Gas industry floats plan for switch to renewables

Friday, 14 April 2023

Biogas is in the pipeline.

ANALYSIS: More than 65% of consumers now are choosing gas hot water systems for new homes and renovations, according to Master Plumbers, Gasfitters and Drainlayers chief executive Greg Wallace.

Objections from vegans aside, in future some of the gas to run them could come from a facility similar to one here in Goulburn, Australia about an hour’s drive north-east of Canberra.

Our guide points to a wide pipe spewing murky fluid at a rate of knots into an open pit outside the Southern Meats Abattoir, where about 4000 sheep are butchered each day.

“That's essentially the blood, the guts, and all the water used to wash the floor.

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“I tried to avoid going to see the process. I was roped in a couple of weeks ago. Phenomenal engineering but, yeah I’ve got to say – tuna salad for lunch.”

Downhill from the pit, the sheep waste accumulates in a membrane-sealed artificial lake where it is digested by bacteria over a period of few weeks into a methane-rich biogas.

Resonance Asset Management's facility at Southern Meats Abattoir in Goulburn ensures very little of the sheep it processes goes to waste.

Trapped underneath the membrane balloon, the flammable gas can be piped at will to two 800 kilowatt generators imported from Germany that burn it to supply about half the abattoir’s own power needs, when electricity from the grid is at its most expensive.

That’s power to process more sheep.

But strip out the carbon dioxide and other contaminants from the biogas cocktail, and the methane could equally well be injected straight into gas pipes as a replacement for natural gas.

Biogas firm Ecogas and gas distributor First Gap will be doing just that next year when they start to mix biomethane generated from Auckland Council’s kerbside organic waste collections into the gas network to meet demand from about 7200 homes.

It’s a gas, gas, gas

AGIG’s hydrogen plant in Adelaide is both green and very clean, but was costly to set up.

Down the track, “green hydrogen” produced from the electrolysis of water might be blended in to add a third ingredient, alongside biogas and natural gas.

In a neatly manicured facility on the outskirts of Adelaide, gas distributor Australia Gas Infrastructure Group is using a hydrolyser imported from Siemens in Germany and the state’s abundant and sometimes completely free day-time solar power surplus to split water into hydrogen and oxygen.

The hydrogen is then injected through a thin metal pipe into its natural gas network, at a concentration of about 5% by volume, to just under 3800 homes.

Given the plant cost A$15 million (NZ$16m) to set up, the financials still look unappealing, but AGIG sustainability manager Kristin Raman stresses it is a demonstration facility that is also relatively under-utilised and could be built more cheaply, with more scale economies.

Even the crisp gravel underfoot is top spec, she notes.

Drifting off course?

And challenging or not, New Zealand’s gas distribution industry and the Government agree that something needs to change to put gas on an environmentally-sustainable course.

There may be room for debate whether an individual gas user would be doing the climate much of a favour in the short term by switching appliances to electricity today, given the implications for peak power generation.

But by 2050, when both Labour and National agree that at least almost all electricity should be coming from renewables and the consequences of climate change will be more visible than they are today, it could be pretty difficult to justify burning fossil gas to run a bath or do the dishes.

Generators at Melbourne Water’s Eastern Treatment plant burn biogas produced from sewage sludge, saving it about A$8 million a year in offset power costs.

Yet, without a plan, consumers who are designing homes around gas now could become a millstone around the country’s climate change ambitions for much of the rest of the century.

Once homeowners have plumbed for a small gas system attached to the outside of their house to provide continuous hot water, after all, it is likely to determine their preferred fuel for many decades.

The gas heaters themselves might only last 15 to 20 years on average, but even if people were motivated to replace them with electric hot water cylinders down the track, they are then likely to run into the problem of where they then put the thing.

The Climate Change Commission took a stand in 2021 when it proposed simply banning new piped gas connections, or bottled LPG supplies, to previously unsupplied homes from 2025.

Energy Minister Megan Woods has so far chosen not to implement the proposed ban, explaining the Government it is still exploring whether renewable sources of gas could take over from natural gas.

Her hope is that the gas distribution network could morph from being a potential environmental liability that might need to be quietly strangled, into a proud part of the “green transition”.

Make it a date

Industry body GasNZ has suggested that instead of a new connection ban, the Government mandate that 5% of all gas should be sourced from renewable sources by 2030.

That would be enough to meet more than a third of the gas demand from homes and other non-industrial customers, such as cafes and restaurants.

