S116-Australian-Gas-Infrastructure
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26 February 2021 Infrastructure Victoria Via online submission: https://engage.vic.gov.au/victorias-30-year-infrastructure-strategy/making- submission To whom it may concern, Victoria’s draft 30-Year Infrastructure Strategy Australian Gas Infrastructure Group (AGIG) welcomes the opportunity to make this submission on Infrastructure Victoria’s draft 30-year Infrastructure Strategy. It is important that the strategy recognise and remain open to consider all opportunities to achieve net zero emissions as required by Victoria’s Climate Change Act. In Victoria, where natural gas remains an important part of the energy mix, hydrogen represents a significant opportunity for Victoria to achieve its targets, while making use of Victoria’s extensive gas network and minimising costs. After introducing AGIG this letter will briefly outline our submission which focuses on the role of renewable hydrogen, the future of gas networks and also comments on Infrastructure Victoria’s upcoming work on the Gas Infrastructure Advice to the Victorian Treasurer. As owners of gas infrastructure in Victoria we are taking a leading role in the deployment of renewable hydrogen technologies and the development of Australia’s hydrogen industry. AGIG can provide valuable insights on the issues raised in the Gas Advice Terms of Reference, particularly on how the value of Victoria’s gas infrastructure can be optimised, including the extent to which gas infrastructure can be used for hydrogen. We therefore look forward to continuing and increasing our engagement with Infrastructure Victoria on these issues. About AGIG AGIG is the largest gas distribution business in Australia, serving more than 2 million customers through our networks in Victoria, Queensland, South Australia and several regional networks in New South Wales and the Northern Territory. In Victoria, we reliably distribute gas to over 1.3 million customers through over 21,000km of distribution network. Australian Gas Networks (VIC & Albury) and Multinet Gas Networks serve much of Victoria including the Melbourne CBD, the eastern and south-eastern suburbs, and much of eastern and central Victoria extending north to Wodonga and east to Bairnsdale. At AGIG, we are committed to sustainable gas delivery today, and tomorrow. In 2017 we worked with Australia’s five peak gas bodies to develop Gas Vision 2050 – a pathway to achieve near zero emissions in our gas sector. We are now delivering on this Vision by deploying low carbon gas projects. Our projects include: Hydrogen Park Murray Valley (HyP Murray Valley) proposal – A 10MW elctrolyser to produce renewable hydrogen for blending with natural gas (up to 10%) and supply the twin cities of Wodonga (Victoria) and Albury (NSW), with the potential to supply industry and transport sectors. Hydrogen Park South Australia (HyP SA) – A 1.25MW electrolyser to produce renewable hydrogen for blending with natural gas (up to 5%) and supply to more than 700 existing homes and businesses in metropolitan Adelaide. First production is expected by around April this year. 1 Hydrogen Park Gladstone (HyP Gladstone) – A 175kW electrolyser to produce renewable hydrogen for blending with natural gas (up to 10%) and supply to the entire network of Gladstone, including industry. First production is expected in 2022. The Australian Hydrogen Centre (AHC) – A virtual centre delivering feasibility studies for 10% and 100% blending of renewable hydrogen into towns and cities in South Australia and Victoria. Overview of AGIG’s response Our submission provides additional information particularly relevant to Recommendations 8, 9 and 10: 8. Allow new gas-free housing estates and review current gas policies; 9. Specify climate scenarios and carbon value in assessing infrastructure; 10. Strategically review climate consequences for infrastructure. The information we provide helps clarify the potential role of gas networks, the potential use of renewable hydrogen to achieve net zero emissions and the need for appropriate policy and regulatory frameworks to enable a low cost transition that addresses customers energy needs. Attachment A provides detailed information on the following issues: We introduce the potential role for hydrogen in addressing customers’ energy needs while reducing emissions. With appropriate policy and regulatory settings hydrogen has potential to play a significant role in achieving Victoria’s emission reduction targets; We present analysis from Frontier Economics and the Grattan Institute which suggests that replacing natural gas consumption with electricity supply is a costly approach to achieve net zero emissions in Victoria. Instead, using Victoria’s extensive gas distribution networks to deliver