Grattan warns Australia must plan for a future with less gas

Australia needs to stop assuming gas will remain a permanent feature of the energy system and begin actively managing its decline, according to new research from the Grattan Institute.

In a report, Out of Gas: Managing the decline of gas in Australia, the Grattan Institute argues governments have avoided difficult decisions about the long-term future of gas despite Australia's commitment to reach net zero emissions by 2050.

Speaking on the Grattan Institute podcast, energy program director Alison Reeve said gas use was already falling across households, industry and electricity generation, but not quickly enough to meet climate targets.

"We have to start grappling with the reality that gas is not going to last forever," Reeve said.

The report warns that while renewable gases, hydrogen and carbon capture technologies will play a role in reducing emissions, they will not be sufficient to sustain current levels of gas consumption.

"What that points you towards is we need to reduce the amount of gas that we're using," Reeve said.

Grattan said governments should provide clearer long-term signals, including setting phase out pathways for household gas use and better coordinating planning between gas and electricity networks

The report highlights the risk of a "death spiral" for gas networks as more consumers electrify, leaving fewer users to shoulder the fixed costs of maintaining pipeline infrastructure.

"The worry is that you could get into a situation with completely unmanageable gas bills for some people," Reeve said adding that vulnerable households could be disproportionately affected if governments fail to manage the transition.

The Grattan Institute also said policymakers need to rethink the future role of gas fired generation. While batteries are increasingly replacing gas for short term grid support, Reeve said gas would still be needed during prolonged periods of low renewable output.

"We know we're going to need it, and we know that there's going to be times when you get that two-week period in winter where its cloudy and its cold," she said.

Beyond domestic consumption, the report argues Australia should prepare for a gradual decline in its liquefied natural gas export industry as global decarbonisation efforts accelerate and international buyers reduce demand.

"We need to make sure that we are getting the best value that we can out of having an LNG export sector at the moment," Reeve said.

The report calls for governments to better integrate gas and electricity planning while ensuring taxpayers are not left carrying future rehabilitation costs from ageing gas infrastructure.