A new report has warned that the use of gas in Australia has peaked but the transition away from gas could become costly and chaotic as the federal and state governments have largely ignored this decline.
A new report from the Grattan Institute, Out of gas: Managing the decline of gas in Australia, calls on the federal and state governments to take control of declining gas production and use to achieve climate targets.
“Australian households and businesses are using less gas every year. But governments have largely ignored this trend, and have failed to plan for the consequences,” said Alison Reeve, Energy and Climate Change Program Director at the Grattan Institute.
The report noted that electricity networks are facing unprecedented strain, backup generation is not being deployed fast enough, domestic gas bills are skyrocketing, and under-pressure manufacturers are being forced to close.
To prevent the market from collapsing into disorder, the report outlines a seven-point roadmap urging policymakers to transition gas from a widespread fuel into a highly managed, niche resource.
Key recommendations include setting firm phase-out dates for residential gas connections and reforming pipeline regulations to facilitate the progressive, safe decommissioning of local distribution networks.
The report also calls for the integration of gas and electricity infrastructure planning, recommending that the Australian Energy Market Operator’s (AEMO) Integrated System Plan be expanded to cover both sectors.
This would allow networks to absorb the massive surge in electricity demand as gas-to-electric switching accelerates.
Furthermore, it urges market reforms to properly price gas-powered electricity generation, which will run less frequently but remain vital as an emergency backup during renewable energy droughts.
For residual industrial demand, the report pushes for a national demand-side scheme to accelerate the production of green hydrogen and biomethane.
The report also fires a warning shot at Australia’s booming liquefied natural gas (LNG) export sector, noting it faces a future as a high-cost producer in a shrinking global market.
It demands that governments actively manage the post-LNG transition by reforming gas taxes, tightening emissions caps, and forcing exporters to pay for environmental clean-ups.
“Reducing gas use in Australia is a multi-decade project that must start today. Continuing to ignore the problem will result in a chaotic and inequitable process with higher costs for all,” Reeve said.