renewable hydrogen represents a lower cost pathway to achieving net zero emissions - a pathway that should remain open as renewable hydrogen production is deployed. We have provided information on how and where our Victorian networks will be ‘hydrogen ready’ by 2035; We note that hydrogen can provide storage and other services to electricity networks, creating value for the wider energy system through greater coupling between electricity and gas/hydrogen networks; We note that connection to the reticulated gas supply system for new greenfield estates in Victoria is not mandatory under the Victorian Planning Provisions. Further, any immediate decisions to prevent new connections to gas networks in Victoria would increase costs for customers by limiting future options for meeting customers’ energy needs while achieving net zero emissions; and We introduce work underway in consultation with the Australian Energy Regulator, customers and stakeholders to consider the future of gas networks in Victoria. The future of gas is a live issue considered by industry As Infrastructure Victoria rightly points out, the gas transition will not be easy for Victoria, with Australia’s largest natural gas infrastructure network. We agree with Infrastructure Victoria that there is not enough evidence now to suggest the Victorian Government should make an immediate decision on the future of the gas network. The future remains uncertain and governments, networks and other stakeholders should allow time to fully examine the viability of renewable hydrogen. This will reduce the risk of making pivotal decisions too early and increasing costs for customers unnecessarily. Decisions made today will have implications across both gas and electricity networks and for customers and may create path dependency, locking in higher cost solutions. We note that outside of this consultation, Infrastructure Victoria has been asked by the Victorian Government to provide advice to the Treasurer on Gas Infrastructure. This advice will consider the role 2 of Victoria’s gas transmission and distribution networks under a range of energy sector scenarios to achieve net zero emissions in 2050.1 This advice is timely as the future of gas is a live issue. All three of Victoria’s gas distribution networks have just begun planning and engagement for the next five-year regulatory pricing reset (called an Access Arrangement, AA, review). Through the AA review process, our industry has begun to consider the possible pathways the energy sector might take, and the actions that need to be taken today and planned for the future to deliver affordable net zero energy solutions for customers. The next AA period will commence in July 2023, with our Final Plan due to be submitted to the Australian Energy Regulator (AER) in July 2022. The future of gas networks is important in this process as the economic life of our assets is a key input in determining network tariffs. The AER has also elevated consideration of future gas market issues in their strategic priorities list.2 The elevation of this issue on the AER’s list of strategic priorities provides a pathway to develop an appropriate framework to address the issues for customers and investors, which we support. Recognising the potential interdependencies between the work of Infrastructure Victoria and the upcoming work of the AER and industry on future of gas issues, we would like to explore how these processes can complement one another and welcome the opportunity to provide inputs to Infrastructure Victoria’s Gas Infrastructure Advice. We therefore look forward to continuing and increasing our engagement with Infrastructure Victoria on these issues. Once again, I would like to thank you for the opportunity to provide a submission on the draft Infrastructure Strategy. Should you have any queries about the information provided in this submission please contact ). Yours sincerely, 1 See: https://www.infrastructurevictoria.com.au/project/infrastructure-victoria-advice-on-gas- infrastructure/ 2 AER Draft Decision, AGN SA Access Arrangement 2021-26 – Overview, November 2020, p.12. See: https://www.aer.gov.au/system/files/AER%20-%20Draft%20Decision%20- %20AGN%28SA%29%20access%20arrangement%202021-26%20-%20Overview%20- %20November%202020.pdf 3 Attachment A Hydrogen in the future energy supply mix We believe it is useful to begin by introducing some of the potential benefits of renewable hydrogen for Victoria. The benefits and potential applications of hydrogen are broad and will emerge more fully as projects (like those outlined in our letter above) are delivered and demonstrated. Gas Vision 2050, released in 2017, reflects the ambitions of key organisations in Australia’s gas sector to play a role in Australia’s low carbon future.3 The report showed that gaseous fuels have