IEEFA Report: Reducing Gas Dependency in Western Australia through Renewable Energy and Green Hydrogen

While other parts of Australia reduce their reliance on gas, Western Australia (WA) continues to increase its consumption, driven by just four industrial sectors. A new report suggests that emerging technologies and the availability of renewable energy could significantly reduce the state’s gas usage and benefit industry.

WA is the only state or territory to increase gas consumption since FY2020, making up nearly half of Australia’s total usage, according to the IEEFA report “Reining in Western Australia’s gas addiction.” A significant portion (84%) of WA’s gas demand is attributed to liquefied natural gas (LNG) processing (36%), electricity generation (24%), alumina refining (17%), and ammonia production (7%).

Over the next decade, WA’s gas consumption is expected to rise further with numerous gas, metals, and minerals projects in development. The state’s demand (excluding LNG processing) is predicted to increase by 19% by 2034, according to the Australian Energy Market Operator (AEMO), with potential for even greater growth.

Amandine Denis-Ryan, CEO of IEEFA Australia and co-author of the report with IEEFA contributor Cameron Butler, warned that the expected rise in WA’s gas consumption could lead to greater dependency on gas just as supply constraints emerge. She added that the anticipated growth in gas demand, coupled with tightening supply, could drive prices higher and make gas-intensive industries increasingly unviable over time.

LNG processing is the largest gas consumer in WA, with 10% of gas used in liquefaction rather than sold as LNG. Electric turbines offer a proven alternative, reducing emissions by up to 90%, enhancing production and efficiency, and lowering maintenance costs.

Ms. Denis-Ryan highlights that despite the benefits and maturity of electric turbines, there are no plans to implement them in Australia’s LNG plants. She also points out that significant gas could be recovered by capturing fugitive methane, but the lack of regulatory and policy incentives is hindering progress.

While the gas demand from WA’s LNG industry is expected to decrease by nearly a third over the next decade, this decline will be counterbalanced by increased demand in other sectors. Notably, two projects could more than double gas demand for ammonia production and its derivatives.

Mr. Butler explains that ammonia is an ideal first adopter of green hydrogen, as it is already made from hydrogen, and 30% of its gas feedstock can be switched to green hydrogen without significant equipment upgrades. He also notes that a shift to green hydrogen could be encouraged through offtake requirements for miners, who use half of Australia’s ammonia production in explosives.

IEEFA estimates that mandating 30% of explosives to be produced from green hydrogen by 2035 would increase miners’ operating costs by only 0.2%. Alumina production is another major industrial gas consumer in WA, where electrification presents a viable solution.

Mr. Butler explains that mechanical vapour recompression, which uses industrial heat pumps, could electrify 70% of alumina’s gas consumption, with 1GJ of electricity replacing 5GJ of gas. He adds that this technology has the potential to be financially attractive even without government subsidies, but it needs to be demonstrated and de-risked for the industry.

Gas plays a significantly larger role in WA’s electricity generation compared to other states, with more gas used for power generation in WA than the rest of Australia combined. This is driven by both grid and off-grid electricity, as the concentration of mining and heavy industries in the state’s remote north-west has led operators to depend on gas for onsite power generation.

Ms. Denis-Ryan highlighted that WA’s transition to renewables has lagged behind other states, especially in the north-west, despite the state’s strong renewable resources like wind and solar. She warned that excessive reliance on gas could undermine Australia’s competitiveness in emerging green markets, such as green iron and steel, where green hydrogen-based production is gaining traction over gas-based methods.

The report identifies several untapped opportunities for Western Australia to decrease its gas demand and transform its industries, positioning the state as a leader in the global energy transition. IEEFA suggests a set of focused actions to achieve this transformation:

• Create a clear roadmap to reduce gas demand, including setting specific targets.
• Minimize the impact of new projects on gas demand by mandating renewable energy for new mining projects and promoting the gradual integration of green hydrogen into new green iron and ammonia production.
• Fast-track gas demand reduction in existing facilities by supporting the electrification of gas-heavy industries, like LNG processing and alumina refining, through targeted trials, funding, financial incentives, and accelerating the shift to renewable electricity.