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18 April 2015

Manufacturing's emerging gas train wreck



Sometimes the weirdness of the energy debate is too much for this elderly observer.

I confess to being gobsmacked by the reaction to the new Australian Energy Market Operator forecast on gas demand and supply.

Yes, it is rather startling news that the previously foreshadowed east coast winter gas shortfall has been overturned -- although the devil here is always in the supply assumptions AEMO is using -- but the really eyebrow-raising aspect is the insouciant reaction of the mainstream media (and the silence of the non-green politicians) to the key implication of the review.

The new AEMO demand outlook depends to a large extent on a fall in industrial consumption across the east coast and especially so in New South Wales and Queensland "where a number of large industrial gas consumers are closing and (we expect) further declines due to rises in domestic gas prices".

So, nothing to see here, eh?

The fossil fuel types have had their noses wiped and we can all move on. Let’s get back to having that discussion about whether the RET should be varied by roughly the same amount of supply as households need each year in Tasmania…

But the implications for jobs in this AEMO outlook are, as the economists say, non-trivial.

According to Manufacturing Australia, the decline in demand by gas-intensive industry involves companies with 83,000 direct employees (and, I’d guess, about a quarter million people working for firms providing them with goods and services).

The factory lobby group calling for gas market reform and increased gas supply (but not, let it be noted, for gas reservation), declares that, if the present path is maintained, “Australia will lose much of its gas-intensive manufacturing industries and (not be) likely to get them back.”

The Australian Industry Group, welcoming the federal government decision to launch an ACCC review of gas market competition but also alarmed by the AEMO demand claims, adds: “You can’t have a gas market without gas.”

AiG, which represents 60,000 businesses, is urging policymakers to understand that delivery of new gas resources is “critical to consumers”.

The NSW Business Chamber, whose members in Western Sydney and regional centres are on the front line of this debate, points out that 45 per cent of state manufacturers rely on gas as their primary energy source.”

The AEMO forecast, it adds, doesn’t mean that “NSW is magically off the hook”.

How exactly is this a non-issue (judging by the public debate reaction) when the public chatterers nearly did themselves a mischief agonising over the problems of the automotive industry with roughly a seventh of the employment involvement?

The green side of things, meanwhile, is starting to make an art form out of presenting two opposing thoughts in its propaganda.

Thus, it is at work in the Senate just now demanding that the coal companies pay a lot more tax while simultaneously calling for them to all close down.

In the gas space, it argues that NSW can rely on resources in other states while simultaneously working to baulk all new industry developments, most prominently in Victoria.

In the renewables space, it harps on about job prospects as much as emissions abatement, but the prospective manufacturing employment losses from gas problems far outweigh any gains from building wind farms.

By the way, that Australian Bureau of Statistics report on renewables jobs that got a bit of a run a week ago shows, when you take the trouble to look at the spreadsheets, that (a) the big drop in employment since 2011-12 has been in the rooftop solar area, (b) wind farm employment has more than doubled in this period to 2,690 people, finally surpassing conventional hydro power (which has 1,810 jobs but produces double the amount of electricity), and (c) one of the growth areas has been in bureaucrats, who numbered 1,170 out of 12,590 working in the area last financial year.

Coming back to the gas wrangle, the line of chat that users can always switch to electricity glides over the twin problems that the costs of doing so may be beyond many factory owners and that, where some do, their electricity will almost certainly come from coal-fired plants.

This sort of all care, no responsibility stuff may seem okay down the bottom of the garden, but there is no excuse in my book for mainstream politicians and the media to be carefully averting their gaze from the train wreck emerging for gas-based manufacturers.

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