The east coast of Australia faces the prospect of excess gas demand in coming years due to declining gas production, with the imminent possibility of short-lived periods of excess demand in Victoria on peak demand days. However, this analysis shows that cost-effective and targeted interventions to lower gas demand could fully eradicate anticipated peak day excess demand in 2027 and 2028, provided action is taken soon enough.

Improving gas efficiency and increasing the use of highly efficient electric appliances would have the double benefit of reducing market tightness and increasing the predictability of energy bills. Indeed, it would increase the share of costs associated with capital investments compared with variable energy costs, which would smooth out energy costs throughout the year. For example, researchers calculated that a household’s winter energy costs would be only 90% higher in winter compared with summer by using heat-pump based appliances compared with 167% higher for gas-based equipment.

This analysis, while indicative, presents a compelling case for further investigation, and IEEFA encourages the Australian and Victorian governments to further consider these interventions. The alternative would be costly supply-side solutions that lock in higher energy bills for households during a cost-of-living crisis and potentially further expose gas users to volatile international gas prices.