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Page added on July 19, 2015
It’s cold in my house and the price of gas is going up – what can I do?
Cold weather has arrived in eastern Australia, to the glee of those who enjoy skiing. But you don’t have to venture onto the slopes for cold to be a danger. With gas prices rising, many in the community are shivering while contemplating how big their next gas bill will be.
Eastern Australia’s gas market is rapidly changing, driven by the first exports of liquefied natural gas (LNG) from Queensland. And this is affecting the whole supply chain, from gas producers, to the way we use gas in our homes.
Gas was cheap, for decades
In Victoria, South Australia, and through to New South Wales, Queensland and Tasmania, gas has long been viewed as the preferred fuel for many applications – from industrial uses right down to warming our lounge rooms. Since the discovery of the massive Bass Strait oil and gas deposits off Victoria in the late 1960s, gas consumption across eastern Australia grew, decade after decade.
But despite these discoveries and growing production, the resource companies involved were often frustrated. While global crude oil prices went up and up, eastern Australian gas prices were stuck in the 1970s. Gas consumers enjoyed access to some of the cheapest gas in the developed world.
On the other hand, gas producers dared not complain too loudly. They often considered this gas nearly a waste product – interfering as it did with the speed at which the far more valuable crude oil and LPG could be drawn from the ground. If eastern Australia had been another jurisdiction such as Nigeria or North Dakota, this nuisance gas could have been quickly disposed of by flaring or venting. However, with some foresight, Australian industry regulators have generally discouraged such wasteful and environmentally damaging practices.
Faced with this constraint, what were the resource companies to do? Unlike crude oil, gas is costly to ship to the more lucrative markets in Japan and Korea, first requiring liquefaction at temperatures as low as minus 160C. Creating new demand “sinks” for gas in-country was one strategy. Pipelines were built to connect up all of the eastern states. Still, this “domestic” gas languished at a sales price far below that of crude oil.
Coal seam gas arrives
Then in the first decade of this century came the realisation that coal seam gas (CSG), located mostly in Queensland but also in New South Wales, could be produced in quantities far exceeding the demands of the staid domestic market, by a factor of three or more.
Following the examples of Western Australia and the Northern Territory, the only option for gas companies was to invest billions of dollars in, at last, building the first liquefaction and export facilities on Australia’s east coast.
For legacy gas producers, even those not directly involved in the LNG-export decisions, this was the dream come true. After decades, a buyers’ market rapidly shifted to become a sellers’ market. Where previously buyers would remind producers they would be happy to take that “waste product” off their hands, producers could now inject into supply contract negotiations the spectres of “world-parity pricing” and “high CSG production costs”.
Nowhere in the world had it ever occurred where an established, reasonably large domestic market, serving customers ranging from large industry to millions of homeowners, was suddenly eclipsed by the mammoth export-focused LNG industry.
Eastern Australia gas demand peaked – three years ago
Even before the launch of the first LNG export cargo from Queensland late last year, major gas buyers raised concerns about future gas costs and contractual availability. The Australian Competition and Consumer Commission is examining transparency and barriers to competition in the gas industry.
When the New South Wales upper house held an inquiry into gas supplies earlier this year, it gave us, at the University of Melbourne Energy Institute, the opportunity to present our analysis of declining future gas demand in that state. Now Victoria’s upper house is likewise having an inquiry where we will present aspects of our extended research into gas supply and demand across all of eastern Australia.
The eastern Australian gas market has experienced significant upheaval and will continue to change over the next ten years. Data from the Australian Energy Market Operator indicates that the volume of gas used in eastern Australia peaked three years ago.
Gas demand will continue to decline across all sectors. In the electricity-generation sector, with rising gas prices, the abolition of the carbon price, and a surplus of coal-fired generation, gas will only be sparingly used. The Australian Energy Market Operator is also forecasting a steep drop in the amount of gas used by industry.
