Battery Boom Crushes Gas Cartel's Power in National Electricity Market

A global gas shock is underway due to Qatari blockages that have left Europe short of gas for winter. LNG prices in Asia and Europe are at their highest point since the war began, causing concerns about European gas storage levels.

Goldman Sachs has weighed in on the issue, suggesting that a price-driven fix could help manage European gas storage levels. According to Goldman, as TTF (European gas prices) rallied, pulling Asia LNG spot prices (JKM) higher, Asia LNG buying interest moderated, which drove the JKM-TTF premium lower.

This has led to an increase in flexible US LNG supply being sent to Europe instead of Asia, contributing to higher European LNG imports. However, despite these developments, European gas storage injections are still lagging behind expectations, with NW European gas storage ending August at 51% full, 3.4 percentage points below the base case.

The Albanese government is expected to give ground to the gas industry over its domestic reservation scheme, but will hold firm on its insistence that the policy creates an oversupply of gas in the east coast market. Meanwhile, a battery boom is helping to stabilize wholesale electricity prices and reduce the power of the gas cartel to set the marginal cost of electricity.

Grid-scale batteries have poured into the National Electricity Market (NEM) over the past year, growing from virtually nothing to 2% of power. The scale is sufficient to rip away the gas cartel's power to set the marginal cost of electricity, with batteries now being the dominant price setter and highly competitive.