Edition #4 — May 2026
Welcome back to Behind the Meter. The last fortnight delivered the biggest gas policy announcement in a decade, a federal budget that quietly funded the next phase of NEM reform, and a winter gas outlook that, against expectations, is looking calmer than the headlines suggest.
I want to spend most of this edition on the gas reservation scheme, because the way it is being reported and the way it actually works are two different things, and the gap matters for anyone with a gas contract on the books.
The Take: The gas reservation scheme everyone is reading wrong
On 7 May, the federal government announced a Domestic Gas Reservation Scheme that will require east coast LNG exporters to supply 20% of their gas into the domestic market. The headline number sounds dramatic. Twenty percent is a lot of gas. The press conference framed it as the answer to the structural shortfall the ACCC has been warning about for the better part of three years.
Then I read the design. It does not start until 1 July 2027. It only applies to export contracts signed after 22 December 2025. Every long-term foundation contract that underwrites the existing Queensland LNG projects is grandfathered. And the Industry Minister, when asked what the scheme will actually do to prices, said the government is not making predictions about specific price levels. That is not a small caveat. That is the whole story.
What the scheme really does in the next 18 months is almost nothing. New export contracts will move modest volumes into the domestic market, because most LNG cargoes are already committed under contracts signed years ago. The 20% bite into uncontracted cargoes is real but small relative to total east coast demand. The southern states, where the physical risk lives, are not connected to Queensland LNG by enough pipeline capacity to soak up the difference even if the volumes were larger.
The honest read is this. The scheme is a long-dated structural lever pointed at the next cycle of LNG contracting, not a price intervention for 2026 or 2027. What it does well is signal to producers that future export approvals come with a domestic obligation attached. That changes how the next wave of project economics gets written. It does not move the contract market most commercial buyers are pricing into today.
So what should anyone actually do about it. If you are renewing gas in the next 12 months, do not write the reservation scheme into your forecast as a price-suppressant. Contract prices are still sitting between $13 and $15 a gigajoule, and AEMO's GSOO still flags a 12 petajoule shortfall risk in Q3 depending on LNG export decisions. The Q3 risk is real, the relief is not. If anything, the announcement may pull forward producer positioning ahead of the 2027 commencement, which could tighten short-term offers, not loosen them.
The harder conversation, and the one I keep having with clients, is whether the underlying gas exposure should be there at all by the time the scheme bites. For most commercial sites in Victoria, NSW and SA, the economics of partial electrification have shifted enough that a five-year gas hedge is now a strategic question, not a procurement one. The reservation scheme does not change that. It might, in three years, slightly soften the prices you pay for gas you have already decided to stop buying.
Quick Hits
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The federal budget put real money behind consumer energy resources. The 2026-27 budget committed $97.2 million to establish a Consumer Energy Resources National Technical Regulator and another $15.9 million for the AER to implement the NEM Wholesale Market Settings Review recommendations. The CER regulator is the part to watch. It will set the technical standards for how household solar, batteries and EVs participate in the grid, and those standards will define the addressable market for every aggregator and VPP operator for the next decade. Commercial buyers should care because the same visibility and dispatch framework, set at over 30 MW for large users, will eventually decide how C&I flexibility gets paid.
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AEMO's 2026 GSOO downgraded the shortfall risk, again. The March update pushed the forecast structural shortfall further out and credited the grid battery rollout and electrification with taking a fresh bite out of underlying demand. The pattern across the last three GSOOs is consistent: the gas cliff keeps moving right as batteries and electrification do more of the work the gas peakers used to do. If your portfolio modelling still treats a 2027 or 2028 gas crisis as the baseline, the data is moving against you.
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The NEM Wholesale Market Settings Review final report is now in implementation mode. All NEM jurisdictions except Queensland agreed in March on how to land the 12 recommendations, and the National Electricity Law changes are being written through the course of this year. The two pieces commercial buyers should track are the trigger-based market-making obligation, which is designed to deepen liquidity in the contract market and could materially change forward curve quality region by region, and the Electricity Services Entry Mechanism, which is what replaces the Capacity Investment Scheme when it concludes in 2027.
From the blog: If the gas exposure question in the take is live for you, the piece I wrote on electrification economics for commercial portfolios walks through the network and tariff side of that calculation. The decision rarely comes down to gas price alone.
The reservation scheme will be reported as a price-relief story for the next month. It is not. It is a structural signal pointed at the 2030s, dressed up as a 2027 intervention. If you are advising clients on gas exposure, the right move is to keep them out of the headline reading and into the actual mechanics. The scheme buys time. It does not lower the bill.
Until next fortnight,
— Cohen
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