Submission: Climate Change Authority 2024 Issues Paper
The Australian Pipelines and Gas Association (APGA) represents the owners, operators, designers, constructors and service providers of Australia’s pipeline infrastructure, connecting natural and renewable gas production to demand centres in cities and other locations across Australia. Offering a wide range of services to gas users, retailers and producers, APGA members ensure the safe and reliable delivery of 28 per cent of the end-use energy consumed in Australia and are at the forefront of Australia’s renewable gas industry, helping achieve net-zero as quickly and affordably as possible.
APGA welcomes the opportunity to contribute comments to the Climate Change Authority’s (CCA) 2024 issues paper. Ambitious yet achievable 2035 targets require an expansion of decarbonisation efforts into gas and liquid fuel supply chains. This will require robust customer decarbonisation analysis and APGA’s prior recommendations to sector plans.
A 2035 renewable gas target (RGT) of 75 petajoules per annum (PJpa) as an achievable contribution from gas use decarbonisation to Australia’s 2035 decarbonisation target.
APGA supports a net zero emission future for Australia by 2050[1]. Renewable gases represent a real, technically viable approach to lowest-cost energy decarbonisation in Australia. As set out in Gas Vision 2050[2], APGA sees renewable gases such as hydrogen and biomethane playing a critical role in decarbonising gas use for both wholesale and retail customers. APGA is the largest industry contributor to the Future Fuels CRC[3], which has over 80 research projects dedicated to leveraging the value of Australia’s gas infrastructure to deliver decarbonised energy to homes, businesses, and industry throughout Australia.
APGA recommends multi-vector decarbonisation analysis for gas and liquid fuel supply chains to better understand decarbonisation opportunities. For gas this means economic analysis of biomethane and hydrogen alongside electrification for gas use decarbonisation. This is demonstrated in analysis by ACIL Allen on least cost decarbonisation options for gas use (Attachment 1) which is the basis of APGA’s recommended 2035 RGT of 75PJpa.[4]
Based developed upon robust analysis, APGA recommends that 2035 targets can be delivered based upon actions recommended under the sectoral decarbonisation plans. This includes actions in line with APGA recommendations to each Federal Government sectoral plan consultation to date, as well as recommendations APGA has prepared in advance of future sectoral plan consultations.
APGA recommendations to the Electricity and Energy Sector Plan (EESP)
APGA provided the following recommendations in its submission to Department of Climate Change, Energy, the Environment and Water (DCCEEW) consultation on the EESP (Attachment 2).
- NGER market-based method for gas emissions accounting. Recognising renewable gas certificates in NGER emissions accounting is critical to providing the investment signal for renewable gas production projects reaching FID in the near term. While GreenPower renewable gas certificates are being issued today, NGER does not recognise them.
- GPG support via the Capacity Investment Scheme or analogous support mechanism. GPG is needed to support Australia’s 82% renewable electricity target. Extending the CIS to include GPG or developing a similar scheme can provide the long-term investment signals necessary to support investment in GPG capacity.
- A national Renewable Gas Target. Around 480PJpa of renewable gas is required to deliver least cost gas use decarbonisation by 2050[5]. Targeting the least cost pathway to net zero gas sets national gas decarbonisation ambition. Strong industrial reliance on renewable gas of at least 210PJpa in 2050 makes a national RGT no-regrets policy.
- Contracts for Difference for renewable gas supply. Renewable gas certification and recognition in NGER is the first step in starting a renewable gas industry today. The Hydrogen Headstart program is an excellent start but more must be done to ensure availability of large volumes of renewable gas including biomethane. Renewable gas Contract for Difference schemes could be used to cap the cost of renewable gas supply.
APGA recommendations to the Land and Agriculture Sector Plan (LASP)
APGA provided the following recommendations in its submission to Department of Agriculture, Fisheries and Forestry (DAFF) consultation on the Land and Agriculture Sector Plan (Attachment 3).
- Reference the EESP for energy decarbonisation. Duplicating energy decarbonisation efforts within the LASP risks misalignment with the EESP as well as unnecessary decarbonisation cost if LASP doesn’t consider EESP decarbonisation of fuel supply.
