Issue 240 April 2025
With the federal election now set for 3 May, and politicians and the media in full campaign mode, the question of how far energy issues will influence the outcome is receiving a lot of attention – especially as it may be a deciding factor for voters contemplating supporting a third party, something the pundits suggest may be highly important this time round.
“You're not going to have a strong, sustainable economy until you get energy policy right” – Innes Willox, CEO, Australian Industry Group.
“In the febrile environment of the federal election campaign, an uneasy consensus seems to have emerged between the major parties on an unlikely topic: the shortcomings of the gas industry in Australia and the need to bring it to heel” – Daniel Mercer, ABC energy reporter.
“Australia has lost its cheap energy advantage, if only because it was always going to be more expensive than advertised to decarbonize a fossil fuel-intensive economy” – Michael Stutchbury, editor-at-large, Australian Financial Review.
“Peter Dutton has made energy affordability a central part of his campaign, vowing to prioritize domestic gas supply, address shortfalls and reduce energy prices” – The Nightly digital newspaper.
“Energy policy is too significant an issue to be decided in the heat of an election campaign” – Cecile Wake, Shell Australia chair. “There is a danger that, if it gets caught in the dynamic of an election, we can have unintended consequences that are very difficult for anybody to walk back from or to modify.”
“Real vision and a bipartisan approach are needed to get Australia’s energy transition back on track” – Wake.
“This is a contest between a flawed government and a still unconvincing opposition. The risk for Albanese and Dutton is that neither captures the Australian imagination and that both major parties struggle, with their primary vote support suggesting the May 3 election may become a pointer to a more fractured nation and another big crossbench” – Paul Kelly, editor-at-large, The Australian newspaper.
“The big parties are exhausted. Their political machines are creaking. They have lost the trust of a large chunk of the population” – media commentator Chris Uhlmann.
“I am not sensing much momentum from the election campaign, and even less enthusiasm from voters. To be frank, many no longer care. They know there is nothing on offer for ordinary Australians. For them, it’s another ‘least worst’ election with expensive promises, weak offerings and unlikely pledges” – Alexandra Marshall, The Spectator Australia.
“In the past three years, I’ve spent a lot of time all over Australia speaking to people whose votes will decide the next election. Everywhere people tell me this country is going in the wrong direction. They can’t afford to pay their bills. They’re worried they’ll lose their homes or businesses. They’re hurting and angry” -- Nyunggai Warren Mundine, Centre for Independent Studies. “As for energy policy, I don’t believe Australians want to hear any more politicians going on about targets that everyone knows will never be met. They want to know when they’ll get affordable, reliable and abundant electricity again.”
“The cost of living remains at the forefront of the election” – Michele Levine, CEO, Roy Morgan research and polling company.
“We know cost of living is the number one issue for Australians. We know Australians, like people right around the world, are doing it tough with the increases in cost of living in recent times. That's why they deserve a government on their side. A government making decisions like short-term energy bill relief and, longer term, the plans to introduce more of cheaper, more reliable energy” – federal Climate & Energy Minister Chris Bowen at a media conference in March.
“If Australians had a dollar for every time a politician promised to reduce their power bills, they might actually be able to afford them” – reporter Ryan Cropp in the Australian Financial Review.
“Energy security is an easy target to be a political football and political partisanship is not good for producers or for consumers of gas” – Mark Hatfield, Chevron Australia managing director. “Some of the things we’re seeing now are maybe some short-term fixes that could have long-term implications with negative outcomes.”
“There is now not enough gas available outside the production of Queensland LNG producers to meet demand on the east coast, and that position is getting worse as long-term production in Gippsland in Victoria declines” – Tony Wood, Grattan Institute.
“Gas is needed to meet electricity demand when the mix of coal, hydro and renewables is not enough to meet demand. When this happens, the high cost of gas tends to push up the wholesale price of electricity” – Wood.
A majority of Victorian voters in the key federal electorates of Kooyong and Goldstein believe that natural gas has a long-term role in the State’s energy mix, research commissioned by Australian Energy Producers shows.
AEP says: “With Victoria facing peak-day gas shortfalls from 2028, a poll of 1600 voters found that 86 per cent of voters in Goldstein think there is a role for gas, 61 per cent citing a long-term role. In Kooyong 81 per cent of voters believe there is a role for gas, 52 per cent citing long-term.
The poll also found that eight in 10 households in the two Melbourne electorates rely on gas for cooking, heating and hot water, and strongly oppose the Victorian Government’s plan to force them off gas.
