Gas networks ready for renewables

by Ian Grayson

Australian Finanical Review

As Australia continues its transition from fossil fuels to renewable energy, the role played by gas, and gas networks, is capturing increasing attention.

Used extensively by both businesses and consumers, gas is currently a key source of power for everything from industrial processes and manufacturing to heating, cooking and hot water everywhere from hospitals to hospitality venues, as well as homes and offices.

Moreover, we’ve been living with gas for a long time with many of the nation’s gas networks evolving over the last century as we’ve transitioned from towns gas to natural gas, and in the future to renewable gas.

However, while natural gas is currently a mainstay of the Australian economy, there are growing pressures to reduce its usage.

Proponents of electrification have pushed for a rapid transition to renewable sources of energy such as wind and solar to allow the nation to meet its emission reduction targets.

Participants at a recent executive roundtable, conducted by the Australian Financial Review, acknowledged the importance of electrification, but warned against ignoring other proven avenues towards decarbonisation, including the role of renewable gas. Not only during the energy transition, but for energy users who will long be reliant on gas, for decades to come.

“A fully renewable energy sector is still a long way away right now,” said Cathryn McArthur, executive general manager, customer and strategy at Australian Gas Infrastructure Group (AGIG).

“That’s why promoting a local renewable gas sector (complementing wind and solar) is critical to ensuring we have a smooth transition to a fully renewable energy system.”

Put bluntly, adding renewable gases like green hydrogen (made from renewable electricity) and biomethane (from organic waste) to our energy mix simply helps to ensure there is a robust, reliable and secure energy supply on the country’s journey to net-zero, also helping to avoid a risky “all our eggs in one basket” scenario.

“It’s about giving businesses and consumers the choice to have the type of energy that best suits their needs, as they do today,” McArthur said.

Danny Price, founder and managing director of Frontier Economics, said some state and territory governments were actively herding gas consumers towards electrification, and removing choice.

“Choice is not a word some of these politicians have in their mind,” said Price.

“They’re making the choices. They’re saying it should be this technological mix, of only electrifying. We are in danger of going down the highest cost technology (road) in the most high-cost way that we possibly can.”

Price pointed to the impact government decisions will have on energy prices. He said renewables might be the cheapest source of energy, but there are significant capital costs for additional infrastructure that also need to be considered.

“All of that is going to cost either the taxpayer or the consumer,” said Price. “That’s why I keep saying, you either have a fiscal plan or you have an energy policy, or both, but we’ve got neither. Not only will the costs be inflated, they’ll end up going to consumers because governments just can’t deal with it from a budgetary point of view.”

But the consideration of gas alternatives is not only about cost and choice. It is the potential of emissions reduction.

Roundtable participants discussed how biomethane, green hydrogen and synthetic methane could play a vital role in decarbonising Australia’s energy sector.

Linda Cardillo, general manager renewable gas at Jemena, said like biomethane, synthetic methane is already showing a lot of promise overseas, given it can be used in the same way as natural gas and can be used as 100 per cent replacement in gas infrastructure and appliances. Not to mention its ability to be blended into existing gas production and other processes like natural gas.

“If carbon was priced effectively and we had effective investment in carbon capture technologies, it’s a perfect way to utilise our existing infrastructure,” she said. “You’re using a captured CO2 molecule and combining it with green hydrogen. It’s also a great way to transport renewable electricity.”

While there are significant benefits on offer, Cardillo said a lack of clear government policy risked delaying or preventing production and usage of renewable gas. In the meantime, companies such as Jemena are pushing ahead with proof-of-concept projects.

“We’re starting with our Malabar plant in south-east Sydney,” she said. “It will be the first that will get certified under the renewable gas certification scheme (operated by) GreenPower.”

The pilot GreenPower certification process for renewable gas operates in a similar way to other schemes that cover other sources of renewable electricity. Cardillo said steps should be taken to make the certification permanent.

“It should be open to all customers of gas to be able to choose to use that, and to pay a green premium to support the development of more renewable gas generation,” she said.

“There’s a lot that isn’t in place to ensure that the market for renewable gas generation is enabled.”

Melissa Perrow, general manager of energy at Brickworks, said it was unnecessarily difficult for heavy industry and manufacturers to claim emission reduction credits for using renewable gas.

For example, Perrow said if her company were to build a biomethane production facility alongside one of its brick manufacturing plants, it would be able to claim reduction credits for the life of that facility.

“However, if the same facility was located down the road and is injecting biomethane into the network, we can’t claim credits over a long-term basis. There’s a short-term fix being provided under Australian Carbon Credit Units, but there’s only a period of time and then it expires.”

“We need to be confident there is a clear pathway for buyers to be able to invest and pay the premium to buy renewable gas for their business that’s transported through the networks that exist today, but be able to claim that reduction at the consumer site.”

Looking to the future, the roundtable participants pointed to opportunities that low carbon gas will provide to open up potential new markets for Australia. As well as meeting domestic demand, there is also an opportunity for significant exports.

“You can use LNG ships, and you can export it,” said Cardillo. “So, rather than talking about exporting green hydrogen, what about green LNG? Japan would love that. Korea would love that.

“We’ve got a whole LNG sector that could be replaced by green LNG. There’s so much we can do in that space and it’s not even being talked about, which is crazy.”