Bills

Gas (Ban on New Connections) Amendment Bill

Second Reading

Adjourned debate on second reading.

(Continued from 7 September 2022.)

The Hon. H.M. GIROLAMO (19:46): This is a relatively simple bill and one that requires only a simple answer: we do not support this bill. I am the lead speaker from the opposition, and this bill should be dealt with swiftly and sent straight to the rubbish bin. This bill continues the honourable member's obsession with turning South Australia into little Victoria, and whilst we in this place cannot save Victorians from themselves, we can seek to protect our state from the politics of Victoria sweeping into South Australia.

In a cost-of-living crisis the opposition chooses to back the choice of those who work hard and are aspirational to save for a house to choose how they wish to connect to the energy system in this state. In a cost-of-living crisis the opposition chooses to back the choice of many home owners who believe that with greater choice comes the ability to choose the cheaper option. In a housing crisis we do not need to limit the choices of those who are seeking housing by making it more expensive. It will only affect those most vulnerable in our community, something we all thought even the Greens would be able to understand and would have been against.

The honourable member stood in this place recently and acknowledged the greatest housing crisis in a generation, but it is very shortsighted to see the impact this bill would have on the market and the hurdles it would put in the way of those trying to buy a house in this state. The proposed Greens' bill would serve to threaten the security and diversity of energy supply and remove customer choice from the market. Former member the Hon. Mark Parnell brought a number of similar bills, to remove the mandatory application of gas connections to new housing estates, for example, but they did not go very far, and I very much hope this bill is the same.

This bill is incredibly shortsighted and overlooks the importance of renewable gas to the nation's energy transition. Future renewable gas sources such as green hydrogen or biogas are being investigated to replace natural gas right now, providing a pathway for a carbon neutral gas to home in the future. This bill seeks to hobble those houses of the future. Literally, houses being built 18 months from now will not be open to the forthcoming energy transition, which I would have thought is something the Greens party, the supposed party of the environment, would have supported.

I have visited the site of LMS Energy, a great innovative company in South Australia. It is Australia's leading biodiversity and emissions reduction company, which turns waste from landfill into biogas. My question to the honourable member is: would you like to see the end of these projects, which are literally diverting waste from landfill from our community and turning it into energy? These future renewable sources of energy are net zero carbon and provide new and reliable sources of energy, which can be utilised in the same way as natural gas is today.

To say we are talking about the same houses is not too much of a stretch. Under the former Liberal government, Hydrogen Park SA in Tonsley generated green hydrogen from a 1.25 megawatt electrolyser. This green hydrogen was blended into the natural gas network in a trial of some 700 homes in Mitchell Park. At present, the blend contains 5 per cent hydrogen. The trial began in May 2021 and is believed to be the biggest trial in the world blending hydrogen into a suburban gas supply.

Australian Gas Infrastructure Group has indicated the trial has been a success and is looking to expand it. As old gas pipelines are being replaced, the Australian Gas Infrastructure Group is upgrading the new pipelines to be capable of supporting these higher concentrations of hydrogen. A transition to greater percentages of hydrogen will occur over time, with the Australian Gas Infrastructure Group aiming to offer 100 per cent green hydrogen to new housing estates by 2025—at the same time that this bill would come into effect and have houses with no ability to connect to the future energy source.

I hope that this council will not even entertain this bill today. Looking at Victoria, a report by Northmore Gordon, which was commissioned by the Greens in Victoria, showed that gas would begin to endure a shortfall of supply in 2027. It went on to note that there is sufficient time for policymakers—for some of us of the parties of government in this state—and the energy market to respond. The Northmore Gordon report talks about solving the problem of gas shortages by reducing demand, which is what I am presuming the honourable member is seeking to do today.

The report even states the burden on families, advocating for 600,000-plus ducted gas space heating units in Victorian homes to be replaced with reverse-cycle air conditioners. The cost of this ranges between $6,380 for a working family to $8,270 for those with a larger house. If this is taken as a once-off cost, it is a huge whack for households who are already struggling with their bills.

Put simply, the Greens in Victoria have advocated for Victorian families to foot the bill for changes they need to make to their homes, and even then the emissions will likely increase as a result of the change of the mix in the grid. Households will be forced to pay higher electricity bills, as natural gas cooling and heating in the home is cheaper and more efficient than electricity-powered units. This report does not even contemplate other household costs families are asked to take on, including replacing gas hot water systems, gas cooktops, and better insulation.

