Claims of industry lobbying as new ISP to model “green gas” alternative to solar

The Australian Energy Market Operator has raised eyebrows and uncomfortable questions around the ongoing influence of fossil fuel lobby groups after including a new “green gas” scenario in the updated draft for the 2024 Integrated System Plan, its roadmap to a rapid transition to a grid dominated by renewables.

AEMO on Wednesday revealed its latest Inputs, Assumptions and Scenarios Report (IASR), with updates and adjustments to the range of scenarios it will use to inform the next round of ISP modelling.

The scenarios see “slow change” dropped, with the low case now described as an upgraded “progressive change”. At the top end, the “hydrogen export” scenario will actually “moderate” its assumptions of hydrogen exports.

But controversy has already emerged over a new scenario called “Exploring Alternatives,” which will explore the use of “green gas” such as biomethane to replace gas in Australia’s existing reticulated gas networks.

“Exploring Alternatives” has been introduced by AEMO to sit between “Progressive Change” and “Step Change” – the largely unchanged scenario broadly considered to represent the most likely path to a net zero grid.

In stark contrast to Step Change – which models a five fold increase in rooftop solar PV by 2030 – Exploring Alternatives models a dampened uptake of rooftop solar against a “stronger uptake of green gas,” which the report says “reduces the role of electrification.”

As AEMO’s Magnus Hindsberger explained in a webinar on Wednesday afternoon, “green gas” offers an alternative to green hydrogen – modelled separately in the Hydrogen Export scenario (previously “Hydrogen Superpower”) – as “a future kind of a gas playing a key role in in the gas network.”

It’s hard to imagine the majority of stakeholders supporting such a scenario, given that the “step change” scenario was overwhelmingly endorsed by most experts this year, and given the accelerating push to electrification.

To observers like the Climate Council’s Tim Baxter, the addition of Exploring Alternatives means that AEMO now plans to offer two different pathways for “green gas” to make its way into the 2024 ISP “and zero strong electrification and efficiency scenarios.”

In a Twitter thread on Wednesday, Baxter questioned whether this was a result of Australia’s powerful gas industry wielding its influence, once again.

“Hydrogen export” => feed hydrogen into the domestic gas network to replace gas [ignore gas network upgrade costs!],” Baxter wrote on Twitter.

“Exploring alternatives” => feed biomethane [from where?] into the gas network to replace gas. Both equally unlikely and expensive compared to electrification.

“As much as I would like to be wrong, it’s hard to see how this could be anything other than the effect of gas industry lobbying,” he said.

“There is no-one I know who isn’t either directly invested in, or representing, gas network providers that believes green gas will beat electrons.”

Questions were put directly to AEMO during the webinar, too, including by Baxter and by the Clean Energy Council’s director of renewable hydrogen and electrification, Anna Freeman.

“It sounds like we are placing a lot of emphasis on the role of biomethane, which is an upgraded gas from biogas,” Freeman wrote in the Q&A section of the webinar.

“My assumption was that was likely to play a modest role in decarbonising gas, given that there are limited economic sources to capture the biogas in the scale at which it might be required.”

Freeman also questioned – as did others – whether updated modelling would reflect current sky-high gas prices, which could – and should – “accelerate electrification of households, business and heavy industry?”

Electrification of homes and businesses alongside much higher uptake of distributed solar and battery storage is widely considered to be the smartest, quickest and cheapest way to decarbonise energy grids.

Saul Griffith, the founder and chief scientist at Otherlab, estimates that by the end of this decade, Australia could be reaping $40-$60 billion a year net savings by a wholesale commitment to residential electrification alone.

With gas prices soaring, the case for electrification in 2022 is better that ever, which explains why experts like Baxter and Freeman are left scratching their heads at this new added focus on “green gas” from the market operator.

Here’s how Hindsberger explained it in the webinar:

“Exploring Alternatives …[is] best seen as a contrast to Step Change, which has pretty much a decentralised focus …[with] a very strong uptake of DER, orchestration being very … optimised, [and] a very high level of electrification as well. So a quite substantial and immediate reduction in natural gas demand.

“Exploring Alternatives is kind of a looking at, are there any other ways of achieving something that’s close to, or similar to, the ambitious and step change, but without, I guess, relying on DER.

“So that is really exploring a more moderate growth of DER technologies in this scenario and also adds in the biomethane as an alternative to electrification.

“So, using biomethane in the reticulated gas network, increasingly over time, instead of electrifying … a substantial amount of the current natural gas demand.”

Hindsberger also stressed in the webinar that there is a scenario that considers “deep electrification” – and that is Step Change.

“It does have more DER, but it’s also got a very high uptake of energy efficiency, very strong electrification … [and] a relatively fast reduction in natural gas demand,” he said.

But as RenewEconomy has reported, the Step Change scenario, curiously, assumes little or no green hydrogen production by 2030, which would be a surprise to the likes of iron ore billionaire Andrew Forrest, and the now BP-led consortium pushing ambitious green hydrogen and ammonia projects in the Pilbara and elsewhere.

Both have grand plans to produce millions of tonnes of green hydrogen by 2030, although their facilities – along with the proposed Sun Cable solar and battery project – will likely be beyond the main grid which is subject to AEMO’s battle plan.

Interestingly, though, the hydrogen superpower scenario, which this year assumes a near complete removal of coal generation in little more than a decade, is being dialled down to a “moderation” of exports, which likely gives voice to questions about the costs of transport.