Our verdict on the gas reservation policy - Grattan Institute

Grattan Institute has assessed Australia's domestic gas reservation policy, which requires a portion of liquefied natural gas exports to be set aside for domestic use, and rendered a verdict on its effectiveness. The analysis examines how the policy has performed in practice and what it means for gas supply security and pricing in Australia.

Where this fits

Gas reservation bears directly on the reliability and affordability of Australia's electricity grid. Firm dispatchable power underpins a stable system, and gas-fired generation is the principal backup when solar and wind output drops. The policy shapes how much gas is available domestically at what price, which flows through to electricity costs and the economics of keeping generation capacity in the market. A reservation policy that fails to secure adequate domestic supply at reasonable cost undermines the viability of the grid's dispatchable backbone.

What it means

If the Grattan analysis finds the reservation mechanism insufficient to balance export revenue with domestic energy security, Australia faces a narrowing margin: export-driven pricing squeezes domestic electricity markets, pushing out gas plants and forcing reliance on older coal plant or on imports of renewable energy during scarcity periods. Conversely, if reservation is too tight, it strangles export income and investment in gas infrastructure, eroding the productive base. The stakes are not only economic but strategic. Gas supply reliability at home is energy security; exposure to price spikes or supply interruptions from export commitments is a vulnerability.