Those projects that offer the lowest cost abatement will be funded first and the APIA has advised the Government there is a key role for natural gas to play in a number of ways.
New plant
Specialised plant and equipment is required to burn natural gas for direct use applications and for onsite electricity generation. There are a number of abatement opportunities in a range of sectors that arise through the purchase and installation of new plant, primarily:
- Switching from diesel electricity generation or grid-sourced electricity to onsite gas electricity generation at mine sites and other facilities. Opportunities for switching from coal to gas-fired electricity generation for baseload grid-connected power stations should also be explored.
- Large and small scale appliance conversion in residential, commercial and industrial applications. Examples could include the replacement of electric water heaters with gas water heaters (at the residential level an aggregation service would be required to achieve sufficient scale), installation of gas space heating in older commercial buildings, and plant replacement at factories and other facilities. In larger applications, gas powered air conditioning offers further opportunities.
- Natural gas vehicle fleets or support infrastructure could be funded. There is a significant opportunity to increase the use of LNG and compressed natural gas as fuels for medium and heavy vehicles, which comprise a large portion of transport fuel use and related emissions. Funding of support infrastructure, such as fuelling stations, along major transport corridors could be sufficient to encourage further private investment in natural gas vehicles.
Connections to gas supply
Some gas-driven abatement opportunities are inhibited by their lack of a connection to gas supply. This is particularly relevant for remote mining projects but can also apply to regional industrial and processing facilities. There may be examples of viable projects that are not sufficiently large to underwrite the necessary infrastructure alone, but further abatement opportunities would present themselves if the infrastructure was present. Projects that involve expanding and extending natural gas infrastructure to allow greater access are an important abatement initiative for existing energy users.
Fuel contributions
Gas supply arrangements in Australia are under increasing pressure to meet export and domestic demand and, as a result, gas prices are rising. It is unknown where the long-term average gas price will land or how high it may go in eastern Australia during the accepted tight supply period to 2020. The Emissions Reduction Fund (ERF) can assist gas-driven emissions abatement by subsidising some of the cost of gas during this time. There are several ways this could be done without unduly influencing the market. Such assistance could increase the number of energy users switching to gas and could also prevent emission increases by ensuring existing marginal gas users keep using gas.
Projects to increase gas supply
Large amounts of emissions abatement can be achieved through maximising the opportunities to switch to gas throughout the economy. This can be done in a widespread manner by increasing the supply of gas, leading to downward pressure on gas prices and increased availability, which would increase the competitiveness of gas and thus its usage.
Projects in this category should be focused on accelerating the exploration and development of Australia’s gas reserves. A prime candidate would be a project to provide infrastructure services to a region, lowering the cost of exploration and commercialisation of discoveries. This would lead to increased activity which would in turn lead to increased gas supply.
Projects of this nature would not easily quantify their impact on emissions abatement. This does not mean projects that accelerate the development and supply of low emission energy should be excluded from the ERF, it may mean that a different set of criteria or alternate mechanism is required to explore these opportunities.
Other issues raised by the APIA so far include:
- The need for the Government to provide long-term policy signals on emissions reduction to guide investment. The ERF and auction process is proposed to run for three years but industry needs to know the future direction of emissions policy to make appropriate long-term investments.
- The appropriateness of prioritising technologies and projects that aren’t eligible for other sources of funding or incentives.
- The need to carefully design any baseline mechanism to penalise increases in emissions above business as usual. In particular, APIA considers there is a very strong case to exclude energy networks from any baseline mechanism. In July 2013 energy networks were permanently excluded from the Energy Efficiency Opportunities program and the findings leading to this exemption, that the sector is already highly efficient, apply to a baseline emissions mechanism.
The Government is moving quickly on its Direct Action Plan, with a view to the policy being in place by 1 July 2014, so the process from here is accelerated, with a green paper due by the end of 2013 canvassing options, and a white paper with the final policy committed to by early 2014.
For more information on APIA’s position on emissions reduction please contact APIA on (02) 6273 0577 or email {encode=”apia@apia.asn.au” title=”apia@apia.asn.au”}
