into federal parliament… wait, is there a trend emerging here?

    #AusPol @ScoMo