THE GAS FUTURE IN VICTORIA
Much of the work of the LAA revolves around government relations. Identifying and acting on bad government policies, or seeking better policies. The LAA and the laundry sector is heavily reliant on gas for our work, therefore reliability of supply and pricing represents a major challenge, particularly as our costs seem to be rising for every input. Although these costs have to be passed on to our customers, the LAA continues to engage with governments and particularly the Victorian Government.
It is in Victoria that the Government has outlined a ‘roadmap’ to move gas towards a carbon neutral future by 2050. This included the possible substitution of hydrogen or biogases for natural gas (termed a ‘fossil fuel’). The Victorian Government wants to electrify the State, thereby clearly showing that the future of gas supply is now doubtful in Victoria. Members should be wary about investing in gas boilers at this time, at least until clearer direction is provided.
The future of gas in Victoria is therefore not positive. Earlier in 2021 the Victorian Government called for submissions for an exit from gas use in the State. This resulted in last year’s release of the Victorian Gas Substitution Roadmap which outlined the Victorian Government’s plan for the end of gas in that State. The Government has already legislated against onshore gas exploration in Victoria (Coal seam gas) and of course oppose ‘fossil’ fuels. Aiming for 95% renewables by 2035, the current reliance on brown coal and gas is to be rapidly phased out. The investment environment for coal and gas is therefore extremely poor as a result, leaving an undersupply of gas guaranteed. Victoria will therefore either have to supply reliable renewable power, or import power from the inter-connected system (generated by other States).
Having locked the gate (banned coal seam gas development), the Victorian Government has no financial link to gas royalties. It does however seem apparent that Victorian voters are supportive of their Government’s approach and are happy that climate change is being fixed/addressed through such policy decisions. That being said, the voters are sensitive to higher energy prices, and while the promise of cheap renewable power is the light on the hill that encourages support for the Government, shorter term consideration require the Victorian Government to ‘take action’ on cost of living issues such as power prices. This is why the Government appreciates the political realities that there can be no hard cut from gas for the voters, hence the support being provided for transitions. From the LAA’s perspective, those transitional payments are available only for households and small businesses, but nothing beyond medium sized businesses. There is nothing for most of our sector in the way of new electric boilers.
The LAA has been reaching out to ministers and their advisers on the issue of gas, in this case. As was the case for industrial relations changes in Victoria, the ministers/staff always refer us to officials/public servants, and on 21st March, the LAA will meet with the Victorian Government’s Energy Strategy team, to talk about the future of gas. The aim of this meeting is to achieve absolute clarity with regard to the future of gas in Victoria, and if the Victorian Government continues to seek the end of gas, we will seek government support for our transition. We know that the preferred position of our sector businesses is to just get on with our work, without government support or interference, but if that government wants to increase our costs and reduce our efficiency, then we will seek grants and incentives to comply with their market intervention.
The Victorian Government is not sensitive to our concerns, nor our costs, nor the viability of our businesses. They are only reactive to the voters and other vested interests. Should the Government not offer assistance, then the only way to increase the sensitivity of the Victorian Government and other governments, is to ensure that their policy decisions, that cause increases in our costs, are passed through to our customers. When those costs are passed through to their customers, with those costs properly attributed to government policy, then there can be sensitivity to our circumstances. Given that we are predominantly detached from retail customers by one stage, cooperation with downstream sectors would need to be achieved to demonstrate the connection on government policies to hip-pocket impacts. This is the path that we may yet have to follow.
Luke Simpkins
CEO