- Decarbonising farming practices and on-farm fuel use. Utilising green hydrogen to produce ammonia for fertiliser will provide immediate decarbonisation benefits for the agriculture sector. Decarbonise heavy vehicles and farm machinery using renewable liquid fuels and hydrogen fuel cells, where electrification and batteries are not desirable.
- Enabling and accessing renewable gas and fuel supply chains. Emplacing frameworks for developing renewable gas supply chains, such as through a RGT. Utilising existing natural gas infrastructure to access biomethane, and local generation projects to access green hydrogen.
- Whole-of-farm accounting. Consider available carbon accounting methods for agriculture under the Emissions Reduction Fund and whether new or combined methods would be fit for purpose, including through proponent-led method development.
APGA recommendations relating to future Sector Plans
APGA recommendations to future industry, resources, transport and built environment sector plans are anticipated to align with similar principles applicable to all four sectors. As these recommendations have not been detailed in an APGA submission to date they are expanded upon in the Expansion on Future Sector Plan Recommendations section below.
Consider the EESP in energy decarbonisation for each sector
The EESP proposes the decarbonisation of electricity alongside the decarbonisation of gas and liquid fuel supply. Considering all three energy supply chains will decarbonise under this plan expands the options available to each transport, industry, resources and built environment sector plans. Duplicating energy decarbonisation efforts within other sector plans risks misalignment with the EESP as well as unnecessary decarbonisation cost if sector plans doesn’t consider EESP decarbonisation of fuel supply.
Australia’s diverse energy customer landscape requires tech agnostic policy
Diverse energy customers require diverse decarbonisation solutions. Energy customers understand their bespoke circumstances best, hence sector plans which enable stakeholders to pursue decarbonisation that works best for them will secure the greatest emissions reduction for lowest cost. This includes consideration of Australia’s geographic challenges in particular in transport and resources decarbonisation.
Gas and hydrogen infrastructure can support decarbonisation in each of these fields
Gas infrastructure delivers more energy at lower cost than electricity today. New gas and hydrogen infrastructure can transport and store energy for a lower cost than electricity powerlines or electricity storage. Leveraging the economic efficiency of gas infrastructure delivering renewable gases can expand decarbonisation options and reduce decarbonisation cost across the remaining sector plans.
APGA recommendation of a 2035 RGT
(See Attachment 1 for more detail)
APGA commissioned ACIL Allen to undertake economic analysis of an RGT. To do so, ACIL Allen first determined the least cost pathway to gas use decarbonisation considering mature renewable gas and electrification opportunities through a perfect foresight model (referred to as the Theoretically Efficient Policy scenario). With this understood, ACIL Allen designed an Optimal RGT scenario which marginally brought forward renewable gas production. This scenario was designed to account for more realistic renewable gas supply uplift, the need for early learning to deliver cost reductions, and the imperfections in market dynamics relative to a perfect foresight model.
The fuel mix outcomes for the Theoretically Efficient Policy and Optimal RGT scenarios can be seen in the figure below. Bringing forward renewable gas production under the Optimal RGT was found to have minimal increase in overall decarbonisation cost resulting in a cost of abatement of $150 per tCO2e compared to $143 per tCO2e for the Theoretically Efficient Policy scenario. Note that the Theoretically Efficient Policy scenario is not practical to implement in Australia.
The Optimal RGT scenario was delivered with a 2035 renewable gas target of 75PJpa. APGA believes this is an achievable 2035 target noting that APGA Members and adjacent renewable gas associations identify at least half of this volume worth of renewable gas production projects already proposed today. These projects are awaiting a market-based method to recognise renewable gas emission in NGER to achieve Final Investment Decision.
APGA anticipates that once the renewable gas market is enabled through a market-based method and/or an RGT, similar to the renewable electricity market since the year 2000, the renewable gas market will develop to multiple times its current size.
Figure 1: Theoretically Efficient Policy and Optimal RGT scenario fuel mixes
Expansion on Future Sector Plan Recommendations
APGA proposes three recommendations which apply to anticipated proposals within future industry, resources, transport and built environment sector plan consultation processes.
