Future Gas Strategy: consultation paper

Bioenergy Australia (Forum) Pty Ltd
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Bioenergy Australia Submission – Future Gas Strategy Consultation Paper

Bioenergy Australia (BA) is the national industry association committed to accelerating Australia’s bio economy. Our mission is to foster the bioenergy sector to generate jobs, secure investment, maximise the value of local resources, minimise waste and environmental impact, and develop and promote national bioenergy expertise into international markets.

This submission is on behalf of the Renewable Gas Alliance (RGA), an alliance founded to accelerate the decarbonisation of Australia’s gas network through increased deployment of biomethane. The RGA has over 100 member organisations, including gas pipeline owners, gas retailers, project developers, technology providers, off takers, research organisations, and state and local government representatives. This submission is on behalf of the RGA and will be supported by individual member submissions relating to their specific expertise.

Australia’s Bioenergy Roadmap (ARENA, November 2021) outlines how, by the start of the next decade, Australia’s bioenergy sector could contribute to around $10 billion in extra GDP per annum and 26,200 new jobs, reduce emissions by about 9 per cent, divert an extra 6 per cent of waste from landfill, and enhance fuel security. Now is the time to capitalise on these opportunities by prioritising biomethane within The Future Gas Strategy.

We thank the Department of Industry, Science and Resources for the opportunity to provide feedback on The Future Gas Strategy. Australia's commitment to achieving net-zero emissions by 2050 means
Government needs to make an urgent, yet deliberate, decision on how we will affordably meet our future energy requirements while enabling rapid decarbonisation of our gas network. Gas will continue to be a part of our energy mix in the future and therefore, the key challenge isn't to eliminate gas but to decarbonise it. Biomethane emerges as the straightforward solution.

Biomethane is a renewable replacement for natural gas that can aid in the decarbonisation of
Australia’s gas network and our hard-to-abate industrial processes. It is game-changing in its application: clean, cheap, proven, and importantly, ready for immediate use.

Biomethane:
• supports decarbonisation, including reaching our target of 43% reduction in emissions below
2005 levels by 2030 and net zero by 2050;
• promotes Australia's energy security and affordability;
• creates a significant economic opportunity, particularly for regional Australia; and
• aligns Australia's decarbonisation strategy with the approaches successfully implemented and
proven effective in international markets.
We strongly recommend the Department considers the significant opportunities offered by the development of a domestic biomethane industry—an industry that provides critical security, reliability and decarbonisation of Australia’s future gas.

Biomethane can decarbonise Australian gas
Biomethane is a drop-in natural gas substitute which can be injected into existing gas grids and transmission infrastructure assets, utilising existing infrastructure and appliances, without the need for significant infrastructure investments. Given the right policy measures, biomethane can be rapidly scaled to account for 23 percent of the total pipeline gas market by 2030, with at least 350PJ of biomethane available for immediate decarbonisation (RACE for 2030, Opportunity Assessment).

For Australian manufacturing industries, gas will remain an integral part of the energy mix. There is no alternative technology for the heating, refining and reforming processes required throughout manufacturing and industrial operations and thus, gas will still be required for the heavy lifting within these industries. For these sectors that cannot fully transition to electrification due to technical or economic barriers, biomethane presents as the only genuine decarbonisation solution.

Significant gas users, including Brickworks, Pepsico, and Interface, have publicly expressed their keenness to become prolific biomethane customers, emphasising its critical role in their decarbonisation strategies and, for some, the sole means to achieve decarbonisation.

Biomethane can be produced from a variety of Australian feedstocks and waste, mitigating the risks associated with supply fluctuations or concerns regarding scalability. Feedstocks include:
• Cereal straw (e.g. wheat, eats, barley);
• Non-cereal straw (e.g. cotton, canola);
• Hay and silage;
• Manure (from sheep, cattle, pigs and poultry);
• Vegetable residues;
• Fruit residues;
• Winery waste (grape marc);
• The organic fraction of Municipal Solid Waste (MSW);
• Sugarcane trash and bagasse;
• Waste from wastewater treatment plants.

Biomethane also supports a circular economy — where waste and pollution are eliminated, resources are circulated at their highest value, and nature is regenerated. By utilising locally produced feedstock and waste, biomethane enhances waste management and disposal practices and supports Australia’s wider decarbonisation strategy.

Furthermore, biomethane offers an opportunity for households to reduce their carbon footprint in cases where transitioning to electrification is neither feasible nor financially viable. Electrifying households can come at a substantial cost of approximately $80,000.1 Failing to acknowledge this financial reality could lead to a significant cost impact on households.

1
Net Zero Australia (12 July 2023), ‘How to Make Net Zero Happen - Mobilisation report’
Biomethane is a proven technology to reduce emissions and is essential to Australia’s strategic decarbonisation approach.

Biomethane promotes Australian energy security
Biomethane production will aid energy security by catering to both basic energy demands, peak loads, reduce the risk of shortages and price spikes and enhancing energy security for all consumers.

