Australia has tough decisions to make about gas, and it needs to make them quickly, a new Grattan Institute report warns.
The report, Out of gas: Managing the decline of gas in Australia, calls on the federal and state governments to take more control of declining gas production and use, to achieve climate targets and protect users from high prices.
'Australian households and businesses are using less gas every year. But governments have largely ignored this trend, and have failed to plan for the consequences,' says report lead author and Grattan Institute Energy and Climate Change Program Director Alison Reeve.
The report shows that gas is in decline in Australia:
- More households now leave the gas network than join it.
- The amount of gas burnt to generate electricity has been shrinking for a decade, and its role backing up renewables is small.
- Industrial use of gas is declining as manufacturing changes and businesses electrify.
But to hit net zero by 2050, gas use needs to fall faster.
Governments should urgently implement policies to reduce gas use across the economy, so that they can control the rate of decline and prevent higher prices.
The report urges state governments to set dates for ending gas use for heating and cooking in homes, if they haven't done so already.
And it urges the federal government to enforce stricter rules to ensure major industries transition away from using gas.
'A declining gas market will need to be managed very differently,' Ms Reeve says.
'As demand declines, demand for the gas pipeline network will evaporate. This creates a risk of sky-rocketing prices for gas users and of stranded assets for gas network owners.'
Less demand for gas will mean more demand for electricity. Governments need to ensure the electricity network can handle the increased demand from gas-to-electric switching.
LNG demand will decline globally in the long-term. But at the moment it is a booming industry in Australia, so the federal government should ensure the industry pays more tax, keeps its emissions under control, and cleans up after itself.
'Reducing gas use in Australia is a multi-decade project that must start today,' says Ms Reeve.
'Continuing to ignore the problem will result in a chaotic and inequitable process with higher costs for all.'