- Consider the EESP in energy decarbonisation for each sector
- Australia’s diverse energy customer landscape requires tech agnostic policy
- Gas and hydrogen infrastructure can support decarbonisation in each of these fields.
Consider the Electricity and Energy Sector Plan (EESP) in energy decarbonisation for each sector
It is important to consider the outcomes of the EESP in planning decarbonisation of other sectors. Accelerating the decarbonisation of existing gas and liquid fuel supply via alternative low carbon fuels will significantly change the range of energy decarbonisation options these sectors can access. More decarbonisation options ensure energy customers can choose the decarbonisation option that works best for them, supporting their ability to remain part of the Australian economy through their decarbonisation journey.
ACIL Allen’s research on a national Renewable Gas Target (RGT) demonstrated that an Optimal RGT could secure net zero gas emissions at least cost through a combination of electrification and renewable gas supply. Without this multi-vector energy modelling, the need to decarbonise gas supply to deliver least cost decarbonisation may have been missed, leading to more challenging decarbonisation.
The EESP is considering the opportunity to decarbonise gas and liquid fuel supply. If future sector plans do not recognise this within the EESP, these sector plans risk specifying unnecessary and costly transitions away from gas and liquid fuel supply chains which are decarbonising. This risks perverse outcomes being driven by these plans including:
- Industrial and resource extraction gas users unnecessarily spending capital to transition process equipment away from gas or liquid fuel supply which decarbonises under the EESP.
- A transport sector being supported to consider hydrogen less without consideration of the EESP supporting a large scale domestic hydrogen market which would increase availability and reduce cost of hydrogen supply overall.
- Built environment gas customers unnecessarily spending capital to transition building heat and hot water away from gas supply which decarbonises under the EESP.
Australia’s diverse energy landscape requires technologically-agnostic policy
Australian energy consumers know what they need best. Energy policy should be technologically-agnostic to support decarbonisation that works for energy consumers. This applies to each of the four sector plans yet to be consulted on.
In the resources sector, the Issues Paper acknowledges the opportunity to decarbonise the mining vehicle fleet by fuel switching from diesel, to electric vehicles, biodiesel or hydrogen fuel cells. Similar alternatives exist for industrial energy use where renewable gas and liquid fuel options may be the most practical decarbonisation option.
In the built environment, no two buildings are the same. Many buildings including commercial properties and high density living may be expensive, difficult or even impossible to rewire. Being able to access renewable gases as a way to decarbonise gas for energy efficient central heating and hot water in these buildings may be the most practical decarbonisation solution.
Heavy vehicles and agricultural machinery can be decarbonised using electric alternatives. But low population densities outside of Australia’s cities and major freight corridors reduces the feasibility of battery electric vehicles. Farm vehicles powered by green hydrogen fuel cells[6],[7] or dual fuel technologies[8] are being brought to market and will soon be available in Australia. Biomethane produced from agricultural and other feedstock can also be compressed into a renewable version of CNG, which already powers millions of passenger vehicles worldwide and can be adapted for heavy vehicles and machinery.
The common thread through each of these sectors is customer choice. Providing customers the choice to choose their lowest cost or most practical decarbonisation will support the achievability of Australia’s 2035 decarbonisation target. Enabling each sector the option to decarbonise via renewable electricity, renewable gas and renewable liquid fuels ensures decarbonisation can occur faster and at lower cost and should be centre to 2035 target setting.[9]
Gas and hydrogen infrastructure can support decarbonisation in each of these fields
Existing natural gas infrastructure provides energy transport and storage at much lower cost than its alternatives today.[10] New gas and hydrogen transmission pipelines consistently cost less to deliver the same quantity of energy across the same distance in comparison to electricity transmission powerlines.[11] Gas transmission pipelines can be designed to provide 4 to 24 hours’ plus worth of energy storage either for free or at low cost (typically below $20 per MWh). This applies to both blended and 100% hydrogen pipelines. Energy storage in natural gas pipelines can be hundreds of times cheaper than energy storage in grid-scale batteries or pumped hydro systems, and 2 to 36 times cheaper in hydrogen pipelines.