Biomethane can be used on-site, injected into the existing local distribution network and can be readily used to improve domestic supply whilst providing net zero carbon energy for gas consumers, hard to decarbonise industrial processes, heavy transport, and gas peaking stations for dispatchable renewable electricity.

The significant scalability of Australia’s biomethane potential can increase domestic gas supply and enhance domestic gas production and security. Increased availability of biomethane will support the electricity grid by providing firming capacity, potentially leading to lower-cost and more stable electricity delivery. Furthermore, as the proportion of renewable gas in the system increases, cost benefits flow to all gas users, including large industrial users and safeguard entities, leading to lower costs for all.

Biomethane can create dispatchable energy to compensate for low energy production during wind and solar droughts. Biomethane can also displace natural gas to run peaking gas power stations to cover off deep storage needs. A notable issue with renewable electricity generation is the enormous overbuild of transmission and renewable generation that is required to meet the peak demand. Yet, as little as 20PJ/year of biomethane could fix this issue – and avoid a significant investment impost on the community.

Biomethane supports our domestic economy
Biomethane offers a cost-effective solution for decarbonising gas user’s operations due to being immediately deployable using existing infrastructure and appliances, thus reducing the total cost of delivery.

Biomethane can be produced at a lower cost than the long-term renewable hydrogen target price and has the ability to be produced at scale with abundant feedstocks and wastes available across the nation. The increased development of biomethane will enable gas users to quickly and cost-effectively achieve net zero emissions now, while also scaling to play a significant role in decarbonising the gas supply system over the next decade and beyond.

The adoption of this technology has the potential to generate over 18,000 full-time jobs, primarily in regional areas, and contribute $50 billion to Australia’s GDP.2

Moreover, by utilising locally produced feedstock and waste, valuable by-products of biomethane production such as digestate fertilisers, CO2, heat, and electricity can create additional income streams, particularly for farmers, while also supporting regional Australia. Through collaboration with

2
RACE for 2030 report into the opportunity of anaerobic digestion for electricity, transport and gas.
different farms, a regional biomethane plant can generate a variety of job opportunities along the supply chain, from raw material cultivation and collection to transport, storage, and pre-processing, while also serving as a key waste management strategy. By increasing decentralised energy production, income remains in regional areas instead of flowing into global energy markets.

However, the limited domestic policy supporting biomethane development is leading to Australian feedstock being exported to overseas markets that recognise the significant value of our feedstock, at times locking into long term offtake agreements that send millions of dollars overseas.

Australia can secure these economic opportunities for our domestic market by developing a future gas strategy that capitalises on our biomethane potential.

Biomethane is proven technology with a ready market
Biomethane exhibits a high level of technology, production, and market readiness.

Technology readiness: The technology to upgrade to biomethane and inject it into the grid has been successfully installed in over 750 locations throughout the world and Australia has the technical capability to use this technology, interface it, install and operate it. A prime example of its feasibility is the Jemena’s Malabar Biomethane Injection Plant in NSW, the first contemporary project in Australia to produce and inject biomethane into the gas network. Jemena has identified approximately 30PJs of biomethane available near its NSW gas distribution network, being enough biomethane to meet the needs of its 1.5 million residential customers - indicating the immediate potential and readiness of biomethane projects.

Production readiness & proven advantages: Biomethane is ready for immediate deployment and can be seamlessly integrated into existing gas grids and transmission infrastructure without requiring significant infrastructure upgrades. Notably, production technologies, including anaerobic digestion, are being actively developed in Australia, highlighting the immediate scalability of biomethane production. The Australian biomethane industry is poised for rapid expansion, with the potential to represent 23 per cent of the total pipeline gas market by 2030 (Australia’s Bioenergy Roadmap,
ARENA, 2021). Biomethane has the following proven advantages:
• Energy generation 365 days a year, regardless of weather and at all times of the day and
night.
• Caters to both basic energy demands and peak loads.
• Complements other renewable sources like water, sun, and wind in the energy mix.
• Reduces reliance on energy imports.
• Processes waste to support a cleaner environment.
• Improves existing waste management practices.
• Captures methane from animal waste.
• Returns digestate to fields, establishing a closed nutrient loop.
• Produces organic fertiliser to reduce expenses on mineral fertilisers.
• Creates additional revenue streams (particularly for regional areas) through resourceful use
of existing assets.
International market: Biomethane is an internationally mature technology and operating at scale. This technology, including grid injection, is driving down emissions globally with 57PJ p.a. produced in the
United States and 45PJ p.a. produced in Europe in 2019.3 Global investment is rapidly accelerating with the EU announcing $37 billion to increase biomethane production,4 noting that Europe already possess over 1,000 operational plants. A comprehensive map detailing the immense potential of the
European biomethane market is available at the GIE and EBA publish the ‘European Biomethane Map
2018. The global biomethane industry is also anticipated to generate $5.5 billion by 2032, having achieved a value of $3.1 billion in 2022.5

Australia lags significantly behind these numbers but with the technical capabilities to adopt this technology, a robust feedstock supply for industry growth, and substantial manufacturing companies demanding this product, there is no reason why Australia cannot become a leading player.