In summary, the Greens want working families to potentially pay a minimum of $7,000 to increase emissions for the household by 400 per cent. In closing, we on this side stand with those who have a house, who want to own a house, who want a choice in the market and how they heat their home and water and provide food to their family, who want choice in the energy options they will pay for, especially for those who want to be able to barbecue. I hope the Greens are not looking to ban the barbecue next.

Members interjecting:

The ACTING PRESIDENT (The Hon. J.E. Hanson): Order! I know that barbecues are very important to Australians, but right now we can move on to the Hon. Mr Pangallo.

The Hon. F. PANGALLO (19:53): I rise to say that I will not be supporting the bill, but I will give the Hon. Robert Simms 10 out of 10 for trying it on again. It is quite obvious that we in this country are going to be reliant on gas for decades. Gas is still a relatively cheap fuel source. It is used everywhere. It keeps industry going. Domestic dwellings rely on it. Maritime operations, defence, you name it—aviation. It is worth a lot of export dollars to this country and will continue to be, the demand is so high.

Gas keeps the lights on and it keeps the air conditioners on. It will keep the air conditioners on in the hot summer predicted by the Bureau of Meteorology and other climate changers, who say that we will experience not only heatwave conditions but also the likelihood of environmental events like bushfires. Factories will be dependent on it, ships have to keep sailing, planes flying. Relying simply on wind and solar is not really going to cut it. I see that AEMO has issued warnings of blackouts in South Australia this coming summer, and that we will be reliant on supplies from particularly Queensland, which is still having to use coal.

The net effect of trying to get rid of a fuel source like gas will be to put more pressure on power bills—not just power bills for consumers, domestic dwellers, but also industry. The wholesale prices will be affected by that. The Greens have great social justice policies, particularly with the housing crisis, so they would be the first to understand that Australians are hurting out there, but doing something like this will only hurt Australians even more, unfortunately.

Investors are also being scared off from putting money into big energy projects in this country as well because of the state of the economic climate globally. Also, we have the current federal government, with its energy market influence and what it is trying to do to meet net zero in 2030. The rest of the world is not doing the crazy things that Anthony Albanese and Chris Bowen want to do to achieve their renewable energy policies, and this fantasy of thinking they can get to net zero in six years' time. It is just impossible.

Recently, airbus Albo flew to China but said nothing about all the coal power stations that China is continuing to build. Not only are they continuing to build those coal power stations but they are offering financial incentives to keep them operating virtually 24/7. The Chinese are still building them—they are not moving away from coal. Yet, we had the Prime Minister there, beating his chest in Tuvalu to save them from climate change. He goes to China and does not say anything about China's policy of continuing with coal. In fact, he spent more time talking to Xi Jinping about Kung Fu Panda and panda bears here in Adelaide.

I point out a trip I did recently to Moomba with the Natural Resources Committee, where we visited Santos. Santos is one of South Australia's great companies. As we know, it is in the business of gas and oil exploration. What we saw there was truly commendable in what they are trying to do in their industry to combat climate change and reduce those carbon dioxide gases. They are currently in the throes, almost halfway through, of building a $200 million US carbon capture storage facility, which will capture the CO₂ from the emissions of their production of gas and oil. They will capture that, liquify it and then it will be stored underground in their empty gas wells.

It is a bold, ambitious project, but it is one that the company has decided to take on and invest quite a bit of money in. It just goes to demonstrate that they, too, have policies and an incentive also to be able to reduce these carbon gases and try to achieve net zero emissions. It is a company that is showing a lot of responsibility. However, we as a country are still relying on their product, and we will be for some time.

To sum it up, I think that getting rid of gas will only drive up other energy costs, particularly electricity. It will harm the very people who are hurting right now, and these are low-income families especially. If they cannot have access to gas in order to maintain their gas cooktops, their heating and other needs, they will end up having to pay enormous amounts for the use of energy that is supplied on the grid through other sources. It is a type of energy source that supplements what is already out there.

Everybody obviously wants to get to net zero as quickly as we possibly can, and also to utilise the renewable energy sources that we have out there—wind and solar, hydro, and hydrogen perhaps, if that ever happens. Let me tell you about hydrogen. This is an interesting thing. While we were at Moomba, I was talking to some of their geologists about the prospect of using hydrogen and producing enough of it for our needs and also for export. Gas, as we know, can be liquefied and then transported on ships that are designed to take LPG. To liquefy natural gas, you have to get the temperature down to, I think, -146° centigrade.

