Gas phase-out: Impossible or inevitable? Industry leaders weigh in

Australia’s energy transition is gaining momentum, yet the role of gas remains one of the most contested aspects of the net zero journey. At the Australian Domestic Gas Outlook (ADGO) 2025 panel ‘Gas phase-out: Impossible or inevitable?’ industry leaders dissected the economic, technical, and political realities shaping gas’s future in the nation’s energy mix. Energy Insights caught up with panelists after the session to hear their reflections — and to find out whether the important discussions held at the conference sparked any new thinking about gas’s role in the transition.

A sector in long-term decline

Kevin Morrison, gas and finance analyst at the Institute for Energy Economics and Financial Analysis (IEEFA), said the sector is in the throes of an inescapable downturn.

After almost 40 years of uninterrupted demand growth, gas consumption in eastern Australia has been in decline for the past 11 years.

Demand in the 2023–24 financial year fell to a 25-year low, with a 32 per cent drop since the 2012–13 financial year, he said. Southern states like New South Wales, Victoria, and South Australia saw a 20 per cent demand reduction over the past decade, with projections of a further 28 per cent decline by 2044. These are largely in the household and commercial sectors, based on the latest forecasts from the Australian Energy Market Operator (AEMO) in its 2025 Gas Statement of Opportunities (GSOO).

Yet while overall demand is falling, Morrison predicts it will still play an essential role in power generation as coal-fired power stations close, although this would come “off a much lower base” following a 60 per cent fall in gas-fired generation over a decade due to renewables.

Dani Alexander, CEO of the UNSW Energy Institute, echoed this point. “While we may need to expand gas generation capacity as a useful insurance policy, gas as a portion of the electricity generation mix is projected to be below 10 per cent by 2050,” she said. “Minimising our reliance on gas-powered generation and maximising the use of cheaper firmed renewable options will be the path to lowest electricity costs.”

Political misalignment and public confusion

Several speakers emphasised the policy and communications gaps obstructing a coordinated gas phase-out.

“My sense is that the public is confused about the role of gas in our net zero future,” said Alexander. “Agreeing on, and communicating, a viable pathway to phasing out gas in line with our emission reduction goals will be crucial to a successful transition without public backlash.”

She also criticised the fragmentation across government portfolios, noting, for example, that the Future Gas Strategy (released early in 2024) referenced emissions-reduction pathways that would be included in six sectoral emissions reduction plans. These plans have still not been published.

Australia’s export commitments further complicate domestic transition efforts. “Given Australia is a large gas exporter, it will also require the decarbonisation of Australia’s trading partners to fully transition from gas,” Morrison said.

Electrification and biomethane rising as alternatives

When it comes to scalable, policy-aligned alternatives, electrification was a consistent theme across the panel.

“Electrification tends to be the most efficient option for decarbonisation,” Alexander said. “Electrification is a relatively low-cost investment with a very good payback period. The payback is even faster when you have solar, which over a third of Australian households do.”

Industrial heat pumps are emerging as a viable alternative for sectors traditionally reliant on gas, Morrison added. These can generate heat of up to 250 degrees centigrade and cover a lot of applications in industrial gas use, from food preparation to metals processing.

Biomethane was also cited as a growing contender. The Victorian state government has set a 4.5PJ renewable gas target, while in NSW, South Australia, and Victoria, biomethane supply is projected to reach 144.1PJ (395TJ/d) by 2030 and 150PJ (411TJ/d) after 2030, which Morrison noted represents around 46-48 per cent of gas demand for the three southern states in 2030, and would remove any fears of looming gas shortages.

Steve Davies, CEO of the Australian Pipelines and Gas Association (APGA), stressed biomethane’s logistical advantages but warned it would take more funding than currently available from policy settings: “Biomethane can be readily supplied by existing infrastructure, but electrification will require significant distribution network upgrades to deliver the additional load.”

The case for strategic gas investment

Despite the long-term outlook pointing toward decline, several speakers argued there remains a strong case for targeted, strategic gas investment.

Florence Lindhaus, Head of Hydrogen and Cluster Manager – Energy at the German-Australian Chamber of Industry and Commerce referenced Germany’s approach: “Germany is planning a fleet of gas peakers which are expected to only run 800 hours per year or so. Gas peakers are a good and flexible complement of a renewable power grid, supplying power when solar, wind, hydro are not performing enough.”

Davies also made the case for gas’s continuing relevance: “Gas use will continue for decades in all its current uses. The reality is that gas does have emissions, but it does not have a lot of emissions compared to other fossil fuels.

“The size of the net zero task means we have to start concentrating our efforts on the best value emission reduction opportunities and it is safe to say that gas use is not at the top of the list compared to the electricity grid or transport.”

Morrison argued that existing gas supply could be better managed to avoid new basin development:

“Australia does not have a gas supply problem; it is just that it exports around 80 per cent of the gas it produces.”

There is scope to redirect some of these LNG cargoes, which would go some way in delinking international gas prices with the east coast gas price, he added.

Charting the future: From molecules to models

Australia’s gas transition will not be binary. Instead, experts see a multi-decade, multi-technology evolution, guided by economic rationality, technological development, and geopolitical necessity.

Innovative pathways like UNSW’s ‘Solar-to-X’ research led by Professor Rose Amal are paving new routes for the future of molecules. OzAmmonia is transforming waste NOx into green ammonia, and SHINE 3.0 is generating e-methanol, said Alexander.

Ultimately, as Lindhaus noted, “A massive ramp-up of electrification which can be run on renewable energy plus firming can be expected… This frees up a lot of gas for use in gas peakers when storage becomes too expensive.”

In this context, the question may not be whether gas will be phased out — but how, when, and in what role it remains. Strategic clarity, policy coherence, and technology acceleration will be key to turning Australia’s net-zero goals from aspiration to execution.