The Victorian Government has released a Renewable Gas Directions Paper seeking input on its approach to accelerating the uptake of renewable hydrogen and biomethane across Victorian industry.
Australia’s commitment to the Paris Agreement demands rapid decarbonisation of its electricity and energy systems.
Transitioning to a renewables-based power grid is the most effective pathway to reduce emissions across the economy, as it enables other sectors to electrify with clean energy, creating a cascading effect in emissions reduction.
While electrification remains the primary pathway for decarbonisation in most cases, some industrial processes require different approaches.
In circumstances where electrification proves technically or economically unfeasible, renewable hydrogen and biomethane are the most viable alternatives to fossil gas.
Given this context, Climateworks supports the intent of DEECA’s Industrial Renewable Gas Guarantee initiative as a strategic mechanism to accelerate hydrogen and biomethane adoption and advance the state’s emissions reduction goals.
The design of this mechanism must carefully balance supporting Victoria’s economic transformation toward net zero emissions while avoiding two key risks: diverting investment away from more cost-effective energy transition measures and locking in high-emissions facilities.
Our recommendations are designed to strengthen the program and ensure it achieves these critical objectives.
Climateworks recommends DEECA consider the following recommendations as it develops the Industrial Renewable Gas Guarantee. The submission body includes specific details on each of these points.
- Climateworks supports establishing a mechanism, such as a certificate trading scheme, to accelerate renewable hydrogen and biomethane production and use in facilities and/or sub-sectors where electrification is not technically or economically viable.
- Climateworks’ analysis suggests the proposed baseline target of 4.5 PJ by 2035 is insufficient to align with the 1.5°C pathway outlined in our 2023 decarbonisation scenarios. Based on this we recommend reassessing the proposed target before the scheme is implemented to ensure it delivers the scale of emissions reductions required to achieve Victoria’s legislated net zero targets.
- Should the scheme be introduced, recover the cost of the renewable gas certificate scheme from industrial gas users to avoid further burdening households and small businesses, who will increasingly electrify and reduce their reliance on the gas network.
- Call on ECMC to direct relevant bodies to conduct analysis to enable forecasting and planning of supply, storage and transmission solutions in ‘regional ISPs’ to improve planning for future energy demand in industrial regions. Relevant bodies are likely to include AEMO, government departments and Net Zero Economy Authority. This analysis will help determine when renewable gas might be the more appropriate alternative to electrification.
- Ensure any Industrial Renewable Gas Guarantee program is compatible with and utilises federal government decarbonisation initiatives, including the Guarantee of Origin and the relevant settings within the forthcoming Sustainable Finance Taxonomy.
More detail on these recommendations can be found in our submission (PDF 0.3mb).
