AEMO projections ring the alarm bell on WA’s expensive and polluting fossil gas addiction  

Last Friday, the Australian Energy Market Operator (AEMO) released its first longer-term, 20 year, projections for gas use in the WA domestic gas market.

Unsurprisingly the 2025 Gas Statement of Opportunities (GSOO) anticipates ongoing growth in fossil gas demand, seeing gas use in the West reaching record levels in the early 2030’s.

And even though more than 90% of the gas produced in WA is being exported, gas companies are once again calling for even more production to meet the domestic market shortfall projected by AEMO. 
 
AEMO’s projections ring an alarm bell on a state that has grown used to prioritising the interests of gas industry over the climate, the economy, and everyday West Australians. 

The high levels of gas use is inconsistent with the Paris Agreement’s 1.5°C temperature limit and would place national emissions reduction goals at risk. Our analysis shows it would also lock WA households and industry into a future of rising energy bills for at least the next decade. But it doesn’t have to be this way.  
 
AEMO’s projections do not come as a surprise because they reflect current policy settings in a state that is addicted to expensive and polluting fossil gas.

WA remains the only state with no renewable energy or emissions reduction targets, and while the rest of the nation has been getting on with the job of cutting emissions, growing gas use and exports has seen WA’s gross emissions rise by a staggering 49% since 2005.  

Ongoing government support and subsidies for gas-powered development continues to drive this trend. Around 160 TJ/day of additional gas demand from new projects in the mining and industrial sectors is projected to come online by 2030, equivalent to around 14% of total current demand in WA.

With different policy settings, much of this new demand could be met by renewable energy and electrification.  

Policies that keep WA hooked on expensive and polluting gas, when lower cost and less polluting renewable energy is available may be great for the gas industry, but they cause real harm to households and businesses, and are working directly against national emission reduction goals and the Safeguard Mechanism.  

At the same time, the AEMO projections reflect the unravelling of a domestic gas reservation policy in WA that, for many years, has been the envy of the nation. LNG exporters are notionally required to supply 15% of production to the domestic market, but the agency responsible for administering this policy recently revealed that just 8% of production has been provided for local use since exports began.  

This was not an issue when demand in the domestic market was matched to supply, but with projected demand growth that is now changing. Despite this, AEMO’s projections reflect an underlying assumption that the WA government will continue allowing gas companies to prioritise export markets over local consumers, supplying far less than 15% of production on an annual basis.

Withholding this gas from the domestic market drives both gas and electricity bills up in WA, benefiting gas companies and costing everyone else.  

The twin drivers of demand growth and weak domestic gas obligations, lead AEMO to project a widening long-term supply gap in WA’s domestic gas market.

Predictably, gas companies like Woodside are using this to call for faster approvals of new projects such as the controversial, expensive and highly polluting Browse Basin. 

What Woodside won’t mention is that Browse Basin gas would not only increase WA’s emissions, but would cost four times as much as existing domestic market gas according to analysis by IEEFA.  But the high emissions and high cost scenario presented by AEMO does not have to be a reality in the West.

Our analysis shows that with stronger policies to support renewable energy and to prioritise domestic gas consumers over exports, the supply gap projected by AEMO can be eliminated without the need for new gas developments like Browse. 

We find there is potential to significantly reduce fossil gas demand in WA through a faster transition to cheaper and cleaner renewable energy. By adopting a renewable energy target and other policies, and removing subsidies and support for gas use, WA’s economy can begin to reduce and phase out expensive fossil gas far more quickly than the projections suggest.  

Even without these measures, we find that the supply gap could be eliminated if the LNG export industry were required to provide a true 15% of production to WA consumers on an annual basis.  

A better long-term solution would be to replace fossil gas with renewable energy and storage— including through electrifying mining and mineral processing. This would deliver lower energy costs for WA consumers, reduce emissions, and avoid the need for large new and expensive gas projects such as Woodside’s Browse Basin.  

Piers Verstegen is a senior policy analyst at Climate Analytics.