Research highlighting the biomethane opportunity
To understand the readiness of the Australian biomethane opportunity, Bioenergy Australia commissioned Deloitte to conduct a survey involving various project developers, pipeline operators, and retailers. As an initial starting point, this survey focused on Victorian projects but there are plans for this survey to be rolled out a national scale. Based on the findings from this survey, it was estimated that there is currently the potential to inject 26PJ into the gas network by 2030, with the lowest price of injection noted at $10/GJ and an average price of $18/GJ.

These projects are ready to play a role in decarbonising Australian future gas.

Several Australian CRC’s have also undertaken research into the Australian biomethane potential and key insights are noted below:

• The Race for 2030 Onsite Anaerobic Digestion for Power Generation and Natural Gas/Diesel
Displacement Report stated:
o Biogas could account for more than 50 per cent of all gas consumption in Australia by
2050, with feedstock to generate potential 371 PJ of biogas per year - the equivalent
of 6.2 per cent of Australia’s total energy consumption.
o This would see a 28 per cent reduction in Australia’s total emissions from natural gas
use, help generate an additional $50 billion to Australia’s GDP, and create 18,100 full-
time jobs.
o In Australia, agricultural waste offers the “greatest potential” for biogas expansion
and could account for around 86 per cent of total biogas potential by 2050.

• The Race for 2030 Biogas from Agricultural Waste: a Techno-economic Evaluation Report
stated:

3
American Gas Foundation, 2019. European Commission, 2017
4
European Commission, ‘REPowerEU with Clean Energy’ May 2022
5
Allied Market Research, "Biomethane Market by Feedstock: Global Opportunity Analysis and Industry Forecast,
2023-2032", 2023
o An Australian full-scale biogas plant project could use 49,000 tonnes per annum of
sugar industry residues and other organic wastes to produce about 3.6 million cubic
metres of bioCNG per year.
o The produced bioCNG could displace more than 8,000 tCO2-e per year of GHG
emissions from fossil-fuels.
o The biogas plant is expected to generate $4 to $4.5 million per annum in revenue,
while also producing highly valuable nutrient rich organic fertiliser, and improving the
productivity and sustainability of local farms.

• The Future Fuels CRC Where are the most viable locations for bioenergy hubs across
Australia? Report:
o Developed a heatmap to estimate the available biomethane and the levelised cost of
energy of running a biomethane plant across Australia.
o Noted that a feedstock collection radius of 50 km-100 km is considered optimal as
transport costs beyond this distance become significant.
o Indicated that the estimated levelised cost of energy for biomethane plants primarily
falls within the range of $10/GJ to $25/GJ.

There is significant research supporting the biomethane opportunity and the RGA offers its expertise and resources to the Department to assist with any work necessary to harness these opportunities.

The Future of Biomethane
Biomethane is a critical component of our Future Gas Strategy and its greatest opportunity. It addresses our decarbonisation goals, enhances energy security, bolsters our domestic economy, and aligns our strategy with international counterparts who have already embraced biomethane.

Our biomethane market is ready for expansion but requires a clear market signal from the
Government to boost confidence and secure future investments. Key policy support includes:

• Recognising biomethane within the GO Scheme: Without this recognition biomethane cannot
be sold to an energy user as a zero emissions, carbon-free gas, through the gas network. As a
result, unlike in Europe and the US, customers who purchase biomethane cannot include this
in their emissions reduction calculations, removing a key incentive to alter their energy mix.
This scenario is a substantial inhibitor to the obvious benefits offered by increased
deployment of biomethane, delaying vital investment and leaving our manufacturers and
industrial users of gas not only at a competitive disadvantage to foreign peers, but unable to
reduce their emissions at a rate comparable to other industries.

Australia urgently needs a system that would allow for the certification of biomethane - a
system to trace the gas and allow environmental claims to flow to the buyer, even when the
gas is supplied co-mingled with its fossil alternative via shared infrastructure. This recognition
can provide investors and gas consumers long term certainty while also reducing the direct
cost impact to customers by spreading costs across a broader gas and energy customer base.
• Allowing for adaptability as the market matures: Policies should be flexible and evolve with
the stages of biomethane market development. Different policy arrangements will be
required to support the standing up and establishing this industry to that required to support
its ongoing supply.

• Supporting long-term policy commitments: Long-term policy stability, ideally at least 20 years,
is essential for providing market and investment confidence.

• Providing market-based and funding support: A blended approach combining market-based
incentives and government funding can effectively kick-start biomethane projects as well as
support the ongoing supply of biomethane. This approach can be adjusted as the industry
evolves and matures.

The above policy support can create a favourable environment that supports biomethane supply, demand and growth.

Gas will be needed now and well into the future and to be ready for this reality, we strongly encourage the Department to prioritise the development of biomethane within the Future Gas
Strategy.

Thank you for taking the time to consider our submission. Any questions or request for further assistance are welcome and can be directed to .

Sincerely,