This becomes important when considering the challenge of transporting renewable energy over long distances – the further the distance, the cheaper pipelines become in comparison with transmission powerlines. Grid-scale renewable energy will be much more cost effective to transport from the generation source as molecules in hydrogen pipelines, than it currently is in electrons via electricity transmission powerlines.
Many of Australia’s remote mining centres rely on gas for their operations. Gas pipelines were developed instead of electricity powerlines as this was the cheapest option for firmed energy supply. Mining in Mount Isa in north-west Queensland has been historically supplied energy by the Carpentaria Gas Pipeline with local renewable generation arriving recently to the region. A proposed powerline to connect Mt Isa to the NEM requires billions of dollars of Queensland Government support to be economically viable.[12] In Western Australia, the Goldfields Gas Pipeline similarly delivers gas from the Carnarvon Basin to Kalgoorlie, supplying mining estates and the Newman Power Station – a region devoid of electricity transmission.
A robust renewable gas supply chain, and in particular, a robust hydrogen supply chain, can support domestic supply of decarbonised heavy vehicle fuel. By pursuing this opportunity alongside residential, commercial and industrial hydrogen uptake, economies of scale can be leveraged in hydrogen production and infrastructure investments. Transport of green hydrogen using hydrogen pipelines would support lower cost hydrogen refuelling along Australia’s major highways between major demand centres as detailed by APGA in past submissions on transport decarbonisation.[13]
Consultation questions
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Climate Change Authority |
APGA response |
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1. How should the authority take account of climate science and Australia’s international obligations in considering possible emissions reductions targets for 2035? |
Australia’s climate targets must align with our obligations as a developed nation and leader on the international stage. To do this, Australia will need to pursue all decarbonisation avenues.
The DCCEEW EESP highlights the value of decarbonising gas and liquid fuel supply in decarbonising all energy use in Australia and APGA identifies a Renewable Gas Target as a key policy to deliver gas use decarbonisation.
AEMO’s Integrated Systems Plan demonstrates that gas power generation is required to firm Australia’s 82% renewable electricity target for many decades. |
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2. How should the authority weight the goals of ambition and achievability in considering possible emissions reductions targets for 2035? |
An ambitious target is not worth pursuing if it is not achievable. More ambitious yet achievable targets are able to be identified through multi-vector modelling of energy decarbonisation options. |
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3. How can Australia further support other countries to decarbonise and develop sustainably? |
The Department of Industry, Science and Resources’ Future Gas Strategy identifies how Australian Liquified Natural Gas (LNG) exports are supporting decarbonisation of other jurisdictions in our region. These exports do so by providing a lower emissions alternative to coal and liquid fuels for developing nations, especially those still working to address energy poverty.
Australia’s LNG exports provide a foundation for a future renewable gas export market. Existing LNG facilities are able to export renewably sourced methane in the same manner as natural gas, allowing Renewable LNG to be a drop-in renewable alternative to LNG[14]. Future hydrogen and ammonia export industries are considered to have similar potential. |
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4. What technologies are important for each sector’s pathway to net zero and why? |
As noted in our substantive submission, renewable gases such as biomethane and hydrogen can contribute to gas customer decarbonisation.
Gas use can be decarbonised through the direct substitution of renewable gas in direct consumption or gas power generation. The existing gas transmission and distribution networks and existing gas storage currently act as short-medium term energy storage facilities and can continue to do so in the future.
This opportunity exists across all gas use covered by sector plans.
