The progressive decline of gas use, which has served as a backbone of Australia’s energy system for decades, requires a coordinated plan to mitigate rising energy costs in the future.
This is the view of the Grattan Institute, which argues that changing technologies, lower-emissions alternatives and the shift towards net zero are reshaping the future role of the resource.
Grattan’s report, Out of gas: Managing the decline of gas in Australia, found that while gas will remain important in some sectors for years to come, demand is projected to decline over time. This will create challenges for governments, regulators and industry as gas networks, infrastructure and markets adapt to a smaller customer base.
Grattan warned that, without a clear plan, Australians could face higher costs and inefficient investment decisions as gas demand falls.
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The report calls for closer coordination between gas and electricity planning, arguing the two systems are becoming increasingly interconnected as more households and businesses switch to electric appliances and equipment.
Grattan Institute believes a managed transition would help minimise costs for consumers, maintain energy reliability and support Australia’s emissions reduction goals.
The think tank said planning now for a future with lower gas demand would provide greater certainty for consumers, industry and investors while reducing the risk of stranded assets and unnecessary infrastructure spending.
The report has advocated for seven key recommendations it argues will minimise industry disruption and enable growth through alternative sources:
- Reduce demand for gas across the economy, with targeted policies across households, industry, and power generation, including phase-out dates for residential gas use.
- Accelerate growth of the biomethane and green hydrogen sectors with better targeted industry policy and a new national scheme to drive demand for renewable gases.
- Reform regulation and planning of gas distribution networks to enable and encourage the safe, progressive decommissioning of the network as households electrify. Share the costs between consumers, industry, and government through a grand bargain.
- Get market settings right to ensure there is sufficient gas-powered generation in the National Electricity Market.
- Better integrate gas and electricity planning to enable a least-cost transition away from gas by expanding the Integrated System Plan to include gas, and integrating the build-out of electricity networks with the phase-out of gas distribution networks.
- Prioritise demand-side measures to address future gas supply gaps by expanding the Australian Energy Market Operator’s ability to identify and use demand-reduction tools.
- Manage the LNG sector more actively to maximise its benefit to Australia. Prepare for a post-LNG economy by reforming gas taxes, requiring emissions cuts from LNG, and using industry policy to replace the economic contribution of LNG.
Read Grattan Institute’s report here.
