For households that go all-electric, it's highly beneficial. The heating is much cheaper and they can avoid gas connection charges. It feels to me like you are postulating the existence of some sort of conspiracy, whereas it's actually just that people like saving money, and reducing pollution, and improving health.
Not at all, I'm honestly asking out of ignorance. How do people move from gas electric ? I'm assuming there's going to be installation costs, maybe new devices to be installed? Not sure. So, how is that paid for? Each household pays for it or this is paid for by the state/federal goverment via taxes?
Currently most households who transition pay for it out of pocket. Some jurisdictions may have rebates or subsidies, eg the ACT has a no-interest loans scheme that would cover moving from gas to electric appliances.
Thank you. Do you know any ballpark cost of how much this out of pocket expense would be? Are we talking hundreds or thousands? This is important to understand so it will determine how long the "investment" will be paid back via the "savings" of changing over. Based on what this article states, those savings could be marginal, hence the payback period would be extremely long, not making it enticing for household, unless forced by the goverment of cource.
Jun 25, 2023Liked by Cameron Murray, Aidan Morrison
Very eye opening analysis. Shows what a lemon subsidising retrofitting is in VIC. But I guess after reading there's still a case for banning gas from new builds so that the housing stock renewal becomes the transition mechanism and merely cuts off growth in gas demand rather than adding to it. It seems more in line with the timeframes and minimal cost given it eliminates building new gas infrastructure and doesn't involve retrofitting.
But no doubt banning it from new builds seems too boring/vanilla
As mentioned below, I think a better conclusion from Grattan's research is that we should ban (or disincentivise) the old resistance-electrical appliances for heating/hot-water in favour of heat-pumps. I'm pretty sure this switch is much better environmentally, and economically. And, according to Grattan, it a strict pre-requisite for the gas-switch making any environmental sense at all.
well done on full analysis. I did provide some basic back of envelope calcs when this Grattan claim was tweeted by prominent people(Simon HAC for example blocked me for point this out). That the maths and physics was simple, and starts with the well know CO2 per joule of brown coal, which is roughly twice that of gas, and with the thermal efficiency of coal power plants, competing with gas at the hob in terms of emissions would actually need coal to be roughly half of what it is now.
Heat pumps are a good idea at any time due to efficiency but are expensive.
Important to point out to disciples, that changing from gas range to induction clearly increases emissions up until about 70% renewable achieved.
oh I see you unloaded on twitter already, fantastic. I haven't recorded it, but some basic facts.
The kg of CO2/BTU from lignite versus natural gas is a key starting point, and its double for the coal, so I knew that would be hard to come back from. Easily obtained from energy/engineering databases.
then it is just the efficiencies of the various processes along the way to get 1 BTU into a pot of water from a gas hob, or induction range. I researched all this from public info, (NSW gas leakage, AEMO transmissions losses, public data on ranges/induction. Power plant efficiency is well documented and known).
Gas - leakage in pipe (lose 2%), efficiency of hob (40%)
Get a BTU into a pot of water on a stove top, and it quickly works out induction is twice the CO2 of gas. Add inefficent old coal plants and wow. So at that point I thought, hang on this is rubbish. total back of an envelope, but when you start at double the emissions per BTU, add a old plant, you know you can't catch up unless you magic out some 300% efficient heat pumps!
The I looked at the actual report and it agreed! Which was funny.
I did have someone critique my calculations saying that I hadn't considered the liquifaction of the gas, and I realized they thought LNG was being used domestically.
So, I ran those numbers, and its still better than brown coal in terms of emissions (and not cost). LNG plants are the biggest consumer of gas in Australia btw.
In short, before we go too crazy about electrification, which is necessary and good, not before you get the grid down to 30% brown coal FFS.
You can virtue signal all you want about it, but it increases emissions until then.
Jun 25, 2023·edited Jun 25, 2023Liked by Aidan Morrison
Interesting.
At a Macro level, your analysis, makes sense.
For my household though, we bought Solar 8 years ago and it's now paid back and we switched to a Heat Pump with the 50% Off rebate C/o the Vic Gov.
Payback with 30 months and we passed that milestone about 18 months ago, which was great during the massive gas price increases which we were not exposed to at all.
