You can’t manufacture cheap gas by decree - AFR

The Australian Financial Review reported on the Australian Energy Market Operator's finding that wholesale gas prices cannot be artificially suppressed through government intervention or price controls. AEMO's analysis indicates that price caps would distort investment signals and reduce supply, ultimately making shortage and volatility worse.

Where this fits

This is a cost and reliability story. Australia's renewable buildout depends on gas as the dispatchable backbone during low-wind, low-solar periods. Gas is not optional in a high-renewables grid; it is the firming fuel of necessity. When policy attempts to cheapen gas by decree rather than address supply fundamentals, it signals that the true cost of the transition, the gas plant, the pipeline, the fuel, the standby margins, is not being counted. Cheaper gas cannot be legislated into existence. The alternative is either accepting higher wholesale prices as the cost of firm backup, or reconsidering the firm-power source: nuclear plants do not bid into gas markets and do not require fuel-cost forecasting, but nuclear remains banned.

What it means

Australia is betting its grid reliability on a dispatchable fuel (gas) whose price it cannot control, supplied by markets it cannot command, while rejecting the one firm, low-emission generation source that does not depend on commodity markets or weather. If wholesale gas prices remain high, either renewables-plus-gas becomes visibly expensive, or reliability suffers. If policy tries to suppress prices through intervention, investment dries up and supply tightens. AEMO is correct: you cannot manufacture cheap gas by decree. The hidden cost of a renewables-only transition includes accepting whatever gas prices the market sets, or building sufficient storage and synthetic fuels capacity to break the dependency, both options not yet costed into the transition narrative.