APGAAug 1, 2022 11:25:00 AM7 min read

Consultation on the Water Heating and the Space Heating and Cooling Activities Issues Papers and Draft Specifications

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 to the Victorian Department of Environment, Land, Water and Planning (DELWP) consultation on both the Water Heating Activities Issues Paper and Draft Specifications and the Space Heating and Cooling Issues Paper and Draft Specifications (together, the Consultations). APGA notes that the Consultations act against emissions reduction by removing support for higher efficiency gas appliances.

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 across the nation.

APGA strongly advises against the removal of gas heating and hot water appliances from Victorian Energy Upgrades (VEU) program, and instead recommends the introduction of incentives for hydrogen ready appliances in the home.

This advice is based on the following key points:

Installation of higher efficiency gas appliances reduces emissions from household energy use, with up to 10% of potential gas emission reduction between now and 2030 being left on the table by not supporting higher efficiency gas appliances;
Just like the electricity supply chain, the gas supply chain is on its own decarbonisation journey through the uptake of renewable gases;
The consultations comparison of appliance emission reduction relies upon data which does not reflect the real emissions of the Victorian NEM, leading to underestimation of electric appliance emissions by around 60%; and
DELWP is missing an opportunity to support the uptake of hydrogen ready appliances, a potentially cheaper option for gas use decarbonisation in the home.

Technology agnostic emissions reduction

Support for the reduction of emissions from home energy use should be technology agnostic. Instead, both Consultations propose removing support for installation of higher efficiency gas appliances.

It is a fact that the replacement of lower efficiency gas appliances with higher efficiency gas appliances will reduce emissions from household energy use.

As advised by the Gas Appliance Manufacturers Association of Australia, gas hot water and gas heating have a design life of 10 and 15 years respectively. By incentivising increased 6 Star gas appliance replacement rates in residential and commercial settings it could be possible to reduce gas use emissions in Victoria by an additional 10% by 2030. Instead, DELWP proposes a lower rate of emissions reduction for Victoria by reducing incentives for gas appliance efficiency improvements.

Renewable electricity or renewable gas, it’s all renewable energy

At the simplest level, it is possible to use renewable gas in an existing gas appliance, just as it is possible to use renewable electricity in an existing electricity appliance. While some forms of renewable gas would require modification or replacement of gas appliances, not all forms of renewable gas have this requirement, and is it possible to modify or replace existing gas appliances with renewable gas ready gas appliances just as it is possible to replace gas appliances with electric appliances.

As demonstrated by the DELWP Victorian Gas Substitution Roadmap, DELWP anticipate that the gas grid will decarbonise over the coming decades and have signalled their intention to consider a Renewable Gas Target[4]. DELWP anticipate a large renewable gas market, with renewable gases accounting for 40% to 70% of gas use decarbonisation efforts between now and 2050. Despite this, both Consultations only consider the opportunity for electricity to decarbonise, but do not consider the ability for gas to decarbonise as well.

If the intent of the VEU program is to reduce emissions, it should not demonstrate a bias between the gas and electricity energy supply chains pathways, both of which can be decarbonised. Instead, the emissions reduction outcomes of each appliance purchased under the VEU should be considered in their own right with the acknowledgment that both gas and electricity supply will be decarbonise over time.

We are all on the same journey to net zero emissions.

DELWP Electricity Emissions Factors

DELWP reference the use of ‘accurate’ electricity emissions factors in demonstrating the relative emissions of gas and electric appliances. The referenced source for these factors are the Victorian Energy Efficiency Target Amendment (Prescribed Customers and Targets) Regulations 2020 Regulatory Impact Statement (RIS)[5]. These can be found on page 34 of the RIS and are defined as average emissions factor measures the decline in emissions intensity when the fuel composition of the entire dispatched generation fleet is taken into account.

Comparing actual Victorian NEM emissions to DELWP ‘accurate’ electricity emissions factors produces the following chart. It is reasonable to expect that DELWP would have access to the below data which the Australian Energy Market Operator makes publicly available. In the spirit of ensuring genuine emissions reduction outcomes for Victorian households, APGA recommends that DELWP revisit their electricity emissions factors prior to coming to a conclusion about emissions originating from appliances in the home.

Figure 1: Victorian NEM Region Emissions compared to DELWP 'accurate' Electricity Emissions Factors [6]

Opportunity to support hydrogen ready appliances

The Gas Appliances Manufacturers Association of Australia commissioned a report by Frontier Economics to consider the relative costs of transitioning all gas appliances in the home to either hydrogen ready appliances or all electric appliances. This study, which has considered aspects which were not considered within the VGSR, identifies that freestanding homes require bill savings of between $1600 and $4000 per annum to justify the increased cost of choosing full electrification instead of hydrogen ready appliances[7].

This figure is greater than the bill savings suggested through VGSR modelling. Even taking the conservative conclusion from this modelling that gas use decarbonisation through electrification and hydrogen conversion come at approximately similar cost, it makes sense to allow for customer choice in determining their approach to decarbonisation of energy in the home. This becomes more poignant still in recognising that DELWP, Infrastructure Victoria, and Future Fuels CRC research all show that customer choice is still a key contributor to household emissions reduction.

Gas Vision 2050: Delivering the pathway to net zero for Australia – 2022 Outlook identifies the development of hydrogen ready gas appliances in Australia as one of the key lagging factors in progressing towards a renewable gas future[8]. It is APGA’s concern that without a clear commitment from governments, the Australian gas appliance industry may not feel like there is a sufficient business case to produce hydrogen ready appliances even if they would deliver lower cost decarbonisation outcomes for customers.

The VEU could be an excellent program to demonstrate government support for a hydrogen ready future by providing financial incentives for households purchasing hydrogen ready gas appliances. This can be a no regrets action taken today to prepare for the opportunity for renewable gas use in homes. Ultimately, the least cost gas use decarbonisation pathway will be taken by Victorian energy customers. Through support for hydrogen ready appliances, the Victorian government can ensure that Victorian energy customers have a choice of renewable energy supply in the event that renewable gases represent the least cost decarbonisation pathway for current gas demand.

To discuss any of the above feedback further, please contact me on +61 422 057 856 or jmccollum@apga.org.au.

Yours Sincerely,

JORDAN MCCOLLUM

National Policy Manager

Australian Pipelines and Gas Association

[1] APGA Climate Statement
https://www.apga.org.au/apga-climate-statement

[2] Gas Vision 2050, APGA

https://www.apga.org.au/sites/default/files/uploaded-content/website-content/gasinnovation_04.pdf

[3] Future Fuels CRC Website
https://www.futurefuelscrc.com/

[4]

[5] Victorian Energy Upgrades Targets and Lighting Consultation 2019 website, DELWP 2022
https://engage.vic.gov.au/project/victorian-energy-upgrades/page/targets

[6] Carbon Dioxide Equivalent Intensity Index, Australian Energy Market Operator 2022
https://aemo.com.au/en/energy-systems/electricity/national-electricity-market-nem/market-operations/settlements-and-payments/settlements/carbon-dioxide-equivalent-intensity-index