For us, we pay more for the Connection Fees per month than our gas usage for the hob, we will disconnect the Gas when we do-up our kitchen.
Yes, we will go for an electric induction hob instead and hopefully by 2025 Battery tech will make sense for our house too.
The Vic Gov incentives are great when one has a long-term strategy and their house is shelter and a home not a speculative asset for flipping.
I realised long ago that with the Gas Cartel as a Consumer/Customer I was better off getting rid of our end-of-life Gas Boiler.
I was right and we're lucky we have a new Bosch Heat Pump and it's safer for the children (only boils up to 60 degrees which was also lower than the old Gas boiler) in our house.
That said, we're most probably not a common household and our choices made sense to leverage the solar and remove the price risks of the Gas Companies.
Interesting analysis and I have no expertise to argue one way or the other.
But it does (indirectly) raise a point that I often think about in all these different discussion / option papers - is it true or correct, or are there other options not canvassed at all, or what is the actual realistic potential for all these things? There are many other things that could be said in this regard, but hopefully you get my point.
We are awash with truths, half-truths and fantasies from all different sectors or interest groups etc all vying to get favoured governmental position and possibly the winner gets to the trophy of government rent seeking. All the jockeying for position on carbon reduction and more recently more affordable housing are two such examples that come to mind - there are just so many different and conflicting "solutions" out there, that it is hard, if not impossible, for anyone to cut through and sort out what is true and immediately feasible.
I have no easy or immediate solution to this problem, but in my head, I dream of some judicial panel working with recognised technical experts who can question the different proponents with the kicker that if they have been found to be using doggy data, false claims or blue sky dreaming - then their submission gets immediately tossed out. That would force proponents to come to these panels with more realistic and accurate proposals.
Firstly, if you're going for net-zero you have to decarbonise as much as possible. If you are aiming to get rid of 100% of net emissions, even 2% matters. I agree that it's a small fraction, but it's a viable place to start.
Secondly, if going all-electric is beneficial for households, then it really does make sense to do it, or at least get the process started. Given the lifetimes of gas appliances and the opportunity to have a natural transition just using end-of-life replacement, it makes sense to advance this argument now and get started sooner rather than later.
I don't know if they make it in the paper but the prospect of economic electrification creating something of a death spiral is another good argument for being pro-active about this shift.
"I don't know if they make it in the paper but the prospect of economic electrification creating something of a death spiral is another good argument for being pro-active about this shift."
Interesting comment. What exactly do you mean?
By death spiral, do you refer to a decline in the number of gas consumers that raises the share of the fixed infrastructure cost that remaining consumers must pay and thereby induces more households to opt out of gas until finally there are no users left?
And do you see that as a good outcome?
Because the upshot of your view is that existing infrastructure that if used fully could yield benefits higher than the costs of running it is not used, due to a coordination failure. Engineering that failure means destroying a lot of value.
For example, imagine if the government built a road and tolled it on the promise to taxpayers that the cost would be fully recovered from users. (This promise is akin to the cost recovery processes of the AER).
Now imagine the government somehow discourages half the drivers from using it, and so has to double the toll on the remaining drivers, who therefore also opt out of using it.
Now nobody uses the road. It sits there idle. Is this a good thing?
I don't think a death spiral is a good thing, and I think it's worth thinking about it as a coordination problem. However, if it is disadvantageous for a household to be on the gas network, they are going to get off it - this doesn't require governments to engineer that failure. It means that there isn't actually a stable equilibrium that means the infrastructure keeps being used. There was before, but technology and economics have changed!
In the report Grattan says governments should stop new gas connections right away. This is the sort of thing that can reduce the risk of asset stranding and potential lost value. It's hard to see why you wouldn't do this, even if there may be an ongoing role for the gas network.
With respect, I very strongly disagree here. The conclusion that "absolutely every source of emissions should be tackled with whatever effort is required to eliminate it, starting now (i.e. in any order)" is one of the saddest and silliest consequences of including the word 'zero' in the stated political target for emissions.
The reality is that some emissions can be permitted by 'net-zero', but we all forget that. If we'd set a target that was for, say 10% or 5% of current emissions gross (not net, we can cancel them with better land use and still achieve net zero), that would at least force the discipline of justifying why a given type of emission doesn't fit within the permitted allowance of emissions on studies like that of Grattan.
