The Australian federal government’s recent decision to exclude gas from the Capacity Investment Scheme (CIS) has ignited a heated debate over the future of Australia’s energy landscape.

Critics argue that this move, part of a deal with the Greens, could lead to higher electricity prices and an increased risk of blackouts for Australian consumers.

Australian Energy Producers Chief Executive Samantha McCulloch has voiced strong opposition to the decision, stating that it contradicts the government’s own advice on the critical role of gas in supporting renewables and ensuring reliable, affordable electricity in the National Electricity Market (NEM).

“Australia needs significant investment in new gas power generation to keep the lights on and power bills down,” McCulloch emphasised, accusing the government of capitulating to the Greens’ anti-gas agenda and disregarding expert warnings.

The Australian Energy Market Operator (AEMO) has projected that the NEM will require 13 gigawatts of new gas-powered generation capacity by 2050.

AEMO also asserts that a combination of renewables backed by gas-powered generation represents the most cost-effective approach to electricity supply.

McCulloch further highlighted AEMO’s stance that gas serves as “the ultimate backstop for our grid”, with demand for gas power in the NEM expected to nearly double by the early 2040s.

The decision to exclude gas from the CIS comes despite the Australian Competition and Consumer Commission’s (ACCC) recent recommendation for governments to expedite new gas supply and investment, recognising gas’s long-term role in Australia’s energy transition.

Industry experts warn that without proper investment in gas supply and infrastructure, Australia’s east coast could face structural shortfalls as soon as 2027.

McCulloch cautioned that the government’s mixed signals on gas’s importance could undermine investor confidence.

As state and federal governments appear to dismiss these warnings, McCulloch predicts that Victoria and New South Wales may soon have to rely on more expensive imported gas.

“Ultimately, it’s Australian households and businesses that will pay the price for this policy failure,” she concluded.

This controversial decision has reignited the ongoing debate about Australia’s energy future, balancing the transition to renewables with the need for reliable and affordable power sources.