In the first of our series analysing the Finkel Review, we look at Dr Finkel's assessment on the place of gas in the Australian energy landscape and his suggestions for the creation of 'more efficient gas markets'. These suggestions include both the familiar and the novel, but it is yet to be seen if Dr Finkel's vision of the future will be realised. Partner Igor Bogdanich and Lawyer Darcy McLennan report.
- Increase supply: State and territory governments have once again been urged to lift moratoria on gas exploration and development, and consider unconventional exploration and development on a case-by-case basis.
- Incentivise investment: Gas-fired electricity generators may be eligible to receive large-scale generation certificates (LGCs) as part of the proposed new 'Clean Energy Target' if emissions remain below a prescribed threshold. Energy retailers would in turn be required to purchase LGCs.
- Improve transparency: Gas-fired generators and gas producers may be required to provide additional information to AEMO and the COAG Energy Council, heightening the compliance burden placed on the industry.
- Enhance security: Generators may be subject to a requirement to provide three years' notice of closure, which may influence ongoing investment decisions.
The Finkel Report is the product of an extensive examination of all aspects of the future of the National Electricity Market. (See our previous Client Update: Finkel: the solution for our energy future? for more detail.)
In considering issues in the gas sector, the Finkel Report drew on previous inquiries in this space and covered now familiar ground, such as the ACCC's 2015-16 inquiry into the east coast gas market. It also noted the recent gas market reforms and initiatives driven by the COAG Energy Council and the Australian Government, such as COAG's 'Gas Market Reform Package',1 gas-related measures in the Federal Budget and the Australian Domestic Gas Security Mechanism.2
Set out below are the key recommendations outlined in the Finkel Report relating to gas. We have also considered the opportunities and threats for the gas sector flowing from these recommendations.
|Recommendations||Opportunities and threats for the gas sector|
It is yet to be seen whether Dr Finkel's recommendations will be implemented. Internal divisions within the Federal Government have been widely reported since the release of the Finkel Report, provoking uncertainty surrounding whether Dr Finkel's blueprint will come to fruition.
A number of the recommendations described above have been made in previous inquiries and by myriad stakeholders in the gas industry. Whether the Finkel Report will stop the revolving door of debate in the gas sector or foster real change is unknown, and only time will tell.
- This package includes the establishment of the Gas Market Reform Group to implement reforms including a framework for information disclosure and commercial arbitration in relation to unregulated pipelines, transportation capacity trading reforms, market transparency reforms and broader wholesale gas market reforms.
- The Australian Domestic Gas Security Mechanism is a Federal Government initiative designed to prohibit the export of liquefied natural gas in 'domestic shortfall' years. Read the exposure draft of the Regulations, draft Guidelines and explanatory material for more information.