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4. Maintaining supply while the transition happens

Principle 4: Reliable gas supply will gradually and inevitably support a shift towards higher-value and non-substitutable gas uses. Households will continue to have a choice over how their energy needs are met.  


Forecasting future gas consumption is difficult due to a wide range of variables that affect demand for gas. Based on currently available data, the analytical report forecasts that:

  • gas consumption is forecast to continue beyond 2050 in its critical role for peak loads and firming in power generation
  • for the industrial sector, gas use will continue beyond 2050 where electrification, other renewable technologies and low-emissions gases are not available or are too expensive
  • households and small businesses will have, for the most part, electrified by 2050, although this will differ across the nation. Low-emissions gases may continue to be used in some locations. 

Read Section 3 of the analytical report for analysis of the domestic supply outlook.

Gas-powered generation

GPG will underpin Australia’s electricity supply in the transition to a net zero economy. It is likely that gas will still play a role in electricity generation up to and beyond 2050.

On the east coast and in the Northern Territory, GPG will be used to firm up the supply of electricity as coal-powered generators are retired. It will also be used to manage short, daily periods of peak demand which cannot be met by alternative sources.

Projections from the AEMO show east coast GPG will decline then stabilise as more renewable sources of generation enter the grid in the near term. While annual GPG demand is expected to fall in this period, peak daily demand is expected to increase by three times what it is today. As coal generators retire and the need for electricity increases, both annual and peak daily demand is projected to increase after 2033.

Annual and peak day GPG demand, step change scenario, 2019–43

This figure shows a comparison between the annual GPG demand in the step change scenario and the peak daily GPG demand. While all values increase out to 2043, peak demand for gas in winter increases more rapidly and has higher values then annual GPG demand and peak summer demand.

Notes: 1000 Terajoules is equal to 1 Petajoule. Source: Analytical Report Figure 3.11

Peaking and firming GPG is an important component of the National Energy Market (NEM) to 2050 and beyond. Demand for natural gas by the GPG sector will depend on the availability of low-carbon alternatives such as hydrogen, energy storage and the ability to abate natural gas safely and effectively. 

On the west coast, GPG will continue to be an important source of electricity generation. It will continue to provide firming and peaking support as more renewables enter the system and low-carbon alternatives become economically viable through to 2050 and beyond. Small-scale generation on mine sites could switch to GPG or to renewables firmed by GPG.

Across Australia, the future demand for natural gas for GPG to 2050 and beyond will be highly dependent on the speed and timing of technological development and commercialisation of low-carbon alternatives. These alternatives include hydrogen powered generators, pumped hydro, batteries, biomethane and other biofuels. 

The Australian Government, in partnership with the states and territories, is active in supporting this transition. The $20 billion Rewiring the Nation program will modernise Australia’s electricity grids and deliver new and upgraded transmission infrastructure. The Capacity Investment Scheme will encourage new investment in new renewable capacity nationally. Building on the National Energy Transformation Partnership framework, these measures will deliver the Australian Government’s 82% renewable electricity by 2030 target.

Why