“The Victorian Government’s decision to end new residential gas connections next year is a turning point for our energy systems. A clear decision on the future of gas at least provides some certainty. But we mustn’t underestimate the impact on appliance supply chains, and we also need to ensure that gas users continue to enjoy secure supply,” Innes Willox, Chief Executive of national employer association Ai Group, said today.
“This decision will have big impacts on the existing supply chain for appliances and services for household gas users. Those impacts need to be minimised. And while a clear call allows electricity and gas networks to avoid spending large sums of energy users’ money on the wrong assets, more energy reform will be needed to keep the overall cost of the networks we need as low as possible.
“January next year is very close and appliance makers are worried they will be stuck with product they can’t sell, not to mention the factories they have invested heavily in. Gas networks operate billions of dollars in assets that may become redundant in the long term and considerable investment will be needed to upgrade electricity networks to deal with the transition.
“The Government has now made the call that electrification is the path ahead for households, at least. Victoria is the largest residential gas market and where it goes, the nation is likely to follow.
“Natural gas use faces three challenges in Victoria and across Eastern Australia. The price has soared in recent years, to the point where the Federal Government’s ambition is to limit gas prices to no more than three times the pre-LNG average. Supply security is threatened, with the Bass Strait declining fast and shortages projected from 2027 onward. And ever deeper emissions targets will require ever less gas use. It’s been clear that change was needed, but debate and uncertainty continued on the roles of efficiency, electrification, and renewable gases like biogas and hydrogen.
“Much more will be needed to cement the Government’s pathway from gas. The quality of electrification matters hugely – if we install high efficiency smart appliances and coordinate them well, demands on the electricity network should be quite manageable. If we electrify badly, network costs will soar. Tariff reform, appliance standards, education and well designed incentives will be parts of the answer.
“The Government hopes that already-approved developments will provide a soft landing, but supply chains need more than hope. They need confidence that they won’t be left in the lurch. If there is an unusual buildup of excess stock in 2024, suppliers should be compensated by the State Government. And if supply chains and tradespeople are to supply the new appliances and services that will be required they need workable timelines, incentive frameworks that don’t promote floods of zero-dollar low quality appliances, support for reskilling and more.
“Most of all, the Government’s pathway will still require strong attention to security of gas supply. Industrial gas users will need gas for many years to come. Household use is likely to decline gradually. The backup and flexibility role of gas peakers will be critical to the electricity system even as bulk energy increasingly comes from renewables. We will not exit gas overnight and it is vital that we have reliable adequate supply for as long as demand remains.
“All this and more will need to be dealt with, including through the next Victorian Gas Substitution Roadmap due later this year, and the Federal Government’s forthcoming strategies for energy performance and future gas,” Mr Willox said.
