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Where Did All of Australia’s Power Go?

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During the brutal summers in Australia, temperatures regularly rise to well over 100 degrees Fahrenheit. This February (southern hemisphere Summer), when temperatures were peaking in Adelaide and across the continent, there was a problem. Australia, a major energy exporter, didn’t have enough natural gas to run the power plants to keep the air conditioning on. As a result, when things got particularly bad one night, 90,000 homes in Adelaide had their power cut to prevent wider blackouts.

How, you may be asking, can this happen in a country that exports natural gas and coal to the Pacific rim? Rachel Pannett explains at the Wall Street Journal:

Resource-rich Australia has an energy crisis, one that offers lessons for America as it prepares to vastly increase natural-gas shipments abroad.

Australia now exports so much liquefied natural gas, or LNG, it may overtake No. 1 exporter Qatar within several years. It exported 62% of its gas production last year, according to the BP Statistical Review of World Energy.

Yet its policy makers didn’t ensure enough gas would remain at home. As exports increased from new LNG facilities in eastern Australia, some state governments let aging coal plants close and accelerated a push toward renewable energy for environmental concerns. That left the regions more reliant on gas for power, especially when intermittent sources such as wind and solar weren’t sufficient.

Shortages drove domestic gas prices earlier this year in some markets in eastern Australia to as high as $17 per million British thermal units for smaller gas users such as manufacturers. On the spot market, gas prices have gone from below $1 in 2014 to roughly $7 today—well above the roughly $3 that prevails in the U.S.—causing havoc around the country.

Read more here.

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Dick Young

Richard C. Young is the editor of Young's World Money Forecast, and a contributing editor to both Richardcyoung.com and Youngresearch.com.