Some gas customers have no option other than renewable gases to decarbonise. The broader the base of the renewable gas industry, the easier and more cost effective it will be to scale up to be able to support these gas customers. APGA disagrees with the perspective that renewable gas should be ‘reserved’ for high-value industrial users. Instead, ACIL Allen analysis indicates that some customers with decarbonisation options beyond renewable gas can still achieve lower cost decarbonisation through renewable gas uptake (Attachment 1). |
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5. How can governments use mandates, rules, and standards to accelerate Australia’s decarbonisation? Is more planning by governments needed? If so, how should this be coordinated and how can this be done while making the transition inclusive, adaptive, and innovative? |
The Australian Government should aim for a decarbonisation strategy which enables consumer choice of both individuals and investors in the technologies they use to decarbonise. As proposed in the EESP, this can be achieved by decarbonising each energy supply chain including gas and liquid fuel supply. This will ensure an inclusive transition where each customer have the opportunity to innovate and adapt upon a range of renewable energy supply options, tailoring them to their unique energy and operational needs. |
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6. How can governments stimulate private finance needed for the net zero transition – are there innovative instruments that could be deployed or new business models that governments could support? Is there a bigger role for governments to play in coordinating the investment needed to transition the economy? |
Australian consumers are already subsidising investments in the net zero transition. Unfortunately, low carbon fuels such as renewable gases and liquid fuels have received minimal government stimulus to date. This is despite gas and liquid fuel supply accounting for over 75% of total energy demand in Australia.
The Capacity Investment Scheme will support investment in renewable electricity generation and storage capacity. However, it excludes thermal generation from eligibility for tenders, even for dispatchable capacity. This is despite AEMO identifying an uplift in GPG investment as a requirement for achieving Australia’s 82% renewable electricity target. Exclusion from the CIS means GPG investors will need to compete against dispatchable investments that have been able to take advantage of the scheme. APGA has commented on this issue in its submission to the Expanded Capacity Investment Scheme.[15]
Some of these schemes can introduce considerable equity issues such as the Victorian Energy Upgrades program which sees Victoria’s poorest households subsidising upgrades for those Victorians who can afford the expense of upgrading appliances. |
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7. How can governments better support markets, including carbon markets, to deliver emissions reduction outcomes? |
APGA concurs with the CCA’s NGER Review Recommendations from December 2023 in which it recommends recognition of robust renewable gas certification schemes within NGER emissions accounting via a market based method for scope 1 emissions produced through gas combustion. This will provide the necessary investment signals for the tens of petajoules per annum of identified renewable gas projects in Australia to achieve FID. This is required for Safeguard Mechanism Facilities to be able to use renewable gases to reduce their emissions along with the declining baselines.
From here, a Renewable Gas Target can set ambition in line with the least cost gas use decarbonisation pathway as identified by ACIL Allen (Attachment 1).
On electricity decarbonisation, APGA recommends adding gas to the CIS or creating a similar scheme will help provide the necessary incentives for investment in GPG. |
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8. What further actions can be taken by governments (e.g. through public funding), the private sector and households to accelerate emissions reductions, including in relation to the deployment of technologies and access to new opportunities in the transition to net zero? What barriers stand in the way and how could they be overcome? |
Robust multi-vector energy modelling is required to identify the full spectrum of gas use decarbonisation options for the private sector and households. Once identified, barriers to investment can be identified and addressed.
Barriers to investment in renewable gas are policy-related and can be solved through policy initiatives that enable a gas use decarbonisation pathway through renewable gas. See answers to previous questions.
The greatest barrier inhibiting renewable gas development today is the lack of a market based method for gas in NGER. Without a market based method, emissions reduction from renewable gas is unable to be commercialised as customers cannot have the emissions reduction of renewable gas purchase recognised in NGER accounting. Addressing this has already been identified by the CCA as a recommendation to government. |
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9. How should governments decide upon the appropriate allocation of resources towards reducing emissions, removing carbon from the atmosphere, and adapting to climate change impacts? |
Determining this is an unenviable challenge made harder by a lack of multi-vector energy modelling to consider the least cost decarbonisation pathways available to each energy customer segment as per ACIL Allen analysis of gas use decarbonisation. Without such analysis it will be difficult to accurately understand the relative cost differences between carbon capture and adaptation. |
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10. How can governments, businesses and people, including First Nations people, help ensure the benefits and burdens of the net zero transition are equitably shared? |
See answer to Q12. |
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11. How can governments better ensure First Nations people are empowered to play a leading role in the development and implementation of climate change policies and actions, including as they relate to the ongoing curation of the Indigenous estate? |
APGA respectfully defers to First Nations communities on this topic. APGA members stand willing and open to working with First Nations communities. |
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12. How can Australian governments support the wellbeing of workers, communities and regions as the nation decarbonises, including in relation to cost of living, workforce and industry transition and access to low emissions technologies and services? |
Australians are concerned about the cost of living. It is important that they are not further burdened by the costs of the energy transition more than is necessary.