But more importantly, the path matters. We can greatly hinder progress towards net-zero by tackling things in the wrong order. I.e, shifting loads that are highly correlated (cold weather means everyone turns on their heaters) onto the electricity system while we're trying to switch from generators that we can control absolutely (thermal) to ones that are negatively/un-correlated with demand (solar/wind) can make it much harder to make progress on an emissions source that matters (exiting coal).
I think the research that Grattan's paper strongly supports the following sequence:
1. Strongly incentivise the switch from electric-resistance heating to electric-heat-pumps. (With whatever combination of subsidies, asset write-offs, bans on new-build, outright-bans on a schedule etc makes sense). I think that Grattan hasn't made the exact calculation in this paper, but reading between the lines, I think this switch is much much better for emissions right now than the gas-electric switch.
2. Try to transition away from coal electricity generation to a low-carbon mix, that we can still mostly rely upon, including in winter evenings.
3. Then (probably after a decade) assess our degree of success on 1 and 2, and consider whether the transition to gas makes sense. If we've done extremely well on 1 and 2, it may be beneficial. But if progress is lagging on either of them, it still won't.
Certainly some emissions are permissible under net-zero! The general view is that this should be those sectors that are hard to electrify and may require direct combustion (or use) of fossil fuels, like certain industrial process or aviation. The decarbonisation literature is very clear that household gas use can be very readily electrified and is a place we should start.
In this case starting now makes a lot of sense. Grattan shows that replacing appliances at the point of failure can get us there, but because appliances have 15 year lifespans it makes sense to start this sooner rather than later. Their recommendations are quite modest and in no means are about doing everything straight away, they say let's stop digging this hole and gradually start filling it back in.
In terms of the sequence above I think you're missing measures that avoid *adding* to the eventual challenge of getting of the gas network. So while we wait for step (3) it's unhelpful if we expand the gas network and more people get gas appliances. Encouraging replacement at the point of failure still allows us to re-evaluate at (3) and potentially tweak the trajectory.
I wonder if the grid impact could be ameliorated somewhat by incentivising battery uptake - batteries could do a lot of heavy lifting discharging at micro/meso (thinking regional areas with community batteries) into peak demand?
Sadly the degree of amelioration is very small for batteries. They're too expensive to scale up. And (though it's not cool yet to say this) the degree is also sadly very small for pumped hydro. Peak demand is a few tens of GW for the NEM. Snowy Hydro is 2GW, which it should sustain for 2 days. That's if it ever gets finished. So it would only every 'top-up' if there's a relatively small shortfall. Almost none of the storage systems publicly contemplated come remotely close to actually supporting the full height of peak demand for even one evening if wind goes right down. Serious models require we have enough peaking gas capacity to handle those rare-but-inevitable occasions.
What you say is probably economically and financially correct. But have you costed in the cost of not slowly transforming our economy from fossil fuels? Your argument is a little like the grain of salt argument ie Australia only contributes a tiny amount of CO2 compared to say China or USA. So why should we do anything? Grattan probably should have tackled the issue of cost of not transforming as part of the analysis!
Please see my response to Joel above. Australia should do our share, even if it is small globally. But the sequence in which we tackle things matters. And in an effort to crush one grain of salt, we might roll a boulder into the path of a much more important decarbonisation endeavour.
At first, I questioned this premise. I then read it again and I remembered when we shutdown under COVID-19 that all the generators gas and electricity were still considerably active and were the major contributors even though all other activity had ceased. So, yes, I can accept the premise of this paper. Its the change at the generators that is the issue, more so than households and other businesses.
Great article. If I may ask, assuming this goes ahead, who would benefit? (Which industries, suppliers, stakeholders, etc.)
The households that get off gas benefit.
How so? How is this transition paid for?
For households that go all-electric, it's highly beneficial. The heating is much cheaper and they can avoid gas connection charges. It feels to me like you are postulating the existence of some sort of conspiracy, whereas it's actually just that people like saving money, and reducing pollution, and improving health.
