Gas bosses turn up heat with 'market failure' warnings - Yahoo News Australia

Gas industry representatives have warned that Australia's electricity market is experiencing a "market failure" driven by the rapid build-out of renewable generation. The warnings centre on the idea that the wholesale price of electricity has fallen so far, driven by the zero-marginal-cost nature of wind and solar, that gas generators cannot recover their fixed costs and are being forced to exit the market or operate at a loss. Gas operators are calling for market reform to ensure that dispatchable generation remains viable.

Where this fits

This is a textbook reliability crisis dressed as a price problem. A renewables-heavy grid with intermittent output requires firm backup capacity. When market signals make that backup uneconomic to own and run, the grid loses resilience. Gas is the interim firming solution, imperfect on emissions, but necessary while battery storage and other options scale. The real problem is not that gas is too expensive; it is that the electricity market has been designed to reward cheapness per megawatt-hour without pricing the whole-system cost of weather-dependent generation. Firm dispatchable power, whether gas or nuclear, must be paid for its availability, not just its output.

What it means

If gas plants exit faster than firming alternatives arrive, Australia faces reliability stress during high-demand periods when wind and solar are low. The short-term consequence is forced reliance on aging coal or diesel emergency reserves. The deeper issue is that a renewables-only transition cannot work without either massive battery storage (still years away and constrained by China's supply chain) or firm baseload generation. Nuclear would deliver that firm, low-emission, low-material requirement. Instead, the policy choice locks Australia into gas as the only legal backup, then struggles to keep it profitable. That is neither cheap nor secure.