Victoria is set to consider options for electrification of all new residential buildings and most commercial buildings as the state moves further to transition away from reliance upon fossil fuels.

Victoria is set to consider options for electrification of all new residential buildings and most commercial buildings as the state moves further to transition away from reliance upon fossil fuels.

The Victorian Government has released the latest update to the state’s Gas Substitution Roadmap.

As part of the updated version of the roadmap, the Government will undertake a regulatory impact statement (RIS) process to investigate options to progressively electrify all new residential and most commercial buildings where appropriate electric appliance options are readily available.

The same RIS will also consider the costs and benefits of requiring existing gas appliances in homes and relevant commercial buildings to be replaced with electric appliances when the current appliance reaches end-of-life.

Exclusions will apply to some gas users.

These include industrial and manufacturing sectors where fossil gas is used directly as a feedstock or for applications such as high heat processes where cost-effective electric appliance alternatives are not currently available.

Exemptions for other gas users such as in the agricultural and hospitality sectors will also be considered.

The RIS will be released for public feedback in 2024.

Meanwhile, the Government has flagged updates to its Victorian Energy Upgrades program through which households and businesses can receive rebates or discounts when they install approved energy saving products.

In 2024, this scheme will be expanded to also include upgrades to electric cooktops.

The Government will work with induction cooktop suppliers and retailers to determine the best way to bring these products into the scheme as quickly as possible.

Other new measures will include:

• Conducting public consultation in 2024 regarding the expansion of minimum energy efficiency standards for rented homes to cover ceiling insulation, draught sealing, hot water and cooling.
• Continuing to work with the renewable gas sector to develop renewable gas alternatives such as biomethane and renewable hydrogen to cater for users such as those in manufacturing and industrial sectors where replacement electricity alternatives are not readily available.
• Working with the Commonwealth and others states and territories to help maintain adequate fossil gas supplies to meet energy demand whilst the energy transition is taking place.

The update comes as Victoria is pursuing an ambitious electrification strategy as part of its efforts to reduce the state’s carbon emissions.

As part of these goals, the state is aiming to derive 95 percent of its energy generation from renewable sources by 2035.

All up, more than two million homes and businesses across Victoria are connected to a gas network.

In total, the state consumes about 200 petajoules of gas each year. The gas sector contributes about 17 percent of the state’s greenhouse gas emissions.

About 60 percent of gas consumption currently occurs through heating and cooling of residential and commercial premises.

The update builds on existing measures which the Government says will help Victoria to move toward phasing out gas and reducing greenhouse gas emissions.

From 1 January, gas connections will be banned from all new homes and residential subdivisions.

From 1 May 2024, the Government is introducing new 7-star mandatory energy efficiency requirements for new residential premises which are being introduced across most states and territories under the 2022 update to the National Construction Code.

The state is also going all electric with new government buildings including schools and hospitals.

The moves come despite concerns that gas will still be required in order to maintain secure and reliable energy supplies as Victoria and indeed Australia transitions to clean energy sources.

Victorian Minister for Energy and Resources Lily D’Ambrosio says that the transition will help to reduce household gas bills – which she says have risen by more than $500 per annum or around 35 percent over the past two years alone.

D’Ambrosio says existing households that go all electric can save $1,700 per year (a claim which is questioned by the gas industry – see below).

With solar installed, this amount could increase to up to $2,700 per year.

This is on top of savings worth up to $400 per year as households no longer need to pay for their gas connection.

Jay Gordon, Energy Finance Analyst at the Institute for Energy Economics and Financial Analysis, welcomed the latest update.

Gordon says that the roadmap will deliver substantial benefits to Victorian consumers, who could save $1,2000 on their annual energy bills by going all-electric.

He adds that a managed wind-down of gas networks is in the best interests of the energy system as a whole.

“Victorian households will benefit from these updates to the Gas Substitution Roadmap,” Gordon said.

“The Victorian Government recognises going all-electric as the lowest-cost option.

“Under this plan, Victoria’s rebate scheme for electric appliances will be extended to include induction cooktops. This will support households to fully electrify their homes, reducing their energy bills by avoiding unnecessary gas connection fees.”

“Broadening the ban on gas connections to all new residential dwellings and some commercial buildings makes sense and will benefit consumers.

“As Victoria transitions off gas, it’s important to limit the continued growth of gas networks, not to invest in expanding them. New pipelines could quickly become stranded assets, with consumers left to pay the costs.

“We have seen an increasing trend of Australian jurisdictions taking similar steps – including the ACT and several local governments in New South Wales.

“(In addition,) Our IEEFA research has shown that supporting the transition to efficient electric appliances when gas appliances reach end of life is a logical next step for Victoria.

“IEEFA’s analysis shows that this is one of the single most impactful actions Victoria could take to secure its energy supply and reduce residential emissions. For each year appliances are switched to electric alternatives at their end of life, Victorian consumers would avoid a cumulative $931 million in locked-in costs over the lifetime of those appliances.”

However, energy producers warn that the latest moves could be harmful to consumers and could jeopardise the state’s energy supply.

Samantha McCullock, Chief Executive Officer of Australian Energy Producers, warned that the moves would place further strain on the state’s electricity system – about 60 percent of which comes from coal.

As a result, McCullock said the plan would drive up energy prices and risk blackouts for limited climate benefit.

McCulloch said Victoria continued to ignore fundamental principles of the clean energy transition including the importance of gas as a partner to renewables in reliable electricity generation.

“Higher prices and a higher risk of blackouts for little climate benefit will be the result of ignoring the important role of natural gas,” she said.

“As the world last night recognised at the COP28 Summit the important role of natural gas in the energy transition, Victoria continues to undermine it and back coal-based electricity.

“Victoria’s energy policy continues to remove from consumers the right to choose.

“Meanwhile, the state ignores the urgent need for new local gas supply close to the state’s millions of households and business users to reduce emissions and put downward pressure on prices.

“Given Victoria generates over 60 per cent of electricity from coal, the focus should be on reducing emissions from electricity, through renewable generation and gas as an instant backup, before adding to power demand.”

Meanwhile, the Australian Pipelines and Gas Association (APGA) welcomed the report’s flagging of increased consultation and supported the intent behind the plan to accelerate the transition to clean energy.

But the APGA questioned some of the claims made by Government modelling – which it noted has not been publicly released.

The claim about Victorian households saving $1,700 per annum from switching away from gas is not possible as average gas bills for Victorians were reported at only $1,600 per annum in October 2023 in the Australian Energy Market Operator’s State of the Market report.

How Victorians moving away from gas can save more than their annual gas bill is unclear, APGA says.

In another example, the roadmap cities the Grattan Institute and IEEFA in an effort to illustrate that emissions from duel fuel homes in Victoria are higher compared with those of all-electric homes.

In fact, APGA says that the Grattan Institute report clearly states that duel-fuel homes had lower emissions compared to all-electric homes in 2023.

“While we welcome more consultation and a rigorous cost-benefit analysis, there are many examples within the VGSR of assumptions being designed to fit a narrative that is clearly not reflective of reality,” APGA Chief Executive Officer Steve Davies said.

“We strongly urge the Victorian Government to make all cost-benefit assumptions and emissions modelling public, so businesses and households can have confidence they’re making informed choices.”

“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.”

“Industry commends the Victorian Government for its renewable gas directions paper, and the acknowledgment that carbon-neutral gases will play an important role in reducing emissions.”

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