Keeping our options open on the path to net-zero

Thursday, 21 July 2022

When the new Minister for Climate Change and Energy, Chris Bowen, was sworn in on 1 June, Australia’s energy market was in turmoil – our country’s largest energy company was facing mounting pressure to bring forward the closure of its coal plants, wholesale power prices had soared, and a cap had been placed on the gas market after spot prices of more than $800 a gigajoule were forecast.  With our target to achieve net-zero emissions by 2050 agreed, these issues remind us that we are still to determine the exact make-up of our future energy system and the technologies – many of which are currently being developed and trialled – that will underpin it. In this context the concept of “do-ability” emerges.    

Do-ability refers to our capacity as a community to deliver the energy system of the future both quickly – so as to limit the impacts of climate change – and affordably, without compromising security of supply. It reflects the fact that competition for raw materials, labour, and finance is tighter than ever before, and that Australia is competing against over 130 other nations around the globe who have set or are considering a target of reducing emissions to net-zero by 2050.  

Do-ability also forces us to consider the sheer size and scale of Australia’s energy system – which comprises over 40,000 kms of electricity transmission lines and cables, and 39,000 kms of gas transmission pipelines.  

This is a system that took almost 200 years to build; decarbonising and potentially augmenting or replacing it will require, for the next 30 years, a ten-fold increase on the current pace of construction – noting AEMO forecasts (in its step-change scenario) that by 2050 we will need to increase renewable generation capacity from 15GW to 140GW, while trebling firming capacity to provide system resilience, including an additional 30GW at utility scale, by the same time. It stands then that tackling this challenge deserves our full focus so that we do not miss our targets nor leave indebted future generations of energy consumers.  

To do or not to do: do-ability and the path to net-zero 

If we take energy security, safety, and sustainability as non-negotiables, we are left to balance reliability and affordability as we design and work through the interdependencies and practical delivery of the energy system of the future – the do-ability if you will.  

Australian homes and businesses have long benefitted from low cost, reliable energy. This energy has delivered us significant economic advantages and has been underpinned by a diversity of fuel generation types. These fuels have been delivered to Australian homes and businesses via our country’s significant electricity and gas networks.  

We now have a great opportunity to reinforce this competitive advantage by fostering the development of a diverse range of renewable fuel types which utilise both our electricity and gas networks. This means supporting the development of biogas, hydrogen, and natural gas with carbon capture and storage for our gas networks, in the same way the renewable electricity sector was supported by the Renewable Energy Target in the early 00s.  

Simply put, the continued use of both our electricity and gas networks is the best insurance we have against threats to system resilience such as weather events (which almost always impact electricity and not gas infrastructure) or instances when solar, wind - and as we’ve seen recently coal generation - is unavailable.  

This hybrid model is also the best way to keep costs down for consumers.  

In February 2021 Frontier Economics published a paper looking at this very issue titled: Potential for Gas Powered Generation to Support Renewables. The paper compared the cost of full-electrification of the energy system against the cost of retaining and decarbonising both electricity and gas infrastructure (the hybrid model). The paper found that the hybrid model would see consumers avoid approximately $12.5 billion in ongoing maintenance and capex costs per annum from 2050 compared to full-electrification. In 2019, a similar study conducted by Navigant, this time in Europe, also concluded that a hybrid energy system including blue and then green gas was the most efficient way of delivering net-zero emissions and would save €217 billion (approximately $300 billion AUD) annually across the energy system by 2050.  

Energy projects are also notoriously complex and can take anywhere from two to 10 years through their planning and approvals process to commissioning depending on their size and scale. With the added imposition of global supply-chain bottlenecks, complex stakeholder negotiations, and fierce competition for labour it’s inevitable that we will see further project timeline blow outs – indeed we are already seeing a number of projects across the NEM being delayed for these reasons. 

Not only does the hybrid model see us avoid unnecessary and costly infrastructure builds, if we can repurpose existing infrastructure to support our net-zero ambitions. Beyond the cost, it is also our best chance of achieving net-zero emissions as we continue to connect and firm-up renewable energy generation by the required deadline.  

And at the residential level we need to consider how we make the transition easier for our customers, without limiting choice or – in the case of the commercial and industrial sector – curtailing their ability to operate and compete on the global stage. Here, global ingenuity is already helping to make renewable gases, such as hydrogen, more affordable, and we should not bet against it in the race to net-zero.  

As Alan Finkel put it in his Quarterly Essay: Getting to Net Zero the enormity of the challenge before us is beyond comprehension. To navigate this challenge, we would be wise to keep front-of-mind the question of whether we can build the energy system we need, in a manner that allows us to achieve our net-zero emissions to time. Do-ability addresses this and guides us to hedge our bets by backing two horses in the race to net-zero and urges us to decarbonise both our electricity and gas networks. At this stage keeping our options open remains the best way to provide Australian energy consumers with safe, secure, and sustainable energy, while ensuring our economy continues to benefit from Australia’s natural energy advantage.  

Frank Tudor 
Jemena, Managing Director