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Victoria’s anti-gas stance is leading to a major power shortage

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By Colin Hay - 
Victorian gas shortage blackouts

The almost rabid anti-gas stance that Victoria has developed in recent years now looks set to come back and bite not only the state but also its citizens and businesses.

With a long-term moratorium against onshore gas exploration and newly introduced policies that pay people to not join the gas network, Victoria has gained a global reputation as an unfriendly place for petroleum companies.

Victoria, like northern neighbour New South Wales, is now faced with major power supply issues.

Blackout warning

The Australian Energy Market Operator (AEMO) warned last week that Victoria was at an increased risk of blackouts from this summer onward.

It noted that the domestic gas supply shifts observed since Q2 2023 have continued, with declining production from gas fields connected to the Longford gas plant in Victoria being the main contributor.

Production at Longford fell by 10 petajoules compared to Q1 2023, with available capacity at Longford dropping below 300 terajoules per day for part of the quarter—the lowest planned capacity since 2004.

State needs more gas

Victorian energy minister Lily D’Ambrosio has confirmed the state needs new gas supplies, after her department warned the government last year that shortfalls were looming.

There have also been reports that the government has been told by local businesses that they are moving elsewhere because they can’t rely on Victoria’s power plans.

AEMO has been warning about declining reserves for a decade.

A major concern for the state’s citizens and businesses is that it is likely to end up like NSW and have to rely more and more on coal to keep the lights on.

Origin deal

Just last week, the NSW government had to quickly make a deal with utility Origin Energy (ASX: ORG) to halt the shutdown of a coal-burning power station because of energy supply shortage concerns.

Origin has confirmed it had been asked to extend the retirement of Eraring for two years to support the security of the state’s electricity supply.

The decision comes at a time when the NSW government is moving to block oil and gas activities off its coast.

This includes plans to ban drilling at the Advent Energy-operated PEP 11 permit, which is estimated to have the potential to contain enough gas reserves to help power the state for a number of years.

Taxpayer dollars at work

There is now a threat that NSW’s taxpayers will have to fork out many millions to Origin to keep the power station running.

The Institute for Energy Economics and Financial Analysis (IEEFA) noted that the NSW government paid Origin $75 million when it handed over Eraring to the utility in 2013.

“Origin enjoyed a number of years making good profits from running Eraring and now if it faces losses, these will be transferred to NSW taxpayers,” the IEEFA said.

“The arrangement announced today could see up to $225m per year paid by the NSW government to Origin to cover any losses they might make.”

“The arrangement also includes potential profit sharing between Origin and the NSW government of up to $40m per year, but this is much lower than the loss coverage.”

Victorian ban

The people of Victoria may be looking at a similar scenario in the coming years.

Earlier this year, the Victorian Greens party reintroduced a bill for an identical drilling ban in Victorian waters to that currently in place in NSW.

The bill would place an immediate ban on any future offshore drilling, as well as exploration, pipelines and infrastructure.

In April, federal resources minister Madeleine King threw veiled criticism at Victoria’s anti-gas stance when she noted that Queensland’s LNG projects were doing the heavy lifting in terms of gas supply for the whole east coast at a time when Victoria and NSW were moving to ban gas exploration.

Victorian opposition leader John Pesutto has already reportedly declared he will extend the life of the coal-fuelled Yallourn power station beyond its set closure date of 2028.