Australia backing the wrong horse

Is Australia all-in on the wrong horse? Federal and State Governments are betting on electrifying everything, trying to pick a winner in 2022 for a race where the finish-line is in 2050. There are, and will be, many twists and turns along the track to zero emission energy.

The assumption that electricity is always cheaper and cleaner is wrong. This blinkered approach ignores viable alternatives to traditional gas, namely renewable net zero and actual zero green gases, which need to be part of a suite of energy solutions.

Since the data around the true cost of switching was publicised in mid-2022, I have fielded calls from many people seeking advice on quotes they have received. They were told not expect change from $50,000. That’s substantial in anyone’s language. Add in that renewable alternative gases, like rLPG (a by-product from Sustainable Aviation Fuel) and rDME (from organic waste), are in development for application in Australia, and it leaves any sensible person scratching their head as to why governments are so single-minded.

Two household scenarios

Recent analysis by Frontier Economics for an LPG household in Victoria shows the switch doesn’t stack up on costs or emissions.

Switching to high-efficiency electrical appliances, accounting for energy bills and appliance costs, sees LPG appliances lower costs until the 2040s, when gas and electrical appliances become similar in price.

A household switching to high-efficiency electric appliances would incur $11,871 in upfront costs to switch to electricity, save $718.33 on annual bills and reduce emissions by a mere 467kg per year (or 9kg per week, equivalent to a typical BBQ cylinder).

This means that it would take homeowners who fork-out for electrical appliances more than 12 years to get a return on investment for a relatively small reduction in their CO2 output. The cost is not offset in any meaningful way by mooted subsidies in the 2023 Federal Budget.

The price of carbon abatement is a whopping $282.65 per tonne, which is 16-times higher than the average price per tonne of buying Australian carbon credit units at $17.35. Given switching to these electrical appliances provides a minimal reduction in emissions, it makes for very expensive and inefficient carbon abatement.

The natural temptation when confronting these much higher costs is to opt for cheaper, less efficient electrical appliances. People might think they’re doing the right thing. But no; emissions are higher when switching from LPG to these appliances.

The household switching to cheaper, less efficient electric appliances would incur $6,520 in upfront costs, save $212.19 on annual bills, while increasing their emissions by a substantial 960kg per year. In this scenario, switching to electrical appliances actually increases emissions.

These realities dispel the myth that electricity is, by default, cheaper and lower emitting than gas.

The lesson is, buyer beware. If families and businesses can afford to splurge on high-end electrical appliances, they can make a modest CO2 saving. But you have to ask yourself… what is the point of switching when the carbon saving is marginal and significantly more expensive or, indeed, actually higher emitting than sticking with gas, particularly considering gas can achieve emissions reductions on a similar trajectory to electricity?

In both scenarios, the cost of switching to electrical appliances does not include the likely costs of household power supply upgrades (from Phase 1 to Phase 3 wiring), which, depending on appliances and dwellings can take total homeowner outlays up to $40,000 and more per premise.

Rather than incurring the additional costs and inconvenience of switching appliances, and upgrading home wiring to cope with the higher loads, gas providers can produce renewable, net zero and actual zero gases for use with existing appliances. It's a much better option for everyone and means that households and businesses can continue to use the gas equipment they know and love with no need to fork out exorbitant costs.

These gases can tap into Australia's existing delivery network, especially cylinders and tankers, with the result being zero emissions. The government’s punting on all things electrical effectively nobbles new technologies at the starting gate.

Advantages of a common sense approach

The shutdown of coal-fired power is another hurdle to governments’ theoretical energy aspirations. Loy Yang A, which generates 30% of Victoria’s electricity is closing in 2035, earlier than expected. The deadline for solar and wind to step-up at appropriate volumes is being cut, making the anti-gas agenda potentially crippling for energy security.

The basic question is: what’s the problem if we change gas so that it’s renewable and zero or net zero? Especially given Australia has a world-class gas delivery network, including 40,000 kms of pipeline and over 20 million cylinders in circulation.

Ideological blinkers and a myopic view of the future appear to be getting in the way of the opportunities for cheaper and cleaner options. Perhaps surprisingly, the ACT Greens are jockeying for a more pragmatic approach.

The ACT Government’s ban on gas connections in new suburbs is well known. So it is a triumph for common sense that ACT homes, as well as cafes, bars, restaurants and anyone in these areas, will still be able to install gas cylinders for their needs.

The Barr Government has confirmed that homeowners and businesses in the new suburbs who prefer the immediacy, effectiveness and reliability of gas heating, cooking and hot water can continue to do so using cylinders connected to the premises.

It’s a sensible, practical response that ensures gas remains part of the capital's energy future. ACT Energy and Emissions Reduction Minister Shane Rattenbury (Greens) is not only across his portfolio, but open to the opportunities on the horizon. He deserves credit for that.

For many people, especially in colder climates, electric appliances are slow to kick-in and have to run harder for longer, negating any green benefits, let alone practical effectiveness. 

We know gas, as it is today, is up to 68% lower carbon-emitting than electricity. It will continue to be lower-emitting than electricity for the next 10-15 years due to the emissions intensity of grid-connected generators across most of Australia being dominated by coal. By this time, renewable gases will be more mainstream, enabling homeowners and businesses to continue to choose the renewable, zero technology that best suits them.

Indeed, as Australia's Special Advisor on Low Emissions Technology and former Chief Scientist Dr Alan Finkel has noted, gas will be essential in backing-up intermittent renewables for decades to come.

We support the development of solar and wind. They are part of Australia’s future energy mix…. some of the time. But, as South Australia experiences with monotonous regularity, without gas blackouts would be experienced multiple days each week when the sun doesn’t shine and the wind doesn’t blow.

There are real benefits for homeowners and businesses with the roll-out of rLPG, which can be used with existing appliances and equipment, without drawing on an electricity grid under immense pressure in terms of reliability and costs.

Biomethane, from organic waste, is already being produced around Australia and used for generating electricity. The next step is to tap into gas networks to decarbonise. Sydney Water and Jemena are working together on biogas from the anaerobic digestion process at the Malabar wastewater treatment plant, to inject into the gas distribution network.

Hydrotreated Vegetable Oil is a diesel-like fuel produced without fossil resources by processing renewable waste used to make Sustainable Aviation Fuel. This is expected to be a major new industry in Australia, with three plants flagged for production (including in Kwinana, WA, and Gladstone, Queensland), producing renewable LPG as a by-product.

It makes sense to have as many runners in the renewables race as possible to spread the energy load and poor policy that shuts the gate on new and emerging opportunities.

Luring Australians away from gas, based on narrow ideology and ignoring the science, inflicts massive unnecessary costs and uncertainty on homeowners and businesses in making the switch. 

It’s not a winning ticket. It’s all pain for no gain and, frankly, bizarre for a nation where homes, commercial businesses and manufacturers prefer and rely on gas.

Brett Heffernan is Chief Executive Officer for Gas Energy Australia. Links to the Frontier Economics study and more information can be found on the GEA website here.