AEP chief executive Samantha McCulloch comments: “More than two million Victorian households are connected to gas and a third of the State’s manufacturing energy needs comes from gas. Natural gas also contributes $22 billion a year to the state economy and supports more than 40,000 jobs across the State.
“The results of the research send a strong message to candidates contesting this election that cost-of-living and rising power bills is front-of-mind for Australians,” she adds.
Cecile Wake, Shell Australia country chair, told the Australian Domestic Gas Outlook conference on April 1 that, for too long, the conversation in this country around energy policy and the energy transition has been polarised and politicised. “It has been characterised as a zero-sum game and this has not served the millions of businesses and households that rely on secure, reliable and affordable energy,” she declared.
Wake noted that the first salvoes fired in the federal election have placed the critical role of gas for Australian energy and for the economy in the spotlight again, risking unintended consequences when it becomes part of polling dynamics.
“Natural gas – which is critical for our national prosperity, for our basic energy security, and to support a deeper penetration of renewable generation – has been in the crosshairs of this debate for too long,” she said, urging a shift in the debate "from ideology to a balanced and rational discussion about the opportunities, the trade-offs and the choices we all need to make.”
She added: "It is time for a grown-up, honest conversation about not just the opportunities of the energy transition, but also the realities, the dilemmas and the trade-offs. Australia cannot dismantle the current energy system faster than we can build the low carbon energy system of the future.”
Wake called out three myths about gas distorting the Australian energy debate.
The first, she said, is that “we can ban all new gas investment without consequence."
She said calls for a blanket ban on all new gas investments imply that Australia can simply ‘flick the switch’ with no impact to our energy security or our economy. "That is both irresponsible and misleading.”
The second myth is that "LNG producers send all the gas to export.”
Rather, Wake said, “even without a formal domestic gas reservation, in the 10 years since LNG exports began in Queensland, the Shell project has supplied an average of almost 15 per cent of all available gas produced to the domestic market, much of it sold at a considerable discount to LNG netback prices."
She noted that Queensland gas, once uneconomic to develop without the scale of LNG projects, now flows to the domestic market. "It’s projects like those in Queensland that are keeping the lights on in cities like Sydney.”
And she pointed out that Shell QGC alone over 10 years has:
• Contributed almost $2.4 billion to the Queensland government via royalties, infrastructure and land taxes – which has been used to deliver essential services to all Queenslanders;
• Spent $6.7 billion with Queensland suppliers;
• Provided more than $40 million in community contributions; and
• Negotiated 3,300 landholder agreements, resulting in $370 million in payments to landholders since 2011.
The third myth, Wake said, is that Australian LNG producers pay no tax. "The facts are that our industry paid about $17 billion in tax for the 2023-24 financial year in the form of company income tax, PRRT, royalties and excise.”
The Shell chair said Australia now finds itself in “a perverse situation for a resources-rich country” because “energy policy inaction, a quagmire of regulatory approval complexity and retail politics are combining to starve Australia of the international investment it desperately needs.”
Whoever wins the May federal election will be pitched almost immediately in to dealing with a significant eastern States energy challenge on the basis of a new report by the Australian Competition & Consumer Commission.
The ACCC is predicting gas supply in the east coast market could fall short by nine petajoules in the period July to September if LNG producers export all their uncontracted gas. This period, which includes winter months, usually sees the highest demand domestically for gas due to colder temperatures.
Due to a fall in production and increased exports, the supply shortfall is projected to reach a historic high of 40 PJ in the southern States for the September quarter.
The ACCC says its revised outlook, coupled with market risks such as higher demand for gas in case of unexpected weather events or outages of coal-fired power plants, increases the risk of a shortfall across the east coast without access to the LNG producers’ surplus gas.
“This changed outlook reflects the susceptibility of the supply/demand balance to short-term reductions in gas production and changes in LNG producers’ intended exports and swaps,” ACCC commissioner Anna Brakey said in a media statement. “The east coast supply and demand balance is projected to worsen further over the next few years – which will increase the impact of LNG producers’ decisions on the market.
“It remains crucial that LNG producers have regard to the domestic outlook before making any significant variations to export volumes or schedules.
“To ensure that the east coast gas market has enough gas this winter, including through any significant demand or supply shocks, we recommend that the federal government work with LNG producers to secure additional gas, which is currently uncommitted, for the domestic market,” Brakey said.
