Gas prices are at record highs, but a project to bring in cheaper gas to the NSW market can't find a buyer.
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The Port Kembla Energy Terminal, being developed by billionaire Andrew Forrest's Squadron Energy, will likely be finished by the end of this year, but Illawarra businesses and households won't be cooking with Port Kembla gas until at least 2026, the independent energy market operator has said.
In a report forecasting the supply of gas to the east coast of Australia, the Australian Energy Market Operator has pushed back the expected start date from 2024 to 2026.
This follows the consumer watchdog, which has been tasked to monitor the Australian energy industry, reporting that the terminal was unlikely to begin importing gas until 2026.
The reason for the delay is the lack of buyers for the imported gas.
This comes despite prices for gas on the east coast of Australia reaching record highs and the facility having the potential to import cheaper West Australia gas.
The perplexing situation has occurred while businesses in the Illawarra struggle with the high cost of energy prices, as Business Illawarra executive director Adam Zarth points out.
"The impact of rising energy prices, both gas and electricity, is definitely being felt in the Illawarra business community," he said.
"Our February survey of business sentiment showed that energy costs are the number one concern for businesses, and driving down business confidence in our region."
UOW energy expert Ty Christopher said the high levels of volatility in the energy market, and in particular the gas market, has created uncertainty, and with many gas users, from retailers to large industrial users, locked in to long term contracts, this was why Squadron was struggling to find a buyer.
"Investors in a gas fired power plant will not want to place themselves in a negative margin situation where they're buying gas for more than they can sell electricity for," he said.
Squadron Energy CEO Jason Willoughby said the facility was on track to deliver gas in 2026, however one of the main buyers would be itself.
"Port Kembla Energy Terminal will play a critical role in supplying the east coast energy market and it will be a strategic asset for Squadron Energy, providing firming capability as we develop our Australia-leading 20-gigawatt renewable project pipeline," he said.
"Beyond Squadron Energy's needs, we are also seeing significant and growing customer demand to contract gas through the Port Kembla Energy Terminal from 2026 onwards."
Since Squadron Energy purchased green energy firm CWP Renewables, it has taken on the firm's projects including a gas-fired power plant in Dubbo, which is expected to be completed in late-2025.
The Port Kembla gas import terminal is the most advanced gas import facility in Australia, however other projects have become casualties of high gas prices and cheap renewable electricity. A Korean company withdrew its proposal for a gas import facility in Newcastle, with the ACCC warning that other projects may be at risk.
"All the proposed LNG import terminals are exposed to this risk. It is possible therefore that other proposals could be abandoned, or delayed until conditions improve," it said in January.
Mr Christopher said that as coal fired power plants are retired, there will be a need for gas as a dispatchable or firming fuel for renewables, but that the transition to renewables was not smooth.
"What we're seeing is a three step process, we've seen step one, step two is where the uncertainty is, and no one can predict step three."
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