guy dundas mei presentation - melbourne energy institute
TRANSCRIPT
Energy Futures seminar
@MEIunimelb @grattaninst #energyfutures
Guy Dundas, Energy Fellow, Grattan InstituteLynne Gallagher, Interim CEO, Energy Consumers AustraliaAndrew Dillon, CEO, Energy Networks Australia
Pierluigi Mancarella, Melbourne Energy Institute Energy Systems Program Leader and Chair Professor of Electrical Power Systems, University of Melbourne
Burning gas in a net-zero world?
Melbourne Energy Institute
Burning gas in a net-zero world home?
Guy DundasGrattan Institute
Energy Futures webinarMelbourne Energy Institute & Grattan
27 November 2020
2
Residential gas use is relatively small, but creates a range of interesting policy issues
Notes: JPDA is the Joint Petroleum Development Area shared by Australia and Timor-Leste. Data is for 2017-18.
LNG exports: 1,299
LNG exports: 2,077
LNG processing: 132
LNG processing: 212
Electricity generation: 260
Electricity generation: 198
Manufacturing: 223
Manufacturing: 198
Residential: 155
Residential: 11
Other: 141
Other: 26
East LNG plants:1,431
779
WA LNG plants:2,289
433
East gas use: 2,209
WA gas use:2,721
JPDA imports: 187 (see notes)
Stock change and discrepancies: 13
East production:
2,017
WA production:
2,714
Qld: 1,484
Vic: 429
SA: 71
NT: 29
The rest: 5
Where gas is produced Where and how gas is used
Domestic production:
4,731
All gas supply:4,931
3
There are three main ways to reduce emissions from household gas use
• Switch from gas to electric appliances, and take advantage of the decarbonising power grid• Replace natural gas (a fossil fuel mainly comprising methane) with biomethane, which is chemically
equivalent but carbon neutral as it is produced from biomass• Replace natural gas with low-emissions hydrogen, either:
‒ Hydrogen with CCS: converting natural gas to hydrogen (‘steam methane reforming’), or gasifying coal, and capturing and storing the resulting carbon dioxide
‒ Renewable hydrogen: Using low-emissions electricity to ‘electrolyse’ (split) water into its constituent elements, hydrogen and oxygen
4
Gas use varies greatly between states, and so the best way to reduce emissions may well tooEnergy use per household, 2017-18, gigajoules
Notes: data is for all households, not just those with a gas connection. Excludes LPG (‘bottled gas’).
0
10
20
30
40
50
60
70
Victoria ACT WA SA NSW Queensland
4 USD/ kg H2
Electricity
Gas (other uses)
Gas space
heating
5
The decarbonising power grid means that efficient all-electric homes are increasingly cleaner than those with gasChange in emissions when choosing gas rather than electricity
Notes: Analysis based on homes with efficient electric appliances (induction cooking, heat pump water heater and reverse cycle air conditioner). Electricity emissions intensity assumed to reduce in line with AEMO Integrated System Plan, Central Scenario. Calculations assume no use of rooftop solar.
-60%
-40%
-20%
0%
20%
40%
60%
80%
100%
NSW Victoria Queensland SA ACT
2024-25
2029-30
2017-18
2034-35
6
New all-electric homes will efficient appliances are generally cheaper than those with gas connections
State Gas appliances switched to electric Saving over 10 years ($)NSW Cooking, hot water 900NSW Cooking, hot water, space heating 5,200Victoria Cooking, hot water, space heating 1,300 to 2,000Queensland Cooking, hot water 3,200WA Cooking, hot water -1,300WA Cooking, hot water, space heating 2,500 to 3,100SA Cooking, hot water 2,200SA Cooking, hot water, space heating 5,600 to 6,100ACT Cooking, hot water, space heating 9,000 to 9,800
Notes: Savings rounded to nearest $100. Analysis based on homes with efficient electric appliances (induction cooking, heat pump water heater and reverse cycle air conditioner). Savings are calculated as a net present value over 10 years at a 1.5 per cent real discount rate. When presented, ranges reflect different choices of air-conditioning (cooling) appliances. Calculations assume no use of rooftop solar.
7
Policy conclusions: a moratorium on new gas connections is a no regrets measure in many places
State Lowest cost fuel choice (new house)
Lowest emissions fuel choice (new house)
Restrict new gas connections?
NSW All-electric All-electric No regretsVictoria All-electric Dual-fuel Higher emissionsQueensland All-electric All-electric No regretsWA Dual-fuel (cooking
and hot water)Probably all-electric
Higher costs
SA All-electric All-electric No regretsACT All-electric All-electric No regrets
Notes: Analysis based on homes with efficient electric appliances (induction cooking, heat pump water heater and reverse cycle air conditioner). Emissions estimated over the coming decade, assuming no rooftop solar. An efficient all-electric WA house produces comparable emissions to a dual fuel house today, and is likely to be cleaner over the decade as grid emissions reduce – but a core projection of grid emissions intensity is not available.
8
Electrifying small user gas loads significantly increases peak demand in Victoria, but not in NSW or SAPeak electricity demand by season, gigawatts
Notes: hourly gas load data attributable to small customers (households and small commercial) converted to electricity based on assumed appliance efficiency.
0
5
10
15
20
25
30N
SW/A
CT
(sum
mer
)
NSW
/AC
T(w
inte
r)
VIC
(sum
mer
)
VIC
(win
ter)
SA(s
umm
er)
SA (w
inte
r)
Com
bine
d(s
umm
er)
Com
bine
d(w
inte
r)
+40%
+7%
+2%
ElectricityElectrified gas load
+2%
9
The economics of switching existing homes from gas are more challenging…Present value over 20 years, $billion
Notes: the ‘switch to elec.’ scenario involves linearly phasing out gas connections over 20 years. Present value calculated using a 2.3 per cent real discount rate
0
5
10
15
20
25
30
35
NSW -keep gas
NSW -switch to
elec.
VIC - keepgas
VIC -switch to
elec.
SA - keepgas
SA -switch to
elec.
Cost of new gas appliances
Cost of maintaining gas network
Cost of new electricity appliances
Cost of expanding electricity network
Cost of gas disconnections and electricity connection upgrades
10
… but do not rule out system-wide electrification
• The ‘keep gas’ scenario fails to address decarbonisation• Lower emissions gas substitutes are likely to be more expensive than natural gas:
‒ Wholesale natural gas is presently $8 to $10 per gigajoule‒ Biomethane in Europe ranges from $7 to $51 per gigajoule‒ Low-emissions hydrogen at $2 per kilogram is equivalent to more than $16 per gigajoule.
• Governments should:‒ work to examine the economics of different pathways in more detail‒ consider how to manage transitional issues.
• In the meantime, implementing gas moratoria in NSW, Queensland, SA and the ACT is a no regrets measure that:
‒ saves cost and emissions immediately‒ avoids the potential cost and uncertainty of a future switch to low-emissions gas substitutes.
• Moratoria can preserve choice and flexibility, e.g. through:‒ allowing LPG connections in new homes‒ allowing new connections for discrete networks that will deliver low-emissions gas.