The Government imposed a price cap on domestic gas, a strategy that Brisbane-based State Gas today said would lead to more volatility in the market and potentially have the reverse affect.
However, the intervention was shown to work, at least for now, with steep falls in prices after its introduction.
One of the nation’s major gas suppliers, Shell, which owns QGC and 50 per cent of Arrow Energy, also announced this week it had reversed its suspension of new gas supply into the east coast market. It had frozen new supply because of the Government intervention claiming it would lead to shortages and gas rationing.
However, the ACCC also threatened to punish companies that withheld supply.
While the wholesale plunge was likely to have an impact on domestic prices, the level of prices was still above 2021 levels.
The report follows one from Federal Treasury which indicated that wholesale prices had dropped the most in Queensland with a 44 per cent change over the final two months of last year.
The Australian Energy Market Operator’s latest market report also showed that renewable output was the highest on record while the level of coal and gas fell.
AEMO’s Violette Mouchaileh said that following the Federal Government’s capping of domestic gas and thermal coal markets on December 9, electricity futures prices fell steeply.
AEMO said the ongoing investment in products such as roof-top solar continued to displace grid generation and drive down daytime demand. The National Electricity Market saw minimum demand records in the December quarter.
Wind and grid-scale solar also reached a record peak of 20 per cent of all generation in the NEM.
Emissions from the NEM also fell to the lowest quarter on record.
“East coast gas prices have also dropped from recent record highs to a quarterly average of $17.79 a gigajoule, compared to $26/ GJ in the third quarter and $10.60 in 2021.”
In its market update today, the Richard Cottee-led State Gas said the federal intervention had created uncertainty in the market.
It said domestic demand was high and expected to remain that way into the future because there was no reliable supply-side drivers capable of boosting supply in the short term.
“The Government’s price caps will probably have the unintended consequence of increasing price volatility, thereby benefitting supplier of spot gas,” the company said.