I asked them about hydrogen: -246° centigrade. It is going to take enormous energy to get to the point where you can liquefy hydrogen. I said to them, 'How are we going to ship hydrogen to export markets?' Well, there is no way yet, because they have not designed ships that are able to transport large amounts of liquid hydrogen and if you do, by the time it gets from one port to the other half will have dissipated. It gives you an idea that trying to make gold out of hydrogen may not be a cheap option. It may be very expensive. I do not think it is going to be the pot of gold at the end of the rainbow, as everyone seems to think it is, because it is going to cost so much to produce it.

In saying that, as I said, we are going to have gas with us for a long time. We are going to be cooking with gas for a long time. Like the Hon. Heidi Girolamo, I certainly do not want to get to a situation where I have to get rid of my Weber Q and the gas with it and have to find somewhere to plug it in and hope that there is electricity supplied by wind turbines that are still blowing.

The Hon. C.M. SCRIVEN (Minister for Primary Industries and Regional Development, Minister for Forest Industries) (20:03): There is no legislation in South Australia which mandates gas connections be installed to newly built buildings. Whether or not a gas connection is installed is a matter of consumer choice, and any ban would reduce consumer choice. A ban on new connections would diminish opportunities for development also of the hydrogen industry. The hydrogen industry is one of the biggest economic opportunities to ever emerge for South Australia, but banning gas connections would risk hamstringing the industry from achieving the scale in the domestic market which many would argue is a prerequisite for seizing the opportunity of potentially creating a hydrogen export sector.

Reducing hydrogen demand would also risk devaluing solar generation, and this is because South Australia frequently has excess solar generation, which has to be curtailed to maintain stability in the electricity system. Hydrogen manufacture creates the avenue for that excess solar, and excess wind at coincident or other times, to be harnessed productively and therefore valued.

Now, already, Hydrogen Park SA (HyP SA) produces renewable hydrogen at the Tonsley Innovation Precinct, and blends this into the reticulated gas supply to approximately 4,000 homes and businesses in Mitchell Park, Clovelly Park and parts of Marion. The HyP SA project has trialled the technical side of the 5 per cent blend and consumer response. Consumer surveys for the project owner, Australian Gas Infrastructure Group (AGIG), and subsidiary Australian Gas Networks (AGN), have found households generally support the change, with 94 per cent positive or neutral.

The success of HyP SA has been instrumental in AGIG adopting a corporate strategy that its distribution network will deliver a 10 per cent renewable carbon-free gas by volume by 2030, and that the network will be fully decarbonised with a stretch target of 2040 and a deadline of 2050. We should be encouraging this transition, not thwarting it. A ban on new gas connections would risk creating unintended and undesirable impacts, including cost burdens on consumers, an increase in overall greenhouse gas emissions and a less resilient energy system.

Gas was being supplied to more than 453,000 residential customers in South Australia as at quarter 3 of this year. The Australian Energy Regulator (AER) estimates the current 2023-24 capital asset base of Australian Gas Networks is about $1.8 billion. For the current five-year regulatory period of 2021-26, the AER determined AGN's allowable revenue at $1.122 billion. This included recovery of capex of $512 million and opex of $356 million.

Any ban to new gas connections would create a future risk that there would be a reduced customer base to cover costs of similar magnitude in the years ahead. This would worsen cost-of-living pressure on the legacy customers as their gas bills increased. This would be the case whether the gas was natural, a renewable blend or had successfully transitioned to 100 per cent hydrogen. Many of these legacy customers would be lower income households, as they are often the ones with the least capacity to move home and to purchase new household appliances, and the added cost burden on the most vulnerable customers should be unacceptable to this parliament.

Further, given the impending electricity transmission connection of South Australia to New South Wales, adding to the existing connections to Victoria, a gas connection ban would risk increasing the greenhouse gas footprint of South Australian consumers. Banning gas connections would transfer that energy requirement for households on to the electricity system.

The source of electricity generation varies considerably by time of day. Self-evidently, solar generation peaks during the middle of the day, but ceases at sunset. Residual demand—that is, demand for grid-supplied electricity once rooftop solar is subtracted from the total demand—peaks in the early morning and the evening.

