By Ben Potter
By rights, so called “renewable gases” should have an uncontroversial role in Australia’s energy transition.
But nothing is simple in the energy transition. The major players – gas pipeline owners, energy companies, energy consumers and the natural environment – have conflicting interests in how the transition unfolds.
So the role of renewable gas –biomethane, synthetic methane or low carbon hydrogen -- has become contentious.
Is it to provide low carbon alternatives to fossil gas only for those users who can’t electrify their houses and businesses (which might not use enough volume to maintain gas pipeline networks at safe pressures)?
Or is it to keep sufficient volumes in the gas distribution networks to prolong their viability?
Gas pipeline owners such as Jemena, Multinet and Australian Gas Networks – which own a big chunk of the $10 billion worth of East Coast distribution networks – think it’s the latter.
They want households to switch to renewable gas and keep using their gas heating and cooking appliances – rather than switch to solar panels, batteries, induction cook tops and heat pumps – for years to come.
Competitive
Jim Snow, executive director at consultancy Oakley Greenwood, backs them. Snow says there’s enough agricultural waste on the East Coast to generate 600 petajoules of biomethane – the entire domestic requirement.
He says it can be delivered at a competitive price to methane that’s extracted from the earth’s crust (about $15 a gigajoule) if the producers can also earn a tradable green certificate and sell the carbon dioxide byproduct to manufacturers.
The federal government is mulling making certificates issued to biomethane producers eligible to acquit liabilities under the Safeguard Mechanism for big carbon emitters and help a wider group of energy users validate emissions cuts and repel “greenwashing” claims. NSW and Victoria are weighing biomethane targets. News on all measures is expected mid-year.
Snow says international green certificates recognised in Europe should also be honoured – particularly those generated in Australia.
“You've got to provide entry for this product that is equivalent to the way you provide an entry for the renewable electricity products.”
The Grattan Institute, Energy Consumers Australia, CSIRO and the Institute for Energy Economics and Financial Analysis say pipeline owners are ignoring big household savings from electrification, and telling the public one thing about the future of gas and the Australian Energy Regulator – via bids for “accelerated depreciation” of their networks due to early obsolescence – the opposite.
Waste not
The vast amounts of waste we generate each year – households, municipal, waste water, industry and agriculture – generate methane as they rot.
We can substitute that methane directly for the methane produced by gas companies. Because this methane would have been generated anyway, and either vented or “flared” into the atmosphere, it counts as a lower carbon form of gas than fossil gas when used for heating or power.
“Green hydrogen” – made by separating water into its hydrogen and oxygen parts using wind or solar energy -- is also considered a renewable gas, but proponents are struggling with the financial viability of pilot projects. The gas industry wants “blue hydrogen” – made from fossil gas with carbon capture and storage – to count as renewable gas. But blue hydrogen is part of a ‘greenwashing” suit brought by the Australasian Centre for Corporate Responsibility against Santos (Jim Snow is an expert witness for Santos).
Unlike biomethane, hydrogen isn’t a drop-in substitute for fossil gas; appliances and pipelines have to be upgraded, or even replaced. On top of that expense, the cost of making green hydrogen hasn’t fallen as hoped, few major projects have got a green light, and production at scale is a long way off. Blue hydrogen is more economical.
Level playing field
Biomethane also has hurdles to overcome. Landfills and waste water treatment plants cluster around cities, making for efficient capture, but agricultural waste – a larger potential source that could drive scale – can be far from gas pipelines. (Snow insists this isn’t a problem.)
Biomethane is making more progress in Europe, where Denmark has brought forward a 100 per cent biomethane target from 2035 to 2030.
Suzie Jakobovitz, head of renewable gas at Jemena, says it can be produced in Australia for $9/GJ-$25/GJ, depending on the source (wastewater and landfill gas is cheaper than agricultural waste gas, for example). Jakobovitz says this is competitive with fossil gas at $7/GJ to $25/GJ. Gas industry estimates are about $9/GJ for fossil gas produced close to pipelines, and $16/GJ-$24/GJ for imported liquefied natural gas (LNG).
The federal government has just passed its hydrogen production tax credit bill, which comes on top of the $2 billion Hydrogen HeadStart grant program.
Jemena operates a small biomethane pilot plant at a Sydney Water site at Malabar and an experimental hydrogen plant in Western Sydney. It would like both to earn Safeguard Mechanism-eligible large-scale generation certificates or LGCs – similar to those earned by solar and wind farms.
Jakobovitz says crops are not currently optimised for waste production but there are enough close to Jemena’s pipelines to produce 34 PJs of biomethane – two-fifths of its current demand in NSW – rising to 54 PJs by 2050.
“We know that close to our network, we've got enough to meet the needs of our industrial customers,” she says.
“Give biomethane an equal footing, and don't pick a technology. Ultimately, it's about driving the lowest cost decarbonization pathway as fast as possible. And biomethane gives you that.”
Kevin Morrison, IEEFA’s gas analyst, doubts enough biomethane can be produced to replace all the fossil gas used in Australia, and says carbon cuts from blending hydrogen in gas networks will be minimal because its energy density is lower. Promotional campaigns for renewable gas may also leave some households stranded with new gas appliances and higher energy bills if electrification accelerates.
But IEEFA doesn’t oppose biomethane and believes it could be a niche market, for example for dairy farmers in rural areas.
“[We] could see the potential was there, and that's why we didn't really want to dismiss it -- whereas it's just far easier to dismiss hydrogen blend,” Morrison says.
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Jim Snow, Suzie Jakobovitz and Kevin Morrison will speak at Quest Events’ Australian Domestic Gas Outlook conference in Sydney from 31 March to 3 April. Learn more here. To access the detailed conference program, download the brochure here.