Energy Networks Australia (ENA) came out this week with new modelling attacking the Victorian government’s proposed Building Electrification changes – a relatively modest proposal that would require broken, inefficient gas appliances are replaced with electric alternatives.
ENA represents both gas and electricity networks, so it’s unsurprising that their recommendations serve their members’ interests. As we know from the advertising being inflicted on us all, the gas networks are fighting to stay relevant. Killing off the Building Electrification reforms will keep their regulated profits flowing for longer.
And to keep their electricity network members happy, ENA are also proposing measures like distribution-connected battery storage which, while not necessarily being a bad idea, would add to the networks’ regulated asset base and hence their profits.
The essential argument ENA makes is that we must wait for the grid to build out renewables and decarbonise before doing anything about gas demand.
This, of course, is nonsense – we can walk and chew gum at the same time. Even in this period of rapid change the planning and operation of Australia’s energy system is an engineering marvel. We are good at this.
ENA’s lobbying also ignores the fact that Victoria is running out of gas and needs better alternatives. There is broad agreement across industry, academia, social services, energy retailers and others that efficient electrification using technology available off the shelf now is the way to go. It’s cost-effective, ready now, and will work.
But let’s dig into the details of ENA’s modelling.
They are pessimistic about the renewable build-out, assuming that Victoria will miss all of its renewable energy targets. This ignores the fact that Victoria has met every renewable energy target to date. We look to have already exceeded the 2025 target of 40% – according to Open Electricity, we hit 42% in 2024.
The future’s looking good too. Victoria’s renewable development pipeline has strengthened in recent weeks with the 557 MW Golden Plains West wind farm now committed, as are the Horsham (119MW), Mokoan (46 MW) and Goorambat East (250 MW) solar farms and the Mortlake 300 MW 2hr battery.
ENA also assumes that the Federal government’s $10 billion Capacity Investment Scheme will fail to meet its targets, ignoring the recently signed Renewable Energy Transformation Agreement between the Commonwealth and Victorian governments.
The purpose of underestimating the clean energy build is to bump up the amount of gas-powered generation that the modelling shows is needed. This forms a major part of their argument, which is that less renewables means more gas, more emissions and higher prices.
ENA sources their electrification costs to households based on previous modelling by ACIL Allen and Frontier Economics. There are a few things to note when we look under the hood.
First, it assumes that households going for efficient appliances will replace gas ducted heating with a whole-of-home ducted reverse-cycle air conditioning system, which is the most expensive option. It is much more cost-effective to install single or multi-head split systems.
Secondly, they don’t include the Victorian Energy Upgrades (VEU) incentives. Replacing whole-of-home ducted gas with whole-of-home reverse cycle will net 43 certificates or more at a spot price of over $100 per certificate.
They also assume that 410,000 Victorian homes will replace gas heating with low-efficiency electric heating, which is pure nonsense. The VEU incentives make the efficient choice cheaper.
In fact, 27% of Victorian homes already have reverse cycle split systems installed but are only using them for cooling. As Tim Forcey from My Efficient Electric Home keeps reminding us, all they have to do is start using reverse cycle for heating and watch their energy bills drop.
The most glaring assumption of all is that ENA assumes that gas prices will stay at $12/GJ. This is fanciful – the era of cheap gas ended a long time ago. Since 2015, Victorian gas prices have tripled, even while demand has dropped significantly. ENA’s modelling even assumes there will be no gas scarcity pricing as we approach a potential shortfall.
All of Victoria’s options for new gas supply are expensive, whether it is from an import terminal forced upon the Geelong community or competing on the international market for Queensland’s coal seam gas.
And as the Australian Competition and Consumer Commission have explained, worldwide uncertainty means that gas producers are just not offering buyers fair contracts for gas.
Which brings us back to electrification. People who have already electrified their homes know how much money they’re saving. Our 2024 report with Renew found that going from ducted gas heating to reverse-cycle split systems will cut heating and cooling bills by two thirds, even while gaining the ability to cool through summer.
The report also showed the impressive impact of insulating homes. Insulation remains one of the best ways to reduce load on the grid and keep homes comfortable at low cost.
More recent analysis from Springmount Advisory found that electrifying and insulating homes can save the average household around $1500 per year. Adding solar and batteries doubles the savings to $3000 per year.
As far as energy prices, we know that wind, solar and storage are the cheapest forms of new generation. We know that gas is only getting more expensive, not to mention the damage it is doing to our climate. We just need to stay the course.
Dr Kat Lucas-Healey is Senior Climate and Energy Advisor at Environment Victoria
