The crisis that has gripped the East Coast gas market in recent weeks – and has worsened since Weston’s bankruptcy – is contributing to the deteriorating energy price situation across Australia, where wholesale electricity prices have also risen. and through to households and industry.
The extreme gas prices will be beyond the reach of many manufacturers who rely on spot prices to source their gas because they were unable to lock in contract rates at prices they deemed affordable at the time.
They come as hundreds of Weston customers along the East Coast were transferred to “retailers of last resort” such as AGL Energy, where many received standard rates tied to wholesale prices, but with an extra mark-up.
Textile manufacturers and others have said they cannot continue to operate at the high rates and will have to consider closing factories as they call for government intervention to control prices.
Mr Willox said that short-term responses are needed to help vulnerable industries and households, along with longer-term measures to change demand and increase the supply of fuels.
“The price pain is already intense for those companies that suddenly need new energy contracts amid local and global turmoil,” he said.
“Households will feel the blow of higher standard electricity prices from July, and more pain is coming for everyone.”
No luck with alternative supplies
Causmag International, a NSW manufacturer of magnesium products that was a customer of Weston but is now being asked to pay more than $40/GJ for gas, has been unable to find an alternative supply.
“Our broker is still exploring the market,” said General Manager Aditya Jhunjhunwala. “No luck so far.”
The high prices are comparable to the shocking price spikes for gas and electricity in Britain last northern autumn, which caused the closure of energy-intensive industrial plants and forced dozens of smaller energy retailers out of the market.
Josh Stabler, director of energy consultant Energy Edge, noted that three of the four East Coast domestic gas markets are now managed by the AEMO under imposed price caps.
Last week, prices in the Sydney and Brisbane markets began to be monitored, at about $28/GJ in Sydney and $40/GJ in Brisbane, Energy Edge said, based on rules introduced when Weston’s customers were transferred to ” retailers of last resort”.
On Monday, the Melbourne market broke the cumulative high threshold for prices allowed over a seven-day period under energy market rules, also limiting the market price to $40/GJ.
A ministerial direction in NSW to be issued on Monday would see the cap on Sydney’s price rise to $40/GJ like the other states, Stabler said.
Victoria’s situation was exacerbated by very cold weather expected to strike in the coming days as a result of a so-called “polar wave”, resulting in a predicted gas demand for the retail market of 1247 terajoules per day, more than the peak of last year, Mr. Stabler added. † Gas demand in Victoria on Wednesday is expected to be 92 percent higher than on the same day last week, he said.
Stabler said AEMO’s intervention meant that prices that would reach $85/GJ in Melbourne on Tuesday and $800/GJ on Wednesday – “luckily for the beleaguered energy markets” – would be capped at $40/GJ.
LNG exports from Queensland do not appear to be causing the pressure, with East Coast LNG exports declining this month. EnergyQuest consultant Graeme Bethune said Gladstone’s LNG exports for May were 1.784 million tons through May 30, up from 2.068 million tons in April.
But this month, more gas was used in the domestic power generation market to offset a 26.9 percent drop in solar production, said Dr. Bethune, citing preliminary figures for May.
He said gas consumption is up 34.6 percent this month, accounting for 9.5 percent of generation, from 7.2 percent last month. Hydropower generation also rose sharply, at 58.6 percent, while coal and wind were both down 1.9 percent.