Policy handbrake on green change

by Mark Eggleton

Australian Financial Review

For local sustainable and renewable energy player EDL Energy, the continuing lack of policy certainty around much of Australia’s energy transition remains a handbrake on investment in this country, especially when it comes to biogas.

This is starkly illustrated by the company’s $600 million investment into the renewable natural gas market in the US whereas over the last three years in Australia, “we’ve invested zero” said EDL’s head of growth Jason Dickfos.

According to Dickfos, that’s “all down to policy”.

“It’s policy and regulatory support - it’s as simple as that,” Dickfos said at the AFR’s recent Renewing our Energy Mix roundtable in Sydney.

“Many years ago in the UK, Europe, and in the US for example, proper policy was structured to essentially penalise the polluters by making them pay a modest amount, which ends up going through to the consumer - but they barely notice.

“This stimulated the biomethane market in the US (often referred to as ‘renewable natural gas’) and it is now a thriving market. The results are now 70 per cent of gas consumed in transport is renewable in the US - it’s working.”

The upshot of this is pipeline companies across the United States are now legislating percentage renewable gas increases to reduce their fossil fuel consumption through their pipeline every year.

The need for governments to better take the lead on the energy transition was a major point all roundtable participants agreed on - as long as the policies being formulated are relatively coherent and don’t entail picking winners and concentrating their efforts on one or two technologies.

A broader, more balanced presentation of our renewable energy options would have tangible benefits for consumers and the Australian economy, the participants agreed.

Yet getting there will be a huge undertaking. So, while the private sector will continue to make sustainable energy investments, they won’t be incentivised to completely change unless the rules of engagement are set in stone by government.

As to what a coherent energy policy might look like, all roundtable participants agreed it goes beyond just decarbonising the electricity sector and talking about the “electrification of everything”.

It means investing in the potential of renewable gas in Australia and fast tracking the pathway to reducing emissions in the supply of gas through gas networks to consumers as much of the rest of the world has already done.

Chief executive of Bioenergy Australia, Shahana McKenzie said although the government is doing a good job in shoring up Australia’s potential hydrogen export industry, there’s also a great opportunity to build on the biomethane (renewable gas) at home, to help decarbonise the domestic gas industry.

“It is critical to put effort into decarbonising our own gas industry and assisting the local manufacturing sector which relies heavily on gas,” said McKenzie.

“If we’re backing hydrogen to go everywhere else in the world then investing in the decarbonisation of our own gas networks here in Australia should be high on the agenda too.”

For McKenzie, the challenge the gas industry must confront is the government (and the sector itself) hasn’t seriously considered decarbonising gas, because the priority has been on decarbonising electricity.

“Compare that to other regions around the world where they already have a far more coherent approach to the gas industry as a whole,” McKenzie said.

Going further, McKenzie said we also need to have a stronger decarbonisation policy for liquid fuels considering they make up around 45 per cent of the nation’s current energy mix.

“Everything is about electrification without consideration of all the sectors that are reliant on gas and liquid fuels such as manufacturing. A lot of those sectors are much harder to decarbonise and electrification is not an option for them,” she said.

Founder and managing director of Frontier Economics, Danny Price agreed our full-frontal rush towards electrification will hurt us in the long term on the world stage and we need to embrace more energy options such as renewable gas technologies.

“For example, if you look at the way in which Europe thinks about things, including hydrogen, it’s starkly different,” Price said.

“They have no problem with blue hydrogen yet we have an irrational hatred towards it.

“It’s not about emissions reduction, it’s about a technological belief system we have so we keep driving towards full electrification (the highest cost technology) while the rest of the world will continue to develop a range of technologies for a range of needs.

“And that will mean industry won’t invest in Australia, our jobs will continue to be exported and we will go backwards.”

Linda Cardillo, general manager of renewable gas at Jemena, warned that unless Australia looked to a more diverse energy future with a broader set of policies, we will head towards an energy crisis especially as existing supplies become more constrained which will lead to reliability problems in peak periods.

“Consumers see prices coming up, but for many people they aren’t really aware of how the gas and electricity sectors work together, nor are they aware of looming supply and reliability issues that could lead us into a similar crisis as we saw in late 2022,” she said.

For EDL’s Dickfos, the issue is we’ve forgotten about gas’s potential role.

“Every time there’s a conversation about extending our natural gas network, it’s controversial.

“There’s debate saying we shouldn’t be doing that but, we should be leaning into gas as part of the overall energy transition because electricity won’t do everything and gas does play a role in not just electricity generation, in the peaking or firming arrangement, but also for transport and industry.

“And at the moment nobody’s really tackling how we’re going to decarbonise transport while other countries are already acknowledging renewable natural gas and hydrogen are really effective ways of decarbonising that sector,” Dickfos says.

According to Bioenergy Australia’s McKenzie, Australia is at a tipping point and in terms of biomethane alone, if we move quickly, Australia could be injecting 20 per cent into our existing distribution networks by 2030.

“The beauty of biomethane is it operates within the existing network here and now - you don’t have to change anything. The feedstock is there, ready to use today.” McKenzie said.