Does southern Australia really need more gas?

Forecasting our energy future is a tough gig, with many variables. AEMO tried hard in its latest Gas Statement of Opportunities report.

Much of the discussion about it has focused on potential winter peak day shortages and longer-term chronic shortages. The discussion is very political, and mostly focused on supply issues, with scope to manage demand largely ignored.

AEMO has provided eight scenarios of future domestic (ie within Australia) gas demand. By 2033, the highest scenario is over 50% higher than the lowest one. With that range of uncertainty, I’m glad I’m not an investor in fossil gas projects. Only the lowest is consistent with limiting global heating to 1.5°C.

In this article I want to focus on the fine print of Southern Australian demand, and the kinds of actions we could take to drive fossil gas consumption down fairly quickly – by how much would depend on how hard governments, business and community try. Energy demand is not an insatiable beast, it is an outcome of many decisions we make.

AEMO presents graphs of daily gas demand in recent years and the mid-range ‘Orchestrated Step Change (1.8C) scenario. I have shown the ‘extreme weather’ version. The graph shows direct gas consumption (in purple) and gas-fired electricity generation (in yellow).

What’s clear is that winter demand for both gas and gas-fired electricity is much higher in winter and is very spiky. That suggests high winter demand is driven by heating of buildings by both gas and electricity.

Inefficient electric appliances and lighting with higher use in winter adds to this. Basically, our use of inefficient gas and electric appliances to heat inefficient buildings (likened by some as ‘not much better than tents’) is the main problem.

We can actually do quite a lot about this. Some things could be done quickly while others take longer. Also, we must focus on replacing inefficient electric appliances that increase demand for gas-fired electricity, not just direct gas use.

My submission to the ACT Inquiry into Gas , see here, includes many suggestions for action. Here are a few of them.

Using existing efficient electric heating

Victorian households own around 2.5 million air conditioners, most of which are likely to be reverse cycle – that is, they can be used for heating. NSW households have even more.

Apparently, most owners don’t realise that these appliances can provide low cost, low carbon heating. They can save two-thirds or more compared with electric fan heaters.

Using a reverse cycle air conditioner instead of gas heating with gas-fired electricity reduces overall gas consumption by a quarter or more, and it’s cheaper to run. So a strong education campaign encouraging a shift from gas to efficient electric technologies could make quite a difference.

Encouraging people to clean air conditioner filters can also improve efficiency and effectiveness, as well as avoiding expensive maintenance call-outs.

Target households with high winter energy bills

The graphs below show quarterly residential gas bills for Victoria and NSW from the survey for the 2020 Australian Energy Regulator report by Frontier Economics.

Clearly, based on a rough gas price of 2-3 cents per megajoule, a lot of households are paying $1000 or more for their winter quarter gas – three or four times the ‘typical’ bills – indicated by the black bars in the graph. And price increases are driving bills higher.

An obvious strategy should be to identify those high bill households and help them to cut their gas costs. There are many reasons for high gas bills, including faulty appliances, ‘leaky’ houses and behavioural factors.

Energy retailers know who these households are, so it is feasible to identify them and introduce programs to target helping them.

Gas-fired electricity generation also tends to peak in winter in southern Australia. This reflects use of inefficient electric fan heaters and radiators in thermally inefficient buildings. As with gas, there are plenty of electricity consumers paying $1500 or more for their winter quarter electricity who could do with some help.

Drive thermally efficient new buildings and aggressively upgrade existing ones

A 6 or 7 star rated dwelling or 6 star NABERS commercial building uses much less energy on a cold, cloudy winter day than most of our building stock.

Upgrading a 1-star home to just 2-stars offers big savings and health and amenity benefits. The Europeans are throwing billions of Euros at building upgrades: we could learn from them.

Finally…

Before we spend too much time debating which source of extra gas we should invest in, let’s do our best to accelerate progress towards near zero fossil gas consumption while also limiting the amount we have to invest in electricity supply infrastructure too.

That’s what’s needed to reduce the risk of runaway climate change while, in many cases, saving money and capturing other benefits.

Alan Pears is a Senior Industry Fellow at RMIT University and a leading expert on energy efficiency.