Enabling all decarbonisation options as per the EESP will ensure energy customers have access to cost-effective decarbonisation options suited to their circumstances. |
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13. How can governments help Australians prepare for and respond to the impacts of climate change? |
As proposed within the EESP, this can be achieve by placing all energy supply chains, including the gas supply chain, on their own decarbonisation journeys through policies such as an RGT. This will enable Australia to meet more ambitious emissions reduction targets faster, with greater certainty, and while minimising cost. |
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14. What else should the authority be considering in its advice to government? |
A 2035 target must be as achievable as it is ambitious. Only with the use of natural and renewable gas can Australia meet those targets. Supporting the decarbonisation of gas supply as proposed within the EESP and FGS should be a priority for the CCA and for Government. |
Attachment 1: ACIL Allen, 2024, Renewable Gas Target - Delivering lower cost decarbonisation for gas customers and the Australian economy
Attachment 2: APGA Submission to DCCEEW Consultation on the Electricity and Energy Sector Plan
Attachment 3: APGA Submission to DAFF Consultation on the Land and Agriculture Sector Plan
[1] APGA, Climate Statement, available at: https://www.apga.org.au/apga-climate-statement
[2] APGA, 2020, Gas Vision 2050, https://www.apga.org.au/sites/default/files/uploaded-content/website-content/gasinnovation_04.pdf
[3] Future Fuels CRC: https://www.futurefuelscrc.com/
[4] ACIL Allen, 2024, Renewable Gas Target: Delivering lower cost decarbonisation for gas customers and the Australian economy, report to APGA and ENA, available at https://apga.org.au/renewable-gas-target
[5] ACIL Allen, 2024, Renewable Gas Target: Delivering lower cost decarbonisation for gas customers and the Australian economy, report to APGA and ENA, available at https://apga.org.au/renewable-gas-target. See Attachment 1.
[6] Seneca ESG, 2023, Kubota to roll out hydrogen-powered fuel cell tractors in 2025, https://senecaesg.com/insights/kubota-to-roll-out-hydrogen-powered-fuel-cell-tractors-in-2025/
[7] JCB, 2023, JCB: Building a hydrogen future, https://www.jcb.com/en-au/campaigns/hydrogen
[8] Blue Fuel Solutions, 2023, H2 Dual Power, https://h2dualpower.com/en
[9] Boston Consulting Group, 2023, The role of gas infrastructure in Australia’s energy transition, https://apga.org.au/research-and-other-reports/the-role-of-gas-infrastructure-in-australias-energy-transition
[10] APGA, 2023, Submission: Inquiry into the feasibility of undergrounding transmission infrastructure for renewable energy projects, https://apga.org.au/submissions/inquiry-into-the-feasibility-of-undergrounding-transmission-infrastructure-for-renewable-energy-projects
[11] GPA Engineering, 2022, Pipelines vs Powerlines: A Technoeconomic Analysis in the Australian Context, https://apga.org.au/research-and-other-reports/pipelines-vs-powerlines-a-technoeconomic-analysis-in-the-australian-context
[12] APGA, 2021, Submission: Electricity supply options for the North West Minerals Province – Consultation Regulatory Impact Statement, https://apga.org.au/submissions/electricity-supply-options-for-the-north-west-minerals-province-consultation-regulatory-impact-statement-cris
[13] APGA, 2022, Submission: National Electric Vehicle Strategy, https://apga.org.au/submissions/national-electric-vehicle-strategy-consultation
[14] Osaka Gas Australia, 2023, OGA to collaborate with Santos in e-methane production in Australia, for export to Japan and other markets, https://www.osakagasaustralia.com.au/news/Files/20230307_pressrelease_Santos_OG_clean.pdf
[15] APGA, 2024, Submission: Expanded Capacity Investment Scheme Design, https://apga.org.au/submissions/expanded-capacity-investment-scheme-design
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