Energy grid company AusNet Services has torpedoed claims that “renewable gas” will be able to serve households for decades into the future and is trying to charge customers an extra $70 million to use its pipelines as it fears the accelerated switch to fully electric homes will leave your assets stranded.

If AusNet’s claim is successful and is followed by Victoria’s other gas distribution networks – Multinet Gas Networks and Australian Gas Networks – the state’s gas households would have to pay about $220 million more for pipelines over the five years until 2028 than was agreed just two years ago.

That would bring to more than $550 million the extra charges claimed by Victoria’s pipeline owners for “accelerated depreciation” over the past two years. Pipeline owners say these claims are justified because rapid electrification will shorten the commercial life of their networks – or the time they can recoup their investments.

The Victorian government has banned gas in new homes and is considering bans on replacing end-of-life gas appliances and a push to speed up the electrification of commercial buildings.

“You’re basically looking at several billion dollars worth of assets disappearing,” says Gavin Dufty, national director of energy policy and research at the St Vincent de Paul Society.

AusNet says in its application to the Australian Energy Regulatory Authority (AER) for an amendment to its gas access agreement for 2023-2028, which, although its initial submission had two possible pathways – electrification or renewable gas – “the renewable gas pathway is now increasingly unlikely for Victorian households “.

At stake are pipeline networks valued at around $5 billion in Victoria, which has the largest domestic network, and the fair treatment of low-income and vulnerable households who will have to pay more to access gas networks after wealthier households and small businesses electrify fully. houses and spaces.

“The problem is that accelerated damping seems to be the only tool AER has, because that’s a crap sandwich, right? says Tony Wood, director of the Grattan Institute’s energy program.

“No one wants to eat, and you have the government, you have the shareholders and the businesses, and you have the consumers. And we have to decide what we’re going to do with these assets, which are on the books of these companies for a lot of money.”

Wood says it’s not fair for either companies or their customers to bear the full burden, and governments and industry should have started working on solutions two decades ago.

Victoria – the state most dependent on residential gas, has 2.27 million gas customers, NSW has 1.5 million, South Australia 472,000 and the ACT 157,000. The gas distribution networks in the four jurisdictions are worth a total of $10.4 billion.

“This from AusNet just tells you it’s something we have to deal with and we have to stop pretending it’s not happening,” Wood says.

AusNet’s pessimistic view of the prospects for renewable gases – including low-carbon hydrogen and biomethane – to be part of the clean energy future for Australian households contrasts sharply with industry support.

Australian Gas Infrastructure Group, which owns Multinet Gas Networks and Australian Gas Networks and is owned by Hong Kong’s Cheung Kong Group, said through a spokesman: “We continue to advocate for more certainty on renewable gas policies ( and) we will make future decisions about access. Arrangements based on those policy directions.”

AGIG says on its website that it already delivers a 10% renewable gas mix to 4000 customers in South Australia and is targeting 10% renewable gas in its networks by 2030 and 100% renewable gas by 2040 “as a extended target’. Yemen. With 1.5 million customers in NSW, it also offers renewable gas on its website.

But AusNet says hydrogen and renewable gases are now “a viable option only for the hard-to-mitigate industrial sector”. So-called hard-to-mitigate industries such as steel, cement and fertilizers face increasing pressure to decarbonize under the Albanian government’s strengthened safeguard mechanism, but have limited commercially proven options to do so.

“Critically, now that the ban on new connections has been implemented, our network must inevitably stop growing and start shrinking in size. This crystallizes that the medium to long term challenge is now managing a declining network,” AusNet’s presentation said.

Victoria’s three gas grid owners claimed about half a billion dollars in accelerated depreciation in their original applications for 2023-2028 on the grounds that accelerating household electrification would make it harder for them to recoup their investment.

The AER reduced that claim to $333 million across the three networks, reducing AusNet’s claim from just under $200 million to $105 million.

AusNet’s proposed change would take the combined accelerated depreciation bill to about $554 million, or more than $100 million a year for the state’s 2.27 million households, an amount that could double if the trend spreads to other states.

States such as NSW and South Australia have opted out of replicating the Victorian government’s aggressive gas replacement roadmap.

However, home and business electrification subsidies are in place in several states, including NSW, Queensland and the ACT, and next year’s federal election looks set to feature a bid by the major parties for increased federal subsidies.

AusNet says Victoria’s aggressive electrification push means the previous forecast for rising residential gas customers is no longer credible.

The number of customers expected to switch off gas within a decade has doubled in two years, and the share of residential development plots expected to be all-electric within five years has quadrupled to 85% as new requirements for full preload for intra connections. (chart)

AusNet said in a statement that the gas will continue to be used for decades, but the company is reopening its access arrangement because “early action helps those who remain connected to the gas network in the long term.

“This includes Victorian industry, for some of whom renewable gas may be the only viable decarbonisation option.”