Do try this at home: fuel-switching from gas to electricity
The amount of gas used in buildings will also decline. As we shiver here in Melbourne, how would you like to reduce your heating costs by up to, say, 70%? If interested, you have to do two things: (1) turn your gas heater to “off” and (2) turn your reverse cycle air conditioner to “on” – on heating mode of course!
In my home we did that for the first time this winter. Our savings are remarkable, though not surprising nor different to what others in the community are reporting. As an example, during two particularly blustery days I found I could comfortably heat my house one day with gas at an energy-only cost of A$4.80 and then do it the next day with my air conditioner at a cost of just A$1.50. Our savings across the full heating season will add up to hundreds of dollars.
Results in other homes will depend on factors including what you pay for electricity and gas, the efficiencies of your gas heater and air conditioner, where your heat sources are located within your home, and individual comfort and convenience preferences. But it should not be long before word gets out to the 4.4 million Australian homes that already have at least one reverse-cycle air conditioner.
Previously I reported on the similarly large savings possible by using an efficient heat pump to heat water, especially if you have excess self-generated solar electricity. Add an induction cooktop and there is no economic need to connect gas to most Australian homes. Businesses are springing up that offer “all-electric” home conversions” to people interested in making the switch.
Collectively, homes are large consumers of eastern Australian gas. This coming “second-era of Australian home electrification” will have a big impact on gas and electricity supply-demand dynamics over the next decade.
13 Comments on "It’s cold in my house and the price of gas is going up – what can I do?"
Makati1 on Sun, 19th Jul 2015 8:49 pm
Every house I built for myself was total electric. I knew I would have heat as long as I had electric. When electric goes off, gas or oil furnaces don’t work anyway (pumps/blowers). I also always had a fireplace or wood stove for supplementary heating and cooking.
Another advantage of total electric is that, most places, electric prices are regulated and the changes are small and well spaced, allowing easy adjustment to budgets as necessary.
alokin on Sun, 19th Jul 2015 9:26 pm
Electric is most likely to be off in winter. Love my slow combustion!
Nony on Sun, 19th Jul 2015 11:39 pm
1. Long article about prices, with no numbers, no analysis.
2. Australian gas in Victoria is at ~$3.5 Australian dollars (~2.6 US dollars). Not what one would think of as a very high price.
3. A look at the last several years shows that current gas prices in Australia are low versus history.
http://www.indexmundi.com/commodities/?commodity=natural-gas&months=180¤cy=aud
GregT on Mon, 20th Jul 2015 1:23 am
If current trends continue, heating our homes will be the least of our concerns. The longer that we continue to add greenhouse gasses into the environment, the further we all go towards the point of no return. Global mass extinction. We may have passed that point already, yet total fucking idiots like the Nony/Marm above, continue to cheerlead for the destruction of everything that matters, all in the name of human greed.
You are a total fucking loser Nony. There is nothing that I would like more, than to meet you face to face. You total complete piece of shit.
tita on Mon, 20th Jul 2015 1:59 am
The trick in efficient heating is to heat the inside of the house… not the outside. So good isolation (especially windows) is necessary (also works to keep the cool inside in summer).
Then, you also can choose to live without much heat, only the room you live in. And always wear warm clothes.
In the end comes the heating source. A gas heater is more efficient than a reverse air conditioning. But heat pumps are efficient when it’s not cold. If you really want to save money, you can also choose to build a big water container under your house, isolated, which will be heated in summer with thermal solar panels, and restitute heat in winter. You only pay the cost of the installation, then… nothing, except a little bit of electricity to pump this heat.
Kenz300 on Mon, 20th Jul 2015 6:56 am
Wind and Solar are the future………safer, cleaner and cheaper than fossil fuels.
Global Renewable Energy Is Status Positive – Renewable Energy World
http://www.renewableenergyworld.com/articles/2015/07/global-renewable-energy-is-status-positive.html
Kenz300 on Mon, 20th Jul 2015 6:58 am
Get an energy audit done on your home. Most utility companies will come out and tell you where the most cost effective improvements can be made. Some utilities even help pay for the improvements.
