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Securing gas supplies for domestic consumption over the long term Tim Nelson APPEA Conference - May 2012 - AGL External. Agenda. The objective function of energy policy The critical role of gas in Australia’s economy Supplies of gas in east-coast Australia

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Securing gas supplies for domestic consumption over the long termTim NelsonAPPEA Conference - May 2012 - AGL External

agenda
Agenda
  • The objective function of energy policy
  • The critical role of gas in Australia’s economy
  • Supplies of gas in east-coast Australia
  • Demand for gas in east-coast Australia
  • A projection of demand/supply in 2030
  • Climate change policy
    • Economics of gas-fired generation
    • Role of gas-fired generation
  • A projection of demand/supply in 2030 (including power generation)
  • Policy implications
    • Integrating planning and energy policy
    • A lesson learned from electricity

APPEA Conference

May 2012

AGL External

energy policy objective function
Energy Policy Objective Function
  • Energy is considered an essential service for residential consumers
  • Importantly, gas is also a vital input in the production of many domestically produced goods and services
  • In this context, energy policy has three primary objectives :
    • Security of supply;
    • Minimised cost; and
    • Removal negative production externalities (i.e. greenhouse emissions)
  • Inherent conflicts exist between these objectives:
    • Removing negative externalities increases end user pricing
    • Greater security of supply may increase end user pricing

APPEA Conference

May 2012

AGL External

business use
Business use

Many industries are critically reliant upon natural gas for production of their goods and services

APPEA Conference

May 2012

AGL External

household use
Household use

3.6 million small connections to the east-coast gas network that use gas for “essential service” applications

  • Hot water
  • Cooking
  • Space heating

APPEA Conference

May 2012

AGL External

supply of natural gas
Supply of natural gas

East-coast natural gas supplies are now dominated by coal-seam gas

APPEA Conference

May 2012

AGL External

demand for natural gas1
Demand for natural gas

All mainland east-coast states use significant quantities of gas for a diverse range of uses

APPEA Conference

May 2012

AGL External

demand for natural gas2
Demand for natural gas

Growth in demand for natural gas has been steady since 1980 after rapid growth in the 1970s

APPEA Conference

May 2012

AGL External

demand for natural gas3
Demand for natural gas

But demand for gas is set to go through a “step change” due to the development of LNG projects in QLD

APPEA Conference

May 2012

AGL External

demand supply position by 2030
Demand/supply position by 2030

There is a tight supply/demand balance by 2030 even prior to the consideration of new gas-fired generation

APPEA Conference

May 2012

AGL External

gas fired generation
Gas-fired generation

The Clean Energy Future Act is likely to alter the economics of base and intermediate power generation

APPEA Conference

May 2012

AGL External

gas fired generation1
Gas-fired generation

But changes to gas pricing alter the economics related to fuel switching for the purpose of emission reduction

APPEA Conference

May 2012

AGL External

gas fired generation2
Gas-fired generation

And peak demand continues to grow requiring further investment in gas-fired open cycle turbines

APPEA Conference

May 2012

AGL External

gas fired generation3
Gas-fired generation

Both climate change policy and peak demand generation is likely to result in an increase in gas-fired generation

APPEA Conference

May 2012

AGL External

demand supply position by 20301
Demand/supply position by 2030

There could be a shortage of gas across the east-coast by 2030 if significant new power generation loads materialise

APPEA Conference

May 2012

AGL External

policy implications1
Policy implications

There must be greater integration of energy policy and planning policy reflecting the importance of security of supply

  • This paper has demonstrated the extremely tight demand/supply balance for east-coast gas to 2030
  • Gas plays a critical role in the economy
    • Essential input for business
    • Essential service for households
  • Rapid development of coal-seam gas reserves has increased community focus on production of natural gas
  • But there has been little community focus on security of gas supplies
  • Policy makers and the industry need to work together to communicate the importance of securing gas supplies
  • Integration of planning policy and energy policy is critical

APPEA Conference

May 2012

AGL External

a lesson learned from electricity
A lesson learned from electricity

Sensible public policy may become more difficult if issues are not addressed ahead of time

Source: Media Monitors

APPEA Conference

May 2012

AGL External

further information
Further information

AGL Sustainability Report (online and concise summary)

www.aglsustainability.com.au

AGL Sustainability Blog

  • http://www.aglblog.com.au

Nathan Vass

Head of Corporate Communications

phone: +61 2 9921 2264

mobile: +61 (0) 405 040 133

e-mail: [email protected]

John Hobson

Head of Capital Markets

phone: +61 2 9921 2789

Mobile: +61 (0) 488 002 460

e-mail: [email protected]

APPEA Conference

May 2012

AGL External

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