The predicted September quarter shortfall of gas is twice that of the same time in 2024, according to Brakey, due to declining production from the Gippsland, Otway and Cooper gas production basins and higher forecast demand for gas-powered electricity generation.
The ACCC report also highlights the importance of sufficient storage in the southern States to avert a shortfall.
Beach Energy chief executive Brett Woods told the Domestic Gas Outlook conference in Sydney on April 1 that both main sides of the Australian political divide now realise the importance of natural gas – but both are adopting positions that will make it “extremely difficult” to increase domestic supplies.
Woods added: “After a long education process, most sides of politics have now found religion and recognise that gas is absolutely critical to Australia’s energy security, jobs, and to work alongside renewables – but on May 3 voters face the prospect of duelling gas policies that disincentivise exploration and production of domestic gas close to where it is needed on the east coast.”
However, the ADGO audience heard a different approach from large consumers. Innes Willox, CEO of the Australian Industry Group, told them that gas users were broadly supportive of the Coalition’s approach, as set out by Opposition leader Peter Dutton.
“When it comes to the Opposition policy, you’ll find very strong support within the customer base of industry for what’s been proposed,” he said. “And that’s because of exasperation with where we’ve got to already around reliability, price, contracting, the like.” All policy options should be on the table, he said, including more projects, gas import terminals and domestic gas reservation.
As I was wont to say in another working life, actually getting useful information about complex energy issues from the mass market media is like standing under a waterfall with a tin cup to secure a drink.
The core issue is not a shortage of information but the deluge of opinion, a considerable amount of which is provided by people with strong views and/or vested interests.
This is never more so than during an election — and it is particularly true during the 2025 federal poll, one where the voters’ opinions about energy problems and promises are seen to be of special importance to the outcome.
There are, of course, people offering views and analysis that are worth reading or hearing, but what they provide tends to get buried in the mostly meretricious pile of what’s on offer — and at present by political spruikers selling their wares.
The Australian Financial Review, which is read by a relatively small number of voters, is a “go to” source for me more frequently than its up-market rivals because it has a quite strong focus on energy information that I find useful and/or interesting.
In late March, as the federal poll took over media attention, one of the AFR reporters, Ryan Cropp, published a “think piece,” as such commentaries are known in the journalism trade, that hung its content on this point: "political leaders have been promising lower power bills for two decades — but, with the energy transition in full swing, it’s high time they came clean about its true costs.”
Cropp’s thesis was: "Australia’s energy system is at a crossroads. It is reliant upon an ageing and increasingly unreliable fleet of coal-fired power stations that will eventually need to be replaced. Whether governments choose to do that with renewables, nuclear or something else entirely, it’s going to cost a lot of money. And no political party has yet had the courage to level with the Australian people about the true price of this uncomfortable reality.”
And he cited economic consultancy HoustonKemp to make the point that underlying electricity prices have trebled over the past 20 years compared with a 66 per cent increase in broader prices in the economy.
As Cropp wrote, “Energy policy can be punishingly complex. The forces that drive long-term changes to the price you pay on your power bill aren’t always straightforward; analysts build entire careers as understanders and interpreters of the system. What is undeniably true, though, is that Australians once paid much less for their power.”
A key factor, as he said, is the politicisation of the “sustainability theme” over the past quarter century.
Citing an energy industry executive who wanted to remain anonymous, he underlined that the “transition" plan has not been produced by engineers on a least-cost basis. The executive he interviewed added: “This is a transition that has a largely political driver and that driver has not always been conducive to coming up with the best solution. We’re learning as we go. And we’re wearing the cost consequences of that.”
As Cropp notes, the present federal energy minister, Chris Bowen, has boosted renewable power, notably wind and solar, as “incredibly cheap.” And he then quotes Greg Houston, an energy economist at HoustonKemp, saying that this is a “half-truth”.
“The big lie in terms of the energy transition is that this is all going to be cheaper,” Houston told the reporter “It is cheaper in a very literal, narrow sense – renewables have a marginal cost of zero once they’re installed. But they need massive network investment.”
And Houston went on to say it is hard to see a situation where either the Coalition’s or the ALP’s plans bring down power bills in the short term.
“Cost overruns are happening everywhere.".
Now these are just bits of Cropp’s commentary — I recommend reading the piece in full — but they go to a core problem for voters next month: who to trust to guide and manage Australia out of the energy swamp in which we are collectively mired?
The vote on 3 May will show what the masses think or hope.
Keith Orchison
1 April 2025