But the proposal, while probably well-intentioned, does have some drawbacks.

To the extent that renewable gas is more expensive than natural gas, it would increase the price of gas for all gas customers – including less affluent households who might be locked into using it as a fuel.

That could be a tough sell politically, given current concerns over the cost of living.

There are many potential feedstocks for biogas and they all break down in much the same way, but they all come with different logistical challenges.

Another fishhook is that it might be difficult to equitably apportion blame, and therefore penalties, to individual businesses in the gas supply chain for any failure to achieve the target.

Also, as the proposed mandate just relates to a single point in time in 2030, it begs the question of what targets the industry would be seeking to achieve before and after then.

Perhaps the biggest weakness of the approach is that it is currently tricky to say whether a 5% target would be too easy, too difficult, sensible or even possible to achieve.

There is no doubt harvesting biogas from anaerobic digestion and directly from landfills can be an environmentally-elegant way of converting concentrated sources of yucky organic waste such as sewage sludge, animal entrails, commercial food waste and municipal waste, into a valuable product.

But less clear-cut is whether it is also a viable way to give more dispersed, higher-volume organic wastes from primary industry, such as animal manure and crop residues, the “circular economy” treatment.

Engineering firm Beca optimistically estimated in 2021 that biogas could meet 20% of the country’s gas demand by the later date of 2050.

But that was predicated on the largely untested assumption that cow manure and crop residues could account for about half the source material.

Whether green hydrogen might make much of a contribution to the gas mix before 2030, or ever become our main source of gas, is also anyone’s guess, but sceptics abound.

Don Elers, general manager of gas at Taranaki-based gas and electricity distributor Powerco, doubts the latter.

Once continuous gas water heaters are installed, switching away from them becomes a headache.

He says green hydrogen will have its uses “but I'm not sure that a whole-of-system conversion over to hydrogen is that viable; I think we've got an easier solution already, which is to electrify”.

Finn Biogas managing director Jason Hawley says there is joke around his office in Australia, “I don’t know the question, but the answer is hydrogen”.

A better way?

An alternative to GasNZ’s 5% proposal would be to only allow gas retailers to supply a new customer with gas when they could show they had bought enough renewable gas to satisfy the average demand of a new residential customer.

That would at least ensure any demand from new household gas connections was met from renewable sources.

That would only be likely to increase the price of gas for new customers, who would be in the position of walking into that reality with their eyes wide open.

But if the Government wanted to more actively accelerate a switch away from natural gas, it could at any point extend such a rule to additionally cover supplies made to existing gas customers who replaced their hot water cylinders.

In that scenario there would be a gradual pressure for energy retailers to shift existing customers to renewable gas, electricity, or solar water heating over a period of about 20 years as hot water cylinders wore out and needed to be replaced.

The obligation to supply new customers with renewables could largely piggyback off the existing consenting process for new connections and the certification process for new gas fittings.

The application of the regime might need to be post-dated by a few years to ensure there was enough of a bow wave of renewable gas supply to mitigate the risk of developers building houses with gas fittings that could not be used due to a lack of renewable supply.

Among the advantages of the approach is that it would be a “set and forget” policy that, unlike a date-based mandate, would not necessarily need to be revisited or updated.

But perhaps most importantly, it would not rely on omniscience about what particular level of renewable gas supply was achievable.

Gas retailers would be highly motivated to pay a decent premium for renewable gas supplied under long term contracts as soon as such a scheme was announced, which could help jump start investment in the nascent renewable gas industry.

But in the worst case scenario that no little or no biogas or green hydrogen supply nevertheless materialised, the mechanism would just act similarly to the blunt ban on new gas connections that the Climate Change Commission originally advocated for.

It’s a good bet government officials will be mulling over this concept, or something quite like it, as they seek to finalise a new energy strategy for release next year.

GasNZ chairperson Ben Gerritsen agrees the approach could work and says it would not necessarily be opposed.

“It’s a good solution and one we’ve also thought about before,” he says. “It does have the advantage of not being about a set point in time, and could evolve as the industry evolves.”

GasNZ is “more focused on the outcome than we are about how to get there”, he says.

“We would support any policy mechanism that signals a commitment to the development of renewable gains and helps to underwrite investment in renewable gas projects today.”

- Tom Pullar-Strecker joined a tour of renewable energy projects in Australia funded by GasNZ and Master Plumbers, Gasfitters & Drainlayers.

Correction: An original version of this story misattributed some quotes to Jason Hawley of Finn Biogas.