Energy Minister Chris Bowen has warned Australia is on the precipice of a gas crisis, and the problem will not be solved quickly.
Chris Bowen says plans to introduce more renewables won't be a quick fix for Australian consumers. (File pic) Photo:
On his first day as Minister for Climate Change and Energy, Bowen has left all options on the table to curtail the rising cost of gas and electricity, including a controversial "gas trigger" to requisition supplies of gas intended for export.
"Action is necessary and action is being taken," he promised gas users in his first press conference.
The Australian Energy Market Operator has activated the Gas Supply Guarantee, which will see the gas industry work with the regulator to ensure peak demand for gas can be met.
That follows a cap of $A40 ($NZ44) a gigajoule being imposed in some states, following soaring wholesale prices.
Bowen noted the decision to pull the gas trigger rests with the Resources Minister, but doing so would not have an immediate impact anyway, playing down suggestions it could be used to solve the crisis.
The current cold spell across south-eastern Australia and the collapse of a gas supplier last week have seen the spot price for gas skyrocket.
Prices were already high due to increasing international demand as nations around the world wean off Russian gas and coal.
Problems with some coal stations in Australia have also contributed to the pressure on gas prices domestically.
"Australian energy markets are facing a perfect storm," Bowen said.
"There are a number of factors at play in relation to the very serious and challenging situation with electricity supply and gas supply in particular.
"The former government promised a gas-fired recovery and left us a gas bonfire."
'Gas trigger' wouldn't take effect until next year
The federal government has the power to force exporters to keep more gas onshore for domestic use, under the Australian Domestic Gas Security Mechanism (ADGSM), known as the gas trigger.
Minister for Resources Madeleine King is holding talks with gas companies today to encourage them to make additional supply available.
Bowen said he would not rule in or rule out using the gas trigger, but pointed out a myriad of problems with the mechanism.
"It cannot come into force until 1 January, even if it were pulled today. It is not a short-term answer," he said.
He also noted it requires lengthy consultation and can only be used where there are supply shortages forecast for a forthcoming year.
"It is not [a policy] designed to deal with the current crisis," he said.
'More renewables' will ease pressure, but not soon - Bowen
Labor was elected with a wide-ranging policy to accelerate the shift to renewable energy, which Bowen said was the best solution to address price problems.
But he acknowledged most of those policies would not help in the short term.
"The previous government did not do the work necessary to increase renewables, to increase storage," he said.
"If we had more storage and more renewables and better transmission, we would be much better placed to deal with the current challenges."
Commonwealth, state and territory energy ministers will meet early next week to discuss other policy options to alleviate the price hikes this winter.
The Australian Petroleum Production and Exploration Association, which represents gas exporters, has indicated it will work with the regulator.
"We understand current spot prices, representing only 10 percent to 15 percent of the industrial gas market, are under pressure," said acting chief executive Damian Dwyer.
"We stress that the majority of manufacturers are unaffected because they are on long-term contracts which, not long ago, were offered for this year at price levels around $6/GJ to $9/GJ."
-ABC