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National power shortages looming: regulator warns

Australia is facing a choice between power cuts and limiting gas supplies for residential and industrial users.

An assessment by the nation's energy market regulator also warns rising energy prices may threaten the financial viability of some businesses.

The Australian Energy Market Operator says the gas and electricity markets can no longer be viewed in isolation and there was a need for a single energy view from a national perspective.

There could be widespread power shortages in NSW and South Australia from next year, followed by Victoria in 2021 and Queensland from 2030, the regulator warns.

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"If we do nothing, we're going to see shortfalls in gas, we're going to see shortfalls in electricity," chief operating officer Mike Cleary told the ABC on Thursday.

"If we use the gas for electricity, the potential for shortfalls are in the domestic and the industrial (supplies). If we use it in industrial and domestic, the shortfalls will be in electricity."

Energy supply shortfalls could be mitigated in the short term by increasing coal-fired generation and renewable energy output combined with increased gas production and the possibility of LNG exporters redirecting a small portion of their production to the domestic market.

Modelling showed supply shortfalls of between 80 gigawatt hours and 363 gigawatt hours could be expected from summer 2018/19 until 2020/21, if there was no new development to support more gas-powered electricity generation.

Federal Energy Minister Josh Frydenberg said the projected gas supply shortfall had the potential to hurt both residential and industrial customers.

"This report is another reminder why the states and territories, who are locking up gas with moratoria, bans and regulatory restrictions, need to urgently rethink their position," he said.

Australia was now exporting two-thirds of what the country produces, leading to a tight gas market, the minister said.

"What we need is more gas supply and more gas suppliers," he said.

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Quarantining new exploration for domestic use was a "creative" suggestion from the Queensland government and worthy of further consideration, Mr Frydenberg said.


* Declining gas production may result in insufficient gas to meet projected demand for supply of electricity from summer 2018-19.

* Maintaining system security is becoming more challenging, increasing the risk of supply shortfalls in both gas and electricity markets.

* Exploration and development of new gas fields would increase supply in the longer term.

* Continued upward pressure on gas and electricity prices may threaten the financial viability of some commercial and industrial customers.