Buy an energy efficient furnace or Air conditioning unit. The extra cost up front will more than pay for itself over time. Extra insulation in the attic or air leak sealing can reduce your utility bills and make your home more comfortable year round.
A little money well spent up front will save money month after month, year after year. Too many people only look at the short term cost and not the long term payback of energy efficiency.
dubya on Mon, 20th Jul 2015 11:46 am
No house I ever lived in Australia was insulated.
Perhaps this might be a partial solution?
alokin on Mon, 20th Jul 2015 6:11 pm
First in Australia the entry door goes directly into the lounge room. Not only you lose heat every time you open it but you heat against the thin door and there are no doors who insulate that good. We changed this and it had a HUGE impact. If you cannot do this at least sow a thick curtain in front of that door. Most windows are single glazed, we have some they are not all that bad (with thick lined curtains) but we had aluminum sliding windows and they are bad this is because of the frame (simply look up the r value of the frame). Alu double glazed windows therefore do not help because in Australia they are not insulated.Do an under floor insulation (awful job). Do insulate the roof, and the walls. We had the wall job done by a builder and it was worth every cent, you need sarking too. If you change your windows make it very clear that you want to see proper insulation around the windows, because the first tradie we asked provides double glazed windows but no insulation around!!
If you don’t do the jobs yourself stay there and watch. Ah and hot water pipes outside are often not insulated or not properly (bends and such).
And hot water is held over 60C if you are not afraid of borreliose then you can regulate that down.
Now our house is OK we don’t freeze anymore. That is the advantage of a woodfire, you can only heat that much then you start thinking on how you insulate.
Makati1 on Mon, 20th Jul 2015 10:03 pm
Lots of expensive ideas that most will not have the resources to actually do.
You might consider a winter room, connecting to a bath that you can insulate and heat by several means. Anything above freezing is good for the rest of the house. I slept in many a cold bedroom when I was a kid. That is what PJs and blankets are for. Not that I have that worry here in the Ps where it never gets below 70F. lol
Davy on Mon, 20th Jul 2015 10:20 pm
Going to get hot and dry for you Mak.
http://www.rappler.com/science-nature/environment/73542-prepare-drought-less-rainfall-2015
apneaman on Mon, 20th Jul 2015 11:33 pm
Things is gonna be rough all over Davy.
Four Million Acres Burned, And a Few Questions About Alaska’s Future
“It’s going to be a bad fire day,” said Dr. Scott Rupp, university director of the Interior Department’s Alaska Climate Science Center and a fire ecologist at the University of Alaska Fairbanks, as he looked out the window at the thick layer of smoke blanketing the city of Fairbanks.
It’s only the middle of July, and the 2015 Alaska fire season is already the third largest since reliable records began in 1950 with over 4.75 million acres burned. That’s more than double the size of Yellowstone National Park.
“It took 40 years to burn 25 million acres, and the next 25 million acres took less than 25 years to burn,” said Rupp noting that large, high-intensity, stand-replacing fires are not out of the ordinary in Alaska. In fact, he said, in the boreal forest, which is mostly composed of black and white spruce, fire is the primary mechanism by which succession occurs. It’s how the species rejuvenate themselves and with most of the state covered in spruce forests, large fire years are expected occasionally.
“However, what sets this fire season and the last two decades apart from the historical record is the growing number and frequency of large fire years we are having in Alaska” Rupp said.”
http://www.usgs.gov/blogs/features/usgs_top_story/four-million-acres-burned-and-a-few-questions-about-alaskas-future/?from=title
apneaman on Mon, 20th Jul 2015 11:38 pm
Major midwest flood risk underestimated by as much as five feet, study finds
Date:
June 30, 2015
Source:
Washington University in St. Louis
Summary:
As floodwaters surge along major rivers in the midwestern United States, a new study suggests federal agencies are underestimating historic 100-year flood levels on these rivers by as much as five feet, a miscalculation that has serious implications for future flood risks, flood insurance and business development in an expanding floodplain.
http://www.sciencedaily.com/releases/2015/06/150630135255.htm