Residential gas usage is not metered by time of use, but it is common sense that this peaks in the morning and again in the evening when households use gas energy for cooking and for heating water and the home. Therefore, fewer residential gas connections will increase electricity demand at precisely the times when there are already steep peaks. This will have the effect of increasing wholesale electricity prices, and it also risks increasing South Australian demand to draw energy from New South Wales and Victoria.

Given that New South Wales remains reliant on black coal, and Victoria on brown coal, South Australians could be swapping gas for the far more polluting technology of burning coal. Over the next couple of decades, these coal-fired power stations will close; however, gas-fired power generation is likely to remain in place for many more decades. At that stage, South Australians would be swapping burning gas at home for gas being burned at the power station to generate electricity, which is then transmitted and distributed—losing some energy along the way—to the home.

These energy and greenhouse gas implications would have to be fully calculated and verified to justify any decision to ban gas connections. Consumers also expect and demand a resilient and reliable energy system. Having a household being supplied by gas and electricity creates a dual option, so that if one source is curtailed the house can still function relatively normally. Given electricity outages are far more common and are likely to worsen as climate change drives increasing ferocity of damaging storms, this benefit should not be underestimated.

Gas pipelines are generally underground, whereas electricity lines are strung overhead, a vulnerability that could only be overcome by massive capital investment and further, as explained earlier, cutting gas will increase electricity demand at peak times outside solar generation periods. Electricity supply at these peak times will require increasing use of grid-scale batteries, but when used to supply energy rather than ancillary services, commercially viable batteries can be drained within hours and increasing demand on these batteries means the system will be less able to cope with dunkelflaute events. For those who do not know, dunkelflaute events are extended periods where it is dark and still. That creates a risk of more blackouts in a less reliable electricity system.

This bill has some superficial appeal as a catchcry in the campaign to address climate change, but unintended risks, worse cost-of-living pressures, potentially more pollution and worsening reliability are all reasons to oppose this bill.

The Hon. R.A. SIMMS (20:11): I think Socrates would not be able to turn this one around, based on the feedback I have heard from my colleagues. It is a shame we cannot make renewable energy from the hot air that I have heard in the chamber tonight during this debate. It is disappointing to hear once again the Labor and Liberal parties clambering over themselves to support gas and dirty fossil fuels. One of the most erroneous arguments that we have heard I think during this debate is the ongoing suggestion that gas is somehow cheaper. We know, of course, that that is simply not the case.

I want to refer the chamber to a report that was released just a few days ago by the Monash Climate Change Communication Research Hub, which reviewed and brought together leading electrification research and looked at the impacts of electrifying the residential sector with more affordable energy efficient appliances. As part of that, the report found that in almost all contexts, electricity would cut household energy bills and that electrifying Australia's entire residential sector would save households $4.9 billion in total annual energy costs.

The author, whose name is Amelia Pearson, said that there was a time not long ago that using gas to heat our rooms, water and stovetops was the cheaper choice. Those days are now behind us and electric appliances are both more efficient and cost effective. As gas prices continue to overtake the cost of electrification, electrification only makes more financial sense for Australian households, she says. The report looked at the yearly energy savings that could come from four primary sources: gas network connection fees, electrifying hot water systems, electrifying heating and induction cooking appliances.

What the report found was that on average wholesale gas prices increased by 234 per cent over the past decade compared to 137 per cent for electricity. Gas rose an average of 6.37 per cent a year compared to 3.77 per cent for electricity, so the constant refrain made by the Labor and Liberal parties that banning gas connections for new homes is going to hike up energy prices is a pure fiction. It is not supported by the evidence.

It is disappointing that the two major parties in our state are hooked on gas, because it is bad for carbon emissions and it is bad for community health and wellbeing. A few weeks ago, we saw the universities of Adelaide and South Australia merge; now we are seeing the Labor and Liberal parties merge on this question and it is very, very disappointing.

You have other jurisdictions around the world, other states around the world, that are showing leadership on this and banning new gas connections. The ACT has done it and Victoria has done it—another Labor government—but here in South Australia you have the Labor government in the arms of the gas companies and in the arms of the fossil fuel industry and it is profoundly disappointing. The Labor Party needs to do a lot better. I will call a division so you can all justify your position to your constituents in the middle of a climate emergency.

The council divided on the second reading:

Ayes 2

Noes 15

Majority 13

AYES

NOES

Second reading thus negatived.