Australia gas demand enters structural decline, Grattan Institute says
Synopsis
Gas consumption in Australia has peaked across residential, industrial and electricity sectors and is now in structural decline, according to new research from the Grattan Institute reported by The Guardian.
Gas use across Australia has peaked and entered a long-term structural decline after more than five decades of growth, according to a new report by the Grattan Institute, as reported by The Guardian. The thinktank said governments need to acknowledge the shift and implement stronger policies to accelerate reductions in gas consumption if Australia is to meet its climate goals.
Key highlights
- Grattan Institute says gas use has peaked across all major sectors in Australia
- Residential gas demand peaked in 2020, while manufacturing use has been declining since the early 2000s
- LNG exports likely reached their peak in 2022, according to the report
- Thinktank says gas demand must fall faster to meet net-zero targets
- Report calls for policies to reduce gas use, including residential phaseout dates
What happened?
The Grattan Institute's latest analysis found that gas demand has now peaked across residential, industrial and electricity generation sectors.
According to the report:
- Residential gas use peaked in 2020
- Gas-fired electricity generation has fallen 11% since 2014
- Manufacturing gas consumption has been declining since the early 2000s
- LNG exports likely peaked in 2022
The report argues that Australia has entered a period of structural decline in gas consumption after decades of expansion that began in the 1960s.
Why this matters
The findings challenge the view held by some policymakers that gas will continue to play a major growth role in Australia's energy system.
The report warns that while gas demand is already falling, the pace of decline is not fast enough to align with Australia's emissions-reduction targets and net-zero ambitions.
According to the Grattan Institute, delaying action could increase future costs and leave governments relying on expensive technologies such as carbon capture and carbon removal to reduce emissions.
Official statements
Alison Reeve, director of the Grattan Institute's Energy and Climate Change Program, said the decline is already underway.
"Gas is now in structural decline across Australia. There's only one way to go from a peak, and that's down."
She said reducing gas consumption would require long-term planning and policy action.
"Reducing gas use is a multi-decade project that must start today."
Reeve also questioned common arguments about the role of gas in the energy transition.
"We hear this catchphrase all the time that gas is important for the transition, but they don't say how much gas, or for how long."
Political debate over gas continues
The report comes as both federal and state governments continue to support gas development initiatives.
According to The Guardian, Prime Minister Anthony Albanese has proposed measures to reserve more gas for domestic use and supports further exploration in Victoria and Tasmania.
Opposition leader Angus Taylor has called for faster approvals of coal and gas projects.
Meanwhile:
- South Australia Premier Peter Malinauskas has advocated lifting the state's fracking moratorium
- The New South Wales government has opened additional areas for gas exploration
Gas and Australia's net-zero pathway
The Grattan Institute said gas will continue to play a role in supporting electricity reliability as renewable energy generation expands.
However, the report estimates future gas demand for electricity backup could be about half the levels recorded during the 2010s.
The analysis projects gas-related carbon emissions will decline from around 90 million tonnes currently to 64 million tonnes by 2050.
Even at that level, emissions would remain too high for Australia to achieve net-zero goals without additional measures.
What happens next?
The report recommends targeted policies to accelerate reductions in gas use across households, industry and power generation.
Among its recommendations are phaseout dates for residential gas use and stronger measures to reduce dependence on fossil fuels.
The report also cautions against relying heavily on alternatives such as green hydrogen, biomethane or large-scale carbon capture technologies, arguing that supply and cost challenges may limit their effectiveness at the scale required.
Future government policy decisions will determine how quickly gas demand declines and how Australia manages the transition toward its climate targets.
FAQs
Q1: Who produced the report?
The report was published by the Grattan Institute and reported by The Guardian.
Q2: Has gas demand already peaked in Australia?
According to the Grattan Institute, gas use has peaked across residential, industrial and electricity sectors and is now in structural decline.
Q3: When did residential gas use peak?
The report says residential gas consumption reached its peak in 2020.
Q4: What does the report recommend?
The thinktank recommends policies to reduce gas use, including phaseout dates for residential gas connections and broader measures across industry and electricity generation.
Q5: Why is gas still important to the energy transition?
Gas is expected to provide backup electricity generation when renewable sources such as solar and wind are not producing sufficient power, although the report suggests future demand may be much lower than historical levels.
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