Environment groups say Victorian gas import terminal not needed after gas use cuts

Environment groups opposed to the construction of a gas import terminal in Westernport Bay in Victoria say the new facility will not be needed because of expected cuts in gas use driven by the state government’s energy efficiency stimulus measures.

AGL Energy is progressing plans to construct the Crib Point Jetty gas import terminal, which has received strong opposition from environmental groups, in an effort to boost supplies into Victoria ahead of predicted gas supply shortfalls.

However, new analysis published by Environment Victoria suggests that much of the predicted supply shortfall that the import terminal is looking to fill could be avoided as a result of a $335 million gas heater replacement program announced in the 2020-21 Victorian state budget.

Environment Victoria’s campaigns manager, Nicholas Aberle, said the business case for the Crib Point import terminal had fundamentally changed due to the energy efficiency support measures introduced by the Victorian government in the wake of Covid-19.

“AGL’s case for the Crib Point gas import terminal was written before the pandemic, before the state budget, and before the biggest government investment in clean energy and energy efficiency in Victorian history,” Aberle said.

“Now we’ve calculated the impact of those government programs and there are serious questions about whether AGL’s Crib Point project is needed at all.”

Environment Victoria has published an analysis of the expected benefits of a Victorian government plan to replace up to 250,000 residential heaters over the next four years.

The government will provide $1,000 to each eligible household towards the cost of installing a new high efficiency electric heater. As around two-thirds of Victorian households currently use gas heaters, the switch to electric heaters is expected to drive a significant reduction in state-wide gas use.

The group found that the replacement program could reduce total Victorian gas consumption by around 33 to 34 Terajoules per day.

This figure was compared to a forecast shortfall of 27 Terajoules per day, that is expected to occur on a 1-in-2 year basis, and a 153 Terajoule per day shortfall expected once every 20 years, published by the Australian Energy Market Operator.

Environment Victoria as this means that the Victorian government’s measures to reduce gas consumption will almost entirely address future supply shortfalls, and suggests that the Crib Point import terminal being developed by AGL Energy will not be needed.

“One proposed new source of gas supply is AGL’s Crib Point gas import terminal project, which is in the final stages of its environmental assessment, with a decision from the Victorian Planning Minister due at the end of March 2021,” the report says.

“The proposed site in Westernport Bay is within the boundaries of an internationally significant and Ramsar-listed wetland, and AGL’s core justification for the project is to meet a projected gas shortfall in winter.”

“However, as this research demonstrates, recently announced Victorian government programs can significantly reduce gas demand, enough to comfortably avoid the most likely 1-in- 2 year gas shortfall. This seriously weakens AGL’s case for additional supply.”

Environment Victoria has called on both the Victorian state government, and the potential investors in the Crib Point gas import terminal to reconsider the need and the financial viability of the terminal, taking into account expected falls in gas demand following increased uptake of energy efficient heaters.

“AGL has previously underestimated the pace of energy transition and the effect it would have on wholesale electricity prices, resulting in massive write-downs. Financial analysts need to take a serious look at the Crib Point gas terminal proposal and how it stacks up now these new policies have been announced and the gas market is changing so rapidly,” Aberle said.

“Gas is a fossil fuel and a significant contributor to climate change. It’s now cheaper and better for the environment for households to switch to efficient electric heating in Victoria, and the transition away from gas will accelerate rapidly in coming years. All of this risks making AGL’s gas terminal a stranded asset before it is even built, at time when the company is already facing serious financial challenges.”

A spokesperson for AGL Energy said that the company’s development plans were informed by analysis undertaken by AEMO and the ACCC, and that an investment in a terminal at Crib Point could meet the needs of several east-coast states facing potential supply shortfalls.

“The market forecasts conducted by independent statutory agencies – the Australian Energy Market Operator (AEMO) and the ACCC – have warned about imminent gaps in the supply of gas to the eastern and south-eastern Australian states from 2024 onwards if additional southern reserves, resources or alternative infrastructure are not developed,” the AGL Energy spokesperson said.

“AGL and APA’s proposed gas import terminal and pipeline is well located to deliver gas into markets in Victoria, South Australia and New South Wales to the households and businesses most at risk of supply shortfalls.”

The Crib Point import terminal has attracted opposition from local and environmental groups, and the Victorian Liberal-National opposition has also come out against the project, saying that Victorian’s own gas reserves should be developed as a priority.