Victorians can expect rapid and sharp rises in gas bills within four years as the local supply hits a cliff and the state uses more gas than it produces, with a new state government report calling for 2 million households to urgently switch to electricity.
New incentives will be offered to encourage people to ditch gas cooktops as the state government pushes ahead with plans to install electric appliances in new buildings and replace obsolete equipment in older homes.
The state government will provide discounts to those wanting to switch from gas cooktops to electric.
The so-called Gas Substitution Road Map forecasts that dwindling production, combined with consistent household use, will mean the state uses more gas than it produces by 2027.
“The trajectory of Victoria’s fossil gas consumption combined with reduced gas supply will probably result in significant tightness in Victorian gas supply by the second half of this decade,” the report, released on Thursday, said.
“This would likely drive rapid and sharp rises in gas prices, impacting Victorian household budgets and industry competitiveness.”
The updated road map has been met with concerns that vulnerable users will be left bearing the brunt of rising costs, while industry has questioned the modelling the government has used to justify switching appliances.
“We’re helping Victorians take the next steps to get off expensive fossil gas … It’s a journey that we need to go on,” Energy Minister Lily D’Ambrosio said on Thursday.
Victorian Energy Minister Lily D’Ambrosio.Credit: Simon Schluter
“There’s a lot of complex work that needs to be done here, and no judgments have been made. We are going to go along that journey, have those deep conversations, those consultations and consider all the permutations to ensure that we avoid any unintended consequences.”
D’Ambrosio confirmed the state would provide discounts to those wanting to switch to electric cooktops under the Victorian Energy Upgrades program, as first revealed in The Age.
The Allan government will also run reviews into new regulations that could require households to switch to electric appliances when their gas products reach the end of their useful life. Natural gas connections in new homes with planning permits will be banned from January 1, but consultation will also begin to expand this ban further, including to commercial buildings.
Minimum energy stands for rentals will also be reviewed to provide stricter regulations for insulation, hot water, heating and cooling.
Victoria’s gas demand is the strongest in the nation, but during summer, when consumption drops off, enough gas is produced from the Bass Strait to offset usage at home. The Bass Strait production is due to drop off from 2027, cutting the domestic supply.
St Vincent De Paul general manager of policy and research Gavin Dufty said Victorians would feel price rises the worst because 76 per cent of homes were using gas.
“We are out there by ourselves. Domestic gas use in the other states is quite small,” he said.
“There have been moratoriums on onshore and offshore gas production in Victoria … it does leave us with future supply capacity constraints, particularly in cold winters. That will push up costs, no doubt.”
Dufty said electrification was the right direction, but the government had made the correct call to first consult about major changes, citing challenges in the upfront costs of switching over and the need for improvements to the electricity grid.
He said those battling with the cost of living couldn’t always afford to make the most of the discount scheme but would feel the pain of higher bills.
“There’s a huge risk here that we will leave the most vulnerable people within the community even more vulnerable,” Dufty said. “This gas load is going to go off onto the electricity network and will have implications for that as well.”
D’Ambrosio said government modelling showed homes that went all-electric could save $1700 a year or $2700 with solar installed – figures that were cited in the government’s road map.
But the Australian Pipelines and Gas Association disputed that, saying it was higher than the average annual gas bill for Victorians, which the Australian Energy Regulator reported in October was below $1600.
The association’s chief executive, Steve Davies, said the industry welcomed more consultation but said some assumptions in the road map were used to “fit a narrative”.
“Every home and business has a responsibility to decarbonise, but Victorians should be trusted to make decisions that suit their needs, such as renewable gas – not have that choice taken away from them,” he said.
The ban on gas connections to new home does not include liquified petroleum gas, which the road map said would have a role to play as a more environmentally friendly option, especially for manufacturers.
Gas Energy Australia chief executive Brett Heffernan said the document had left the door open for LPG to be used alongside electrification to bring down emissions.
“Today’s announcement...will go some way to relieving pressures on Victorian families doing it tough, showing that hugely expensive electrification isn’t the only option home owners have to achieve net zero,” he said.
“Over 356,000 Victorian families already rely on LPG for in-home cooking, hot water and heating, and it has been growing year-on-year for some 15 years.
“They can go on using LPG without needing to bite the bullet on switching ... and achieve net zero emissions from bioLPG over the same time frame as the electricity grid.”
But Environment Victoria senior climate and energy adviser Dr Kat Lucas-Healey said the government document had created a pathway towards ending the use of gas in every Victorian home.
“Victoria’s transition off gas is both more complex and more urgent than anywhere else in Australia. Today’s updated Gas Substitution Road Map update demonstrates the government is seriously grappling with the complexity, but more urgency is still required,” she said.
Opposition energy spokesman David Davis said forcing Victorians off gas would increase costs and deny them choice.
“Instead of restricting energy supply and choice for Victorians, Labor must focus on securing additional supply so that households and businesses can access affordable and reliable power they need and deserve,” he said.
Dan Cass, executive director of Rewiring Australia, said alternative gas products such as renewable methane were “red herrings and delay tactics by the fossil sector”.
“Electrification is the swiftest, cheapest way to lower emissions and remove thousands of dollars a year from energy bills, and it can be done with existing, off-the-shelf technology,” he said.
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