Security, affordability trump net zero: Jemena

Ronald Mizen

Rising geopolitical risks should prompt a rethink of Australia’s energy priorities to elevate supply reliability and affordability above the net zero transition, gas and electricity company Jemena’s chief executive says.

Such a change would bring an end to the political consensus established under the Turnbull government that the three key elements of the nation’s energy trilemma – security, affordability and sustainability – should hold equal weight.

‘‘I don’t think they’re all equal,’’ David Gillespie told The Australian Financial Review ESG Summit in Sydney yesterday. ‘‘Security is absolutely paramount. . . and affordability is a pretty close second. And then if we get those two things right, we’re certainly then hopefully on a very quick decarbonisation journey.’’

Mr Gillespie also called for the federal government to develop a renewable gas target similar to what is in place for electricity to provide a commercial signal needed to spark the necessary investment.

He said that would help create a decarbonisation journey for sectors heavily reliant on combustible fuels.

‘‘If you think about what really sparked renewable electricity, it was a target, and it was a renewable electricity target that really generated a commercial signal for investment and a market long term,’’ he said. ‘‘Working towards a target gives a very strong commercial signal around the importance of the role of a low-carbon combustible fuel for industry.’’

Mr Gillespie also wants companies to be able to apply any emissions cuts from switching to biomethane from gas in their national greenhouse gas reporting, which they currently can’t.

‘‘If there was an industrial customer to buy [our] biomethane from us today, they would not be able to get the benefit in their national greenhouse gas reporting for reduced emissions intensity in their own business,’’ he said.

Speaking on a panel after Mr Gillespie, Cameron Mathie, acting general manager of the Clean Energy Regulator’s carbon markets division, said the regulator was working on a guarantee of origin scheme for products such as aviation fuel, hydrogen and biomethane.

‘‘It’s going to create new markets for green products and should flow through and support the Safeguard Mechanism and complement the carbon market to create, effectively, new certificate markets out there.’’

Mr Gillespie said manufacturing and heavy industries reliant on gas would eventually shift to hydrogen, but until it was widely available and affordable, biomethane was an alternative. ‘‘There are hard-to-abate sectors that are going to continue to see industrial load for gas [to] grow, not shrink in the near term,’’ he said, adding that two thirds of the gas that flowed in Sydney’s network supported industrial load.

‘‘The focus on renewable electricity in recent times has probably seen there hasn’t been a lot of public debate around this topic, there hasn’t been a lot of information, and that’s something we’re keen to push.’’

Mr Gillespie said Jemena was already trialling biomethane in its network in Sydney and while ‘‘small scale’’ it had two benefits over hydrogen.

‘‘One, it is commercially in line with market [expectations] in context of its cost.

The second, is it doesn’t require any wholesale change of household appliances downstream,’’ he said.

‘‘So you can run biomethane in the network blended today without having to think about large-scale appliance change out in the home as well’’ though, he said, the real focus and benefit was in heavy industry.

The energy boss said that about 34 petajoules of economically rational biomethane investment could be made in the Sydney basin, about half the current load.

This could be produced at a cost of between single digits to the mid-teens per gigajoule, which was comparable with a capped price of gas at $12 a gigajoule.

‘‘It’s a third of the network we run in the distribution system in Sydney or pretty much the entirety of our household usage in Sydney as well. So it’s quite meaningful,’’ he said.

The Jemena boss cited Denmark as an example of a country that currently had about 40 per cent of its gas system run on biomethane.