The AEMC has recommended a three-year extension of a safety net mechanism designed to support sufficient gas supplies for gas-powered generators.

Today the AEMC released a final report on the review of the Gas Supply Guarantee (Guarantee). The nation’s energy ministers asked the AEMC to carry out the review during 2021 and report back to the ministers in the first quarter of 2022.

The final report recommends:

  • the Australian Government extend the term of the Gas Supply Guarantee another three years to March 2026;
  • that an assessment on the long term need for the Gas Supply Guarantee be carried out before March 2026; and
  • that the definition of gas supply shortfall be amended to clarify that a shortfall is considered in the context of part of a NEM region rather than the NEM as a whole. 

The AEMC is satisfied that continuing the arrangements for another three years is likely to be consistent with the long-term interests of electricity and gas consumers. This recommendation is consistent with the draft report.

This final recommendation follows consideration of stakeholder feedback as well as the short to medium term outlook for the east coast energy market.

The AEMC has also looked at the various tools available to support reliability in the NEM as well as the tools that enable gas market participants to actively manage their gas usage.

Our view – and the broad view of stakeholders – is that overall, there appears to be enough near-term supply for gas-powered generators to get what they need during electricity peak demand periods.

The Guarantee was set up four years ago as an extra safety net mechanism to encourage gas producers and pipeline operators to make gas available in times of peak electricity demand.

Since then, several new tools to provide greater transparency have been introduced into the NEM and the east coast gas market which help to manage potential gas supply shortages.

Even with these new tools, we recommend a precautionary approach to keep the Guarantee for another three years as the market is in transition and the mechanism is a low-cost option to help manage the risk of any potential shortage.

For more information and contact details, visit the Review of the Gas Supply Guarantee project page.