Energy market experts are warning that the energy crisis currently rippling through Australian and global energy markets could last for several years, as Australia’s dependence on fossil fuels leaves households and businesses exposed to surging energy prices.
A confluence of disruptive global events and a local energy market so significantly orientated towards selling Australian coal and gas into international markets is working to send Australian fuel, electricity and gas prices soaring.
With a growing number of energy companies facing potential collapse – with some even begging their customers to shift to other providers – there are growing concerns that households and businesses will be left facing the brunt of higher energy costs.
It’s a situation the new federal energy minister Chris Bowen labelled a “bin fire”.
And several energy market experts have warned that we cannot expect the current energy crisis to be resolved any time soon.
Speaking with RenewEconomy, Renewable Energy Hub analyst Dr Chun Kiu Ng said that, short of governments intervening in energy markets, there were no clear signs that the current energy market crisis would be resolved quickly.
“There aren’t many signals that would indicate prices will be coming down anytime soon. Apart from an intervention from government, which we are already starting to see a little bit,” Dr Chun Kiu Ng said.
“But there are lots of different things at play, and it is very hard to predict. Each country will have their own position on energy security and how Russian energy sanctions eventually play out is also adds uncertainty.”
He added that the global response to the Russian invasion of Ukraine, which has included the bulk of European Union countries refusing to buy Russian energy supplies, has had a significant flow-on impact on markets in other regions.
“LNG to Asia is now being funnelled to the EU, and a lot of coal from South Africa is being diverted there as well,” he said.
“If you take a big energy supplier out of the market, you have to fill that by diverting resources into Europe. So, LNG, coal, oil prices, they’re all reaching highs which we haven’t seen for decades.
“If you look at coal prices, they were fairly steady for the decade between 2010 and 2020. But with everything opening up, and with the increasing energy shortage globally, and now with Ukraine, you see this exponential rise in prices,” Dr Chun Kiu Ng added.
Managing director of Energy Synapse, Marija Petkovic, says this surge in the price of coal and gas, particularly, is to blame for rising Australian electricity prices, adding that ramping up investment in renewable energy sources would be the best way to shield Australian consumers from the higher costs.
“The extremely high prices we are seeing in the wholesale electricity market are being driven by high coal and gas prices as well as ongoing outages at several coal-fired power stations,” Petkovic said.
“What this energy crisis shows more than anything is that Australia needs to urgently put politics aside and get on with the job of building vastly more renewable energy and energy storage to reduce our reliance on fossil fuels.
“Australia is blessed with some of the best renewable energy resources in the world as well as the space to harness them. This could be our biggest competitive advantage for decades to come,” Petkovic added.
The Australia Institute’s climate and energy program director, Richie Merzian, called on Labor’s Bowen to consider options for requiring Australian gas producers to maintain affordable supplies to Australian energy users.
“Australia doesn’t have a gas supply problem; it has a gas export problem,” Merzian said.
“As a matter of urgency, the newly sworn-in minister for climate and energy should examine options to curtail gas exports to safeguard a sufficient affordable gas supply for Australians in the short term.
“In the medium term, this government should look to do everything possible to speed up electrification, helping households get off expensive gas. This would not only save households from skyrocketing energy bills, but free up gas resources for industries that will take longer to transition,” he added.
It was a sentiment echoed by energy and environmental law expert, professor Samantha Hepburn of the Deakin Law School, who said Australia’s status as a major gas exporter left local consumers competing with international buyers for Australian gas.
“The gas crisis on the east coast has been percolating over many years. Since 2015, when the three large LNG producers commenced in Gladstone gas prices have tripled. This is unsurprising given that 85 per cent of this gas is exported overseas,” professor Hepburn said.
“The disruption to the international energy market caused by Russian sanctions have reduced the global supply of fossil fuels. This means any available fossil fuel is fetching record prices on the international market and east coast consumers have to compete with this.”
Energy market analyst and director of Green Energy Markets, Tristan Edis, suggested that the emerging energy crisis could necessitate new obligations on landlords to help ensure their tenants were adequately equipped to keep their energy costs manageable.
“If you want to lower energy bills and you want to do it reasonably quickly and permanently for those that really need help, you must look at addressing the poor quality of rental property energy efficiency,” Edis said.
“Landlords have done well out of property price inflation but have proven utterly uninterested in taking advantage of incentive programs for things like solar, efficient heaters and water heaters and better insulation,” Edis added.
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