Every year in early March, there’s an increased flurry of text messages, emails, and phone calls across the sector about an all-important AEMO document which helps chart the path of industry for decades.
By APGA corporate affairs manager Paul Purcell.
This year, as has become customary, the Gas Statement of Opportunities (GSOO) did not disappoint the pessimists about the critical challenges ahead, particularly emphasising the risk of short-term natural gas supply shortfalls and the looming long-term supply gaps due to diminishing production in southern Australia. Despite prevalent discourse on the declining demand for natural gas, the evidence points to a more nuanced reality.
The ‘Step Change’ scenario—considered the most commonly accepted or middle road forecast—suggests a modest decline in domestic gas demand of about 8 per cent by 2043, excluding the gas used in producing and exporting liquefied natural gas (LNG). This relative stability in demand is underpinned by the increasing integration of gas-powered generation to support a grid that will become increasingly dependent on variable renewable sources such as wind and solar. Industrial use of gas also remains steady while the model suggests that residential use of gas will fall significantly over the next two decades due to demand-destructive policies.
For many commercial businesses, the transition from gas to electricity presents significant challenges, particularly from an economic viability perspective. A recent survey conducted among more than 500 large Victorian gas users sheds light on the substantial barriers to a single-track electrification pathway.
In Victoria, an overwhelming 86 per cent of commercial and industrial gas users says a move from gas to electricity is not financially or commercially viable for their businesses. In 2020, industry, business, and community’s use of gas provided more than $107 billion enabled economic activity in the state alone.
67 per cent of the participants indicated that their gas appliances have more than ten years of operational life left, making a switch to electricity not only premature but economically disadvantageous.
Waving goodbye to the country’s manufacturing capacity and giving up on decarbonising are out of the question.
Renewable gas offers a strategic alternative, evidenced by its inclusion in the GSOO’s modelling projections for the first time. The document acknowledges the potential of renewable gas to play a pivotal role in Australia’s energy future, estimating that it could contribute up to 30 petajoules per year by 2031, contingent on the successful development of proposed projects. However, the path to developing these projects is fraught with economic, regulatory, and technical uncertainties.
As the Australian energy sector stands at this crossroads, the imperative to chart a pragmatic and sustainable path forward has never been more crucial.
The GSOO’s projections offer a valuable roadmap, but realising the potential of renewable gas requires concerted efforts from policymakers, industry stakeholders, and the community. Developing a supportive regulatory environment, incentivising investment in renewable gas projects, and fostering technological innovation will be key to overcoming the current barriers.
To spur innovation, it’s essential to understand the context of our domestic energy consumption.
Renewables currently account for approximately 40% of Australia’s electricity generation but only about 5 per cent of total energy use. This stark distinction highlights the enormity of the decarbonisation challenge, illustrating that a shift to a greener future extends far beyond the simple augmentation of solar panels and wind turbines. The prevalent reliance on liquid fuels, coal, and natural gas vividly underscores the multifaceted nature of the transition required to achieve significant reductions in carbon emissions.
Renewable gas emerges as a promising player in this complex transition, offering a blend of environmental benefits and practical feasibility. Its successful integration into Australia’s energy mix is contingent upon overcoming significant economic, regulatory, and technical hurdles. The insights from the GSOO serve as a reminder that achieving decarbonisation is a multifaceted endeavour.
It necessitates a comprehensive approach that goes beyond electricity to address the broader energy landscape.
As Australia grapples with these challenges, the focus must remain on devising strategies that are both environmentally responsible and economically viable. The journey toward a sustainable future is nuanced, demanding acknowledgment of the hurdles and a collaborative effort to surmount them.
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