Gas prices hit 10-year high

Gas prices hit 10-year high

We launched our ‘steam services’ division this week.

The idea behind entering this local market, and choosing to do so in a manner that tackles not just fuel supply, but the end-to-end service, is driven by a combination of factors:

  • Rising fuel costs, specifically natural gas, driving the search for cost savings
  • Market fragmentation and under-servicing, creating an environment ripe for disruption
  • Energy policy driving up electricity prices, causing business to seek cost savings

Our mission is simple:

  • Deliver at least 15% savings on lifetime cost of ownership
  • Provide turnkey solutions that we stand by
  • Maintain and operate systems to maximise efficiency, reliability and compliance
  • Provide the ability to save on peak electricity costs via self-generation

We’ve been building toward this outcome for over two years, flagging the potential for local market sales of Coldry back in 2016.

In parallel, we’ve been quite vocal about the escalating cost of gas and electricity and the need to act. The Victorian government has, this week announced its plan to finally act on gas supply constraints through a study into exploration opportunities for conventional onshore gas.

But this won’t be enough. Victoria needs energy diversity.

The below article by Adam Carey in the Sydney Morning Herald highlights the plight.

Wholesale gas prices on the Victorian spot market hit $10 a gigajoule in the December quarter, their highest level in at least 10 years, according to the Australian Energy Regulator, and have doubled since 2016.

And while supply has been cited as the driver behind the rising gas price, Carey goes on to quote Bruce Robertson, an analyst with the Institute for Energy Economics and Financial Analysis, who blames market concentration:

“Australian manufacturers are paying an obscenely high price and they’re going broke, but the solution is not more production,” Mr Robertson said.

“Production has tripled on the east coast of Australia and the price has tripled.”

Regardless, the Victorian government has embarked on a 12-month study of potential underground gas reserves in two large onshore basins that stretch across much of the state’s south.

To be clear, this study is not considering fracking or ‘unconventional’ gas. It is considering conventional onshore gas exploration. The ban on fracking remains.

Having said that, the Victorian Farmers Federation has made it clear:

“I can guarantee if they try to change the moratorium without giving us evidence we will be vocal and forceful in our response,”

David Jochinke, President – Victorian Farmers Federation

If the study shows there are commercial opportunities to safely extract gas without damaging farmland or the water table, the ban on exploration could be lifted after June 2020, enabling exploration to commence.

In terms of energy security, this may be too little, too late, with the AEMO forecasting gas shortages.

And while approval of new exploration would inevitably bring new supply into the local market, as Bruce Robertson noted above, it’s not just about supply. It’s also about market concentration and the fact that gas producers can get higher prices for their product overseas.

Domestic consumers are bidding against a global market.

Adding to export demand is increased demand from domestic power generation. As wind and solar capacity increases, the need for dispatchable backup power has also increased, with gas-fired power stations being increasingly called on to plug the gaps in supply caused by intermittent renewables.

The utility heat market started a shift back in 2014 with the closure of the brown coal briquette plant in Morwell. Those close to the gas network were able to connect. Others installed biomass-fired boilers.

Both groups have been caught out. Gas users by rising prices. Biomass users by issues with supply reliability, quality and the need to supplement with gas or diesel.

In terms of basic energy reliability and affordability, the utility heat market, which is core to so many of our primary agricultural industries, has been forgotten.

Part of the issue is the focus on subsidising wind and solar for electricity generation. These can’t generate affordable, reliable volumes of heat.

The government thought biomass could fill the gap, providing a ‘green’ solution to fuel needs. No so. The feedback we’re getting from the market tells a tale of poor performance, low efficiency, high fouling of equipment, increased downtime for maintenance and the need to call on supplementary LPG or diesel-fired boilers to achieve desired heat production. And that’s assuming business can lock in reliable biomass supplies.

The other part of the issue is the fragmented state of the boiler industry. It’s under-serviced. Many businesses have been advised by ‘experts’ to install systems that aren’t ideal.

Our new steam services business model takes a new approach, partnering with businesses to deliver lower lifetime cost of ownership and improved reliability.

Read more…

Search for underground gas set to ramp up as prices hit 10-year high

13 April 2019 | The Sydney Morning Herald | Adam Carey

Vast swathes of regional Victoria are about to be sized up to see how much natural gas lies beneath the ground and if it can be tapped as a new energy source.

Onshore gas extraction was shut down in Victoria in 2014 following anti-fracking campaigning by farming and environment groups, but the Andrews government will consider lifting the moratorium on conventional gas exploration in June next year…

Source: Search for underground gas set to ramp up as prices hit 10-year high