by Andrew Richards, Chief Executive Officer, Energy Users Association of Australia
With the supercharged push towards net zero targets, energy markets are becoming extremely complex. As the Australian energy landscape changes at such a rapid pace, energy users can no longer afford to be passive observers.
The Energy Users Association of Australia (EUAA) is the peak body representing Australian industrial and commercial energy users. Its membership covers a broad cross-section of the Australian economy including significant retail, manufacturing and materials processing industries.
Combined members employ over one million Australians, pay annual energy bills in the many billions of dollars and support the development of a lasting national energy and climate change plan that puts downward pressure on electricity and gas costs.
The EUAA supports the pursuit of net zero targets and has been helping member businesses act to reduce emissions for some time. In fact, over the last five years, businesses have been large drivers of new renewable projects, underwriting them with long-term offtake agreements.
But while renewable energy is one of the easier actions a business can take to address their overall emissions profile, there are many other issues that need to be addressed and it is often these areas that require deep thought and are more challenging to address.
Recent reports of escalating electricity and gas costs provide concrete evidence of what many consumers have feared for some time; that energy markets will be highly volatile as we navigate our way to net zero. Not unexpectedly, a hard-fought federal election is adding to the complexity of the debate.
Regardless of who wins the federal election or who the next Energy Minister will be, energy users are looking for a post-election re-set that sets a clear path to achieving net zero at least cost, not at any cost.
While the debate over how we get to net zero continues to be highly contentious, if energy users are to successfully navigate the energy transition, an impartial assessment of the challenges and opportunities is required, as only then can we design policy that is truly consumer-centric.
We often see a narrative that achieving net zero will be easy and cheap, when the lived experience for many commercial and industrial energy users is that it is hard and potentially very expensive. That is not to say we shouldn’t do it, but that we need to have our eyes open to the challenges.
The EUAA seeks to support our members in taking positive action to reduce their emission footprint – such as entering into long-term renewable energy power purchase agreements (PPAs), enhancing energy efficiency, and taking initial steps to re-shape their manufacturing processes to accommodate future low emissions technologies if and when they become commercially viable.
At a broad policy level, we see that the existing Federal Emissions Safeguard Mechanism could be a useful way to gradually lower emissions but also that it will require careful modification and a range of supporting policies that recognises not all industry sectors can move to net zero at the same pace.
Helping those in hard-to-abate sectors will require careful planning and tailored responses from government that includes targeted R&D and technology deployment funding as well as assistance for tradeexposed, energy-intensive industry.
It is also important to recognise that not all industrial processes can be decarbonised or that it may take many years for zero emissions technology to become commercially viable. So access to a broad range of highly credible and verifiable offsets will be vital. The transition away from methane gas to either green gas or full electrification is just one example.
Rewiring the national electricity market is also a significant challenge. While more electricity transmission assets will no doubt be required, the sheer scale and timelines being spoken about are unprecedented. We need to recognise this has never been done before.
As it stands today, energy users will wear all the costs and bear a majority of the risk of these assets and it will likely lead to a sharp increase in energy bills. The scale and cost of the challenge can’t be underestimated with an excess of $40 billion in new transmission anticipated over the next decade alone. Therefore, the response from governments needs to be scaled to match the challenge.
For example, well-targeted funding to support identified critical infrastructure can play a role in moderating the costs and risks energy users face. And using this funding to leverage private investment only where a clear need has been identified will be critical as will seeking some level of co-funding from connecting generators.
Calls to weaken the role of the Australian Energy Regulator or require less than a robust economic assessment of transmission infrastructure are a recipe for disaster for energy user bills. While open to improving regulatory processes, the EUAA will not support a dilution of good governance and robust economic analysis of infrastructure that consumers will be expected to pay for over the coming decades.
Finally, the continued use of gas will likely be required for some time to ensure that long-duration gaps in energy supply are sufficiently managed and as a critical input as both heat and product for many industrial and manufacturing processes.
However, with global energy markets undergoing significant upheaval, unaffordable gas prices loom large in the minds of energy users.
The continuation of federal policy that monitors domestic gas availability, the enforcement of the Gas Industry Code of Conduct and an ongoing monitoring role for the Australian Competition and Consumer Commission (ACCC) will provide critical protections for all domestic energy users.
At the same time, we need to look at all the alternatives to traditional methane. Hydrogen could play a role but it has a long way to go to be cost-competitive while the cost of converting consumer side equipment, which will amount to many billions of dollars, seems to be dramatically underestimated by many.
The pursuit of biomethane should not be abandoned as it has the dual advantage of having significantly lower emissions than traditional methane and does not require expensive re-tooling of the network or customer facilities.
For decades, the challenge and opportunity of finding a new way forward to reduce our emissions has been in the news and has been talked about in the community. But, as the saying goes, “the devil is in the detail” and, sadly, many domestic energy users seem to be unaware of the potential price hikes and impacts heading their way.