Article by James Hall, Angela Macdonald-Smith and Sumeyya Ilanbey, courtesy of Financial Review
13.06.2025
Victoria cannot rely on pulling more gas from Queensland to shore up an energy system pushed to the edge by a cascading set of breakdowns and concerns over the reliability of renewables, with the pipeline flowing south already at full capacity.
Queensland’s Liberal-National government remains staunchly opposed to further propping up the southern state’s energy grid, saying it doesn’t have the gas supply capacity to keep “bailing out Victoria’s bad decisions”.
The interstate war of words was reignited on Friday after an east coast cold snap combined with coal power outages forced Victoria to churn through more than 13 per cent of its expected gas for electricity generation for the year in just three days.
The state has already run through 81 per cent of the gas it was expected to use for power for the entire year, according to the energy market operator’s base case estimates.
The increased pressure on supply comes after the competition watchdog warned in March that supplies could fall short in Victoria on peak demand days in the south-east this September quarter unless gas is diverted from export by Queensland’s LNG producers.
But Queensland Natural Resources Minister Dale Last told AFR Weekend his state would refuse to divert further supply and blamed the critical energy constraints on the Victorian Labor government’s refusal to back new gas projects.
“Queenslanders should not be penalised over unscientific decisions down south that favour ideology over economics and engineering,” he said.
“We don’t have the pipeline capacity to keep bailing out Victoria’s bad decisions. The solution to the southern state gas crisis is for the southern states to develop their gas reserves. We’re not asking them to do anything we haven’t done ourselves.”
Victorian Premier Jacinta Allan, speaking broadly about energy security ahead of the Queensland minister’s comments, said the energy market regulator had confirmed the state had averted its gas supply challenges for another year as a “result of a range of actions” her government had taken, including the approval of a gas project in south-west Victoria and legislation to increase offshore storage.
“The increase, just in the past few months, of some significant gas exploration projects totalling hundreds of millions of dollars that are going on right now has seen an extension of the existing timeline around gas supply being pushed by AEMO to 2029 – so that advice has not changed,” she said.
“When we come to these questions of energy security and supply, we would be best to have these discussions and information based on advice from the experts, the independent authorities – not based on speculation.”
The squeeze in Victoria’s energy supply came amid a period of particularly low wind and solar power generation across much of the eastern states.
That was reflected in wholesale markets, with the power price experiencing extraordinary spikes across the National Electricity Market on Thursday evening. It reached close to $17,000 per megawatt-hour, up to 200 times higher than average prices for the March quarter.
Energy market watchers noted the highly unusual situation of near-maximum prices reached simultaneously in Victoria, NSW, South Australia, Queensland and Tasmania, with the volatility continuing for several hours.
“It’s not often you get market cap pricing in all mainland regions at the same time,” said Dylan McConnell, energy systems analyst at the University of NSW. “Tightness is not just a Victorian problem – there is very little variable renewable generation NEM-wide at the moment.”
But McConnell said the situation was still nowhere near as serious as early last winter when a sustained period of low wind generation resulted in a run on stored gas supplies in Victoria that reduced reserves to near-critical levels.
“That said, the current situation does point to cold windless periods as one of the challenges to manage as we move forward. It’s a bit different from traditional concerns about summer heatwaves and air-conditioning-driven load.”
Electricity market analysis firm Global-Roam noted an improvement in market conditions later on Thursday with the restart of one of the coal power units that had been offline at AGL Energy’s Loy Yang A site in Victoria’s Latrobe Valley.
The B2 unit at the Callide coal plant in central Queensland also started to return to service on Friday morning after a lengthy planned outage, the firm said.
Wholesale gas prices also retreated on Friday, after reaching close to $16.50 a gigajoule in Victoria on Thursday. Prices were at $11.40 per gigajoule on Friday afternoon but were still holding north of $14 in Sydney, Brisbane and Adelaide.
