The dash from gas. Could demand in New South Wales fall to half?

Gas transmission and distribution costs often make up the largest part of a consumer’s gas supply bill [1]. Investments in gas supply infrastructure are based on estimates of future demand. If demand is overestimated, unnecessary infrastructure is built. Such poor investment decisions drive up the costs that small and large gas consumers must pay. Recent unprecedented electricity price increases in New South Wales (NSW) were partly due to overinvestment in network infrastructure that, in turn, was partly a result of year-after-year overestimation of electricity demand by the responsible planning bodies. A present danger is that future gas demand in NSW is now likewise being overestimated.

Rather than continuously growing over the next ten years, there are many reasons why NSW gas demand will decline. Wholesale gas prices in eastern Australia are forecast to increase at an unprecedented pace – doubling and even tripling - as a result of imminent coal seam gas exports to Asia from Gladstone, Queensland. Rising gas prices will dampen domestic gas demand across NSW and the other eastern states. Other factors will act in concert with rising gas prices to drive down gas demand. These include the carbon price repeal, ongoing energy efficiency schemes, environmental conservation efforts, warmer winter temperatures, technological advances, and the falling costs of alternatives to gas.

With respect to gas supply, NSW is situated in the middle of the interconnected eastern Australian domestic gas market. Since the mid 1970’s, gas for NSW has largely been supplied via pipeline from the neighbouring states of South Australia and Victoria. More recently, significant quantities of recoverable coal seam gas have been identified within NSW itself. However, some farming and community groups are concerned about the impacts and risks posed by this industry.

The NSW state government has responded to the changing eastern Australian gas landscape by revising coal seam gas production regulations. The NSW state government and parliament are investigating how rising gas prices will impact consumers.

Download PDF File (1.6 MB)

Tim Forcey, Mike Sandiford

Melbourne Energy Institute

Reports and working papers

Research Areas:
Geothermal; Gas; Energy storage; Geological resources; Distributed energy

Receive the latest in energy news from across the University Subscribe here