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States make landmark energy agreement amid warning of more power shortages

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Federal Energy Minister Chris Bowen has given the energy market operator additional powers in a bid to avoid gas shortages next winter, as well as enshrining a landmark emissions-reduction objective for the industry.

Following a meeting between Mr Bowen and his state counterparts on Friday, it was announced that the Australian Energy Market Operator [AEMO] would have the power to shore up domestic gas supply to the country’s east coast market from next year.

The ACCC earlier this month released a scathing report into the gas market, which warned of a worsening energy shortage because producers were chasing higher profits overseas and exporting too much gas.

The report forecast a 56 petajoule (PJ) east coast gas shortfall in 2023 – equal to about 14 container ships’ worth – a massive increase from the 2/PJ shortfall that was identified this time last year.

Two years of challenges

Australians have endured a spike in gas and electricity prices this winter as demand exceeded supply, despite a strong export market.

Mr Bowen said AEMO had also warned that the Australian electricity market’s challenges would remain for the next two years.

The energy reforms include giving both federal and state ministers the power to declare certain new electrical transmission lines as being of national significance.

Mr Bowen said the declaration would allow for the transmission lines to be delivered on time.

The meeting also saw the national energy objectives updated for the first time in 15 years, with ministers agreeing to an emissions-reduction objective.

Mr Bowen said that while the agreement at the meeting would not solve all issues in the sector, it would go a long way to providing more reliable energy.

‘Important next step’

“It’s fair to say the challenges remain, they remain this year, they remain next year, into the immediate future,” he told reporters.

“It’s not a silver bullet, but it is an important next step building on the reforms we agreed in June in relation to AEMO’s power to buy and store gas.”

The emissions-reduction objective will ensure that measures such as net-zero targets would be delivered in the best interests of energy customers.

“It might not sound like much, but this is very important,” Mr Bowen said.

“It sends a clear message to our energy market operators that they must include emissions reductions in the work that they do, in the objectives they have, in any advice or decisions they make.”

Queensland Energy Minister Mick de Brenni welcomed the emissions objective outlined in the meeting.

“It’s a clear and direct signal to the entire nation as well as the global community that everyone is now working together in this new energy era,” Mr de Brenni said.

“This will make sure that our market bodies look beyond just electrons and dollars when they’re taking actions and making decisions on behalf of our national energy market,” he added.

Ministers at the meeting also agreed to reform the ‘retailer of last resort’ regime.

The regime is currently designed so electricity or gas can still be provided to households and businesses should there be a temporary failure in the energy market.

NSW Energy Minister Matt Kean said the domestic supply of gas needs to be ensured, especially with large amounts being exported.

‘Constructive and productive’

“We need to prioritise Australian gas for Australian gas users,” Mr Kean said.

“What we don’t want to see is domestic gas producers prioritising profits and exports ahead of local users.”

Mr Kean said the latest meeting of energy ministers was the “most constructive and productive” in recent years, following on from the reforms proposed.

“This is the first time we’re all on the same page moving forward to build a modern energy system that’s going to benefit consumers,” he said.

“It’s going to benefit businesses, it’s going to benefit the environment. And most importantly, it’s going to benefit our economy.”

A First Nations strategy for energy will also be developed, which will be co-designed with Indigenous people.

-with AAP

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