Not at all, I'm honestly asking out of ignorance. How do people move from gas electric ? I'm assuming there's going to be installation costs, maybe new devices to be installed? Not sure. So, how is that paid for? Each household pays for it or this is paid for by the state/federal goverment via taxes?
Currently most households who transition pay for it out of pocket. Some jurisdictions may have rebates or subsidies, eg the ACT has a no-interest loans scheme that would cover moving from gas to electric appliances.
Thank you. Do you know any ballpark cost of how much this out of pocket expense would be? Are we talking hundreds or thousands? This is important to understand so it will determine how long the "investment" will be paid back via the "savings" of changing over. Based on what this article states, those savings could be marginal, hence the payback period would be extremely long, not making it enticing for household, unless forced by the goverment of cource.
Very eye opening analysis. Shows what a lemon subsidising retrofitting is in VIC. But I guess after reading there's still a case for banning gas from new builds so that the housing stock renewal becomes the transition mechanism and merely cuts off growth in gas demand rather than adding to it. It seems more in line with the timeframes and minimal cost given it eliminates building new gas infrastructure and doesn't involve retrofitting.
But no doubt banning it from new builds seems too boring/vanilla
As mentioned below, I think a better conclusion from Grattan's research is that we should ban (or disincentivise) the old resistance-electrical appliances for heating/hot-water in favour of heat-pumps. I'm pretty sure this switch is much better environmentally, and economically. And, according to Grattan, it a strict pre-requisite for the gas-switch making any environmental sense at all.
well done on full analysis. I did provide some basic back of envelope calcs when this Grattan claim was tweeted by prominent people(Simon HAC for example blocked me for point this out). That the maths and physics was simple, and starts with the well know CO2 per joule of brown coal, which is roughly twice that of gas, and with the thermal efficiency of coal power plants, competing with gas at the hob in terms of emissions would actually need coal to be roughly half of what it is now.
Heat pumps are a good idea at any time due to efficiency but are expensive.
Important to point out to disciples, that changing from gas range to induction clearly increases emissions up until about 70% renewable achieved.
Good article
Thanks! I'd be interested in your envelope if you have it recorded in a thread/blog somewhere!
oh I see you unloaded on twitter already, fantastic. I haven't recorded it, but some basic facts.
The kg of CO2/BTU from lignite versus natural gas is a key starting point, and its double for the coal, so I knew that would be hard to come back from. Easily obtained from energy/engineering databases.
then it is just the efficiencies of the various processes along the way to get 1 BTU into a pot of water from a gas hob, or induction range. I researched all this from public info, (NSW gas leakage, AEMO transmissions losses, public data on ranges/induction. Power plant efficiency is well documented and known).
Gas - leakage in pipe (lose 2%), efficiency of hob (40%)
Coal - plant efficiency (31% thermal efficiency), transmission losses (1.5%), induction efficiency (80%)
Get a BTU into a pot of water on a stove top, and it quickly works out induction is twice the CO2 of gas. Add inefficent old coal plants and wow. So at that point I thought, hang on this is rubbish. total back of an envelope, but when you start at double the emissions per BTU, add a old plant, you know you can't catch up unless you magic out some 300% efficient heat pumps!
The I looked at the actual report and it agreed! Which was funny.
I did have someone critique my calculations saying that I hadn't considered the liquifaction of the gas, and I realized they thought LNG was being used domestically.
So, I ran those numbers, and its still better than brown coal in terms of emissions (and not cost). LNG plants are the biggest consumer of gas in Australia btw.
In short, before we go too crazy about electrification, which is necessary and good, not before you get the grid down to 30% brown coal FFS.
You can virtue signal all you want about it, but it increases emissions until then.
Interesting.
At a Macro level, your analysis, makes sense.
For my household though, we bought Solar 8 years ago and it's now paid back and we switched to a Heat Pump with the 50% Off rebate C/o the Vic Gov.
Payback with 30 months and we passed that milestone about 18 months ago, which was great during the massive gas price increases which we were not exposed to at all.
For us, we pay more for the Connection Fees per month than our gas usage for the hob, we will disconnect the Gas when we do-up our kitchen.
Yes, we will go for an electric induction hob instead and hopefully by 2025 Battery tech will make sense for our house too.
The Vic Gov incentives are great when one has a long-term strategy and their house is shelter and a home not a speculative asset for flipping.
I realised long ago that with the Gas Cartel as a Consumer/Customer I was better off getting rid of our end-of-life Gas Boiler.
I was right and we're lucky we have a new Bosch Heat Pump and it's safer for the children (only boils up to 60 degrees which was also lower than the old Gas boiler) in our house.
That said, we're most probably not a common household and our choices made sense to leverage the solar and remove the price risks of the Gas Companies.
Thanks for your post. :)
Thanks, nice to hear an individual example!
Interesting analysis and I have no expertise to argue one way or the other.
But it does (indirectly) raise a point that I often think about in all these different discussion / option papers - is it true or correct, or are there other options not canvassed at all, or what is the actual realistic potential for all these things? There are many other things that could be said in this regard, but hopefully you get my point.
We are awash with truths, half-truths and fantasies from all different sectors or interest groups etc all vying to get favoured governmental position and possibly the winner gets to the trophy of government rent seeking. All the jockeying for position on carbon reduction and more recently more affordable housing are two such examples that come to mind - there are just so many different and conflicting "solutions" out there, that it is hard, if not impossible, for anyone to cut through and sort out what is true and immediately feasible.
I have no easy or immediate solution to this problem, but in my head, I dream of some judicial panel working with recognised technical experts who can question the different proponents with the kicker that if they have been found to be using doggy data, false claims or blue sky dreaming - then their submission gets immediately tossed out. That would force proponents to come to these panels with more realistic and accurate proposals.
A recent case in point https://www.theguardian.com/australia-news/2023/jun/28/pwc-walks-back-report-used-to-claim-australias-nature-repair-market-could-be-worth-137bn
I think this analysis misses a few points.
Firstly, if you're going for net-zero you have to decarbonise as much as possible. If you are aiming to get rid of 100% of net emissions, even 2% matters. I agree that it's a small fraction, but it's a viable place to start.
Secondly, if going all-electric is beneficial for households, then it really does make sense to do it, or at least get the process started. Given the lifetimes of gas appliances and the opportunity to have a natural transition just using end-of-life replacement, it makes sense to advance this argument now and get started sooner rather than later.
I don't know if they make it in the paper but the prospect of economic electrification creating something of a death spiral is another good argument for being pro-active about this shift.
"I don't know if they make it in the paper but the prospect of economic electrification creating something of a death spiral is another good argument for being pro-active about this shift."
Interesting comment. What exactly do you mean?
By death spiral, do you refer to a decline in the number of gas consumers that raises the share of the fixed infrastructure cost that remaining consumers must pay and thereby induces more households to opt out of gas until finally there are no users left?
And do you see that as a good outcome?
Because the upshot of your view is that existing infrastructure that if used fully could yield benefits higher than the costs of running it is not used, due to a coordination failure. Engineering that failure means destroying a lot of value.
For example, imagine if the government built a road and tolled it on the promise to taxpayers that the cost would be fully recovered from users. (This promise is akin to the cost recovery processes of the AER).
Now imagine the government somehow discourages half the drivers from using it, and so has to double the toll on the remaining drivers, who therefore also opt out of using it.
Now nobody uses the road. It sits there idle. Is this a good thing?
Thanks Tim! Good question.
I don't think a death spiral is a good thing, and I think it's worth thinking about it as a coordination problem. However, if it is disadvantageous for a household to be on the gas network, they are going to get off it - this doesn't require governments to engineer that failure. It means that there isn't actually a stable equilibrium that means the infrastructure keeps being used. There was before, but technology and economics have changed!
In the report Grattan says governments should stop new gas connections right away. This is the sort of thing that can reduce the risk of asset stranding and potential lost value. It's hard to see why you wouldn't do this, even if there may be an ongoing role for the gas network.
With respect, I very strongly disagree here. The conclusion that "absolutely every source of emissions should be tackled with whatever effort is required to eliminate it, starting now (i.e. in any order)" is one of the saddest and silliest consequences of including the word 'zero' in the stated political target for emissions.
The reality is that some emissions can be permitted by 'net-zero', but we all forget that. If we'd set a target that was for, say 10% or 5% of current emissions gross (not net, we can cancel them with better land use and still achieve net zero), that would at least force the discipline of justifying why a given type of emission doesn't fit within the permitted allowance of emissions on studies like that of Grattan.
But more importantly, the path matters. We can greatly hinder progress towards net-zero by tackling things in the wrong order. I.e, shifting loads that are highly correlated (cold weather means everyone turns on their heaters) onto the electricity system while we're trying to switch from generators that we can control absolutely (thermal) to ones that are negatively/un-correlated with demand (solar/wind) can make it much harder to make progress on an emissions source that matters (exiting coal).
I think the research that Grattan's paper strongly supports the following sequence:
1. Strongly incentivise the switch from electric-resistance heating to electric-heat-pumps. (With whatever combination of subsidies, asset write-offs, bans on new-build, outright-bans on a schedule etc makes sense). I think that Grattan hasn't made the exact calculation in this paper, but reading between the lines, I think this switch is much much better for emissions right now than the gas-electric switch.
2. Try to transition away from coal electricity generation to a low-carbon mix, that we can still mostly rely upon, including in winter evenings.
3. Then (probably after a decade) assess our degree of success on 1 and 2, and consider whether the transition to gas makes sense. If we've done extremely well on 1 and 2, it may be beneficial. But if progress is lagging on either of them, it still won't.
this I believe is what the data supports.
Heat pumps are very efficient by any measure, and that is good regardless of grid.
The grids needs to be lower coal % before championing electrification
Gas for heating water is lower emissions until about 30% coal.
https://www.eia.gov/environment/emissions/co2_vol_mass.php
covers the CO2 per unit of energy, the rest is just efficiency of the plant, transmission/leaks and the range/hob/burner
60% coal is not a grid to electrify for emissions reductions, work on the grid, quite simply.
Certainly some emissions are permissible under net-zero! The general view is that this should be those sectors that are hard to electrify and may require direct combustion (or use) of fossil fuels, like certain industrial process or aviation. The decarbonisation literature is very clear that household gas use can be very readily electrified and is a place we should start.
In this case starting now makes a lot of sense. Grattan shows that replacing appliances at the point of failure can get us there, but because appliances have 15 year lifespans it makes sense to start this sooner rather than later. Their recommendations are quite modest and in no means are about doing everything straight away, they say let's stop digging this hole and gradually start filling it back in.
In terms of the sequence above I think you're missing measures that avoid *adding* to the eventual challenge of getting of the gas network. So while we wait for step (3) it's unhelpful if we expand the gas network and more people get gas appliances. Encouraging replacement at the point of failure still allows us to re-evaluate at (3) and potentially tweak the trajectory.
I wonder if the grid impact could be ameliorated somewhat by incentivising battery uptake - batteries could do a lot of heavy lifting discharging at micro/meso (thinking regional areas with community batteries) into peak demand?
Disclosure: not a grid expert!
Sadly the degree of amelioration is very small for batteries. They're too expensive to scale up. And (though it's not cool yet to say this) the degree is also sadly very small for pumped hydro. Peak demand is a few tens of GW for the NEM. Snowy Hydro is 2GW, which it should sustain for 2 days. That's if it ever gets finished. So it would only every 'top-up' if there's a relatively small shortfall. Almost none of the storage systems publicly contemplated come remotely close to actually supporting the full height of peak demand for even one evening if wind goes right down. Serious models require we have enough peaking gas capacity to handle those rare-but-inevitable occasions.
What you say is probably economically and financially correct. But have you costed in the cost of not slowly transforming our economy from fossil fuels? Your argument is a little like the grain of salt argument ie Australia only contributes a tiny amount of CO2 compared to say China or USA. So why should we do anything? Grattan probably should have tackled the issue of cost of not transforming as part of the analysis!
Please see my response to Joel above. Australia should do our share, even if it is small globally. But the sequence in which we tackle things matters. And in an effort to crush one grain of salt, we might roll a boulder into the path of a much more important decarbonisation endeavour.
At first, I questioned this premise. I then read it again and I remembered when we shutdown under COVID-19 that all the generators gas and electricity were still considerably active and were the major contributors even though all other activity had ceased. So, yes, I can accept the premise of this paper. Its the change at the generators that is the issue, more so than households and other businesses.