"Victoria's latest set of gas policies try to address the State's needs and the serious risks we face from high natural gas prices and declining supply, but they need significant pragmatic change to be workable for industrial energy users," Ai Group Victorian Head Tim Piper said today.
"Shrinking natural gas use is inevitable. Natural gas has been getting scarcer and more expensive and the status quo is painful for gas users and something has to change. Electrification makes financial sense for some energy users while renewable gases are essential for others. The State runs big risks if it steps too hard on the accelerator, however.
"Freeing up existing natural gas supplies and bolstering them with renewable gas would be welcome help to avoid gas shortages given the decline of the Bass Strait. Some industrial processes will need gas forever, and policy help to make renewable gas affordable is also very positive. The State has also finally recognised it will need new fossil gas supply investment too, and has been easing barriers to that supply.
"There are three big concerns for industrial energy users.
"First, as overall gas use gradually falls, we have to fix how gas network costs are recovered. Otherwise, industry and the poorest households will eventually be stuck with the full cost of infrastructure built for others. Industry needs a guarantee that outcome will be prevented. The necessary changes will take years to work through and that needs to start now.
"Second, electrification won't work for everyone. The proposed exemptions need to be broad enough and clear enough that households and businesses can still access replacement gas appliances when alternatives are not right for them.
"Third, the proposed start date of January 2026 is a non-starter. This is a huge change to the household and commercial appliance markets, and suppliers need good time to prepare - and a good business climate if they are to maximise local content.
"We also need to recognise that if Victoria doesn't build enough new electricity transmission, generation and storage over the next decade, we won't have enough power for existing demand, let alone new electrified appliances.
"Gas use is going to change. But we can't leave businesses and households behind and Ai Group is looking for effective solutions to these serious concerns," Mr Piper said.
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