In the bid for net-zero emissions by 2050 Australian state and territory governments find themselves at the heart of a burgeoning energy discourse. A proposition by the Grattan Institute, a leading policy think-tank, has urged the phase-out of gas appliances and discontinuation of new gas connections for residences and small businesses.
The plan calls for a cut-off date for the sale of gas appliances, prohibits new residential and small commercial gas connections, and insists on instant asset write-offs for landlords who opt for electrical appliances.
This initiative marks a move towards eliminating gas usage in Australian homes.
Such a change in the energy sector could pose political complications for governments already tasked with leading an ambitious transition from fossil fuels to renewable energy sources.
Government-backed change, but pushback will come
The Albanese Government is set to incentivise the change for approximately five million homes, allocating $1.6 billion to aid low-income households and businesses in adopting energy-efficient solutions such as solar panels and electrical appliances. This provision forms part of a broader electrification package presented in the budget.
The move isn’t without criticism.
Fears of potential job losses, energy price surges and the premature decommissioning of gas assets worth billions of dollars are raising eyebrows among relevant industry heads.
The predicted expense of the gas phase-out surpasses $6 billion. Although the Grattan Institute claims these costs have reduced, the expenses associated with enhancing electricity networks could significantly outweigh the costs borne by households. Issues of supply chain disruptions, skilled labour shortages and the immense scale of the task add to the financial burden.
Grattan Institute's Energy director Tony Wood highlighted the logistical concerns. “In Victoria, you would need to convert 200 households every day for the next 25 years," he stated.
The electrification process across Australia is expected to increase demand for electricians, with federal estimates from 2021 predicting the need for an additional 14,000 trained workers by 2026, summing up to around 157,000.
Large-scale renewable energy projects would also require an extra 12,500 skilled workers, as per the Australian Energy Market Operator (AEMO) projections. The Grattan report suggests that the electrification of households would add considerable strain to an already strained workforce.
The report elaborates, "There are 11 million gas appliances in homes across Australia. At a minimum, there are 11 million hours of labour involved in replacing these with electric appliances. Spread over the 27 years to 2050, this amounts to 1,400 hours of labour per day – 175 electricians working full time. This is significant added demand for an already stretched workforce.”
Competition for labour and blowout costs
As Australia vies for labour and equipment with regions like Britain, the US and Europe, which are implementing similar programs, the challenge of transitioning to renewable energy grows.
Although gas used in homes and commercial buildings represents less than 5% of Australia's annual carbon emissions, a new report titled 'Getting off gas: why, how and who should pay?' highlights the immense logistical hurdles involved in addressing this small slice of the nation's total emissions.
The report posits that despite electric heaters and cookers being ultimately more efficient and cost-effective to operate, the effort to replace an estimated five million gas stoves, 4.5 million gas water heaters and 2.7 million mains gas heating systems currently installed in Australian homes necessitates immediate policy action.
The report states, “In all sectors, emissions patterns change very slowly ... to reach net zero, governments need to start changing asset-replacement patterns now.”
Tony Wood told The Australian that the issue transcended carbon reduction targets. The upcoming gas shortage, brought about by the expiration of the Bass Strait fields owned by Woodside and ExxonMobil, necessitated the same transition. He emphasised the necessity of governments setting a deadline to kick-start extensive public advocacy campaigns to gain public support for the shift.
The report likens the effort required to the task of transitioning Australia’s broadcast TV stations from analogue to digital, which was decided in 1998 but not implemented until 2010 and necessitated a lengthy information and communications campaign.
However, the cost of converting to electric appliances remains a significant hurdle. The report notes that induction cookers and heat pumps are pricier than their gas counterparts, while larger systems suitable for bigger buildings incur additional costs.
To aid the transition, some state governments are offering rebates and incentives for replacing gas appliances with electric alternatives. Both the ACT and Victorian governments offer schemes, although the report asserts that these will not be sufficient for low-income households. It also notes that further incentives will be needed to encourage landlords to make the switch in rental properties.
The report suggests that governments should consider following the ACT Government’s sustainable household scheme, which offers up to $15,000 in zero-interest loans and complements the recently announced Albanese Government scheme that offers up to $1 billion in low-interest loans for energy-efficient household upgrades.
It also highlights the need for additional measures to incentivise landlords to upgrade rental properties, stating that financial constraints are often cited as the primary hurdle. “The simplest way to provide private landlords with a financial incentive to move to all-electric appliances is to provide an instant asset write-off for new electric appliances that replace gas ones.”
Wood underscored the enormity of the task at hand, despite the relatively small carbon footprint of household gas usage. He noted that while large gas users will be affected by the safeguard mechanism, handling the needs of millions of small users will require careful planning and a significant amount of time and resources.