TSBC Report Tasmanian Gas Market August 2016 

Tasmania’s gas market is a wasted resource and at significant risk of failure without comprehensive reform to make it more competitive and attractive to the small business sector.

This is a key finding of the first comprehensive analysis of Tasmania’s 13-year old gas industry prepared by the state’s leading independent energy consultants Goanna Energy for the Tasmanian Small Business Council (TSBC)

The 111-page report also says that the evidence to date shows the gas market has failed consumers and every effort must be made to reduce gas prices and transmissions costs – the highest in Australia – while at the same time creating a level playing field with the existing electricity industry in Tasmania.

TSBC’s Executive Officer Robert Mallett said “the Goanna Energy report was a wake-up call for the Government and the gas industry”.

“Small business is the engine room of the economy and crucial to the future growth of Tasmania,” Mr Mallett said. “But we are being held back by a range of factors, one of which is the high price of energy. Without serious action and a lot of political will from all parties, this important sector will struggle to achieve its full potential.

“This is why Goanna’s report is crucial. It provides a blueprint for action in a market that is in desperate need of some serious attention.

“The Tasmanian Government is to be applauded for its development of an Energy Strategy to take Tasmania forward. But it must back words with action, and the gas market is crying out for real reform and leadership.”

While the Tasmanian Government must take the lead, the report emphasises the solution to the many challenges facing the state’s gas industry will take the support and involvement of all stakeholders, including the pipeline’s owners. The first logical step is conducting a major review of the gas market and its performance.

Recommendations include:

* A major public review of the Tasmanian gas market. It should cover all aspects of the gas market and how it has developed, as well as its future direction. Key themes for the review must include:

– Growing the market and expanding the network;

– Introducing more competition;

– Ensuring competitive gas prices;

– The future of the market in the absence of significant gas consumption by electricity generation.

* Reduction in high transportation costs to improve the relative competitiveness of gas in Tasmania.

* Increasing the penetration of gas in Tasmania being made a high priority. At present only two per cent of small businesses and five per cent of households are connected to gas.

* Increased effort on attracting competition in the retail electricity market in Tasmania.

* The view of small business being considered in relation to any impact on gas prices and consumers from the renegotiations of the Tamar Valley Power Station (TVPS) gas contract.

* Consider the construction of emergency gas storage facilities in Tasmania as a risk mitigation to the single transmission pipeline from mainland Australia.

Goanna Energy’s Marc White said the small business sector was to be commended for showing leadership in taking a significant role in the state’s energy debate. The report’s findings showed the need for urgent action.

“The gas market in Tasmania has a problem, and finding the right solutions is a shared responsibility,” Mr White said. “The pipeline owners, market participants, the Government and gas users all need to face the reality check that the Tasmanian gas market is a wasted resource in need of reform.

“This reform may cause some pain for participants but it is a far better option than stagnation or eventual failure of the industry in Tasmania.”

Mr White said the timely development of the Tasmanian gas market and the stimulation of competition will only be achieved through an approach that mixes competition with a limited number of targeted government interventions. This has been used successfully in the past to stimulate new or emerging markets, including the initial introduction of natural gas in Tasmania.

“Without intervention in these markets previously, competition, access to new products or services and market growth would have been significantly delayed with attendant economic costs,” he said. “The trick is to target the intervention to assist these other objectives and limit its application.”

TSBC Report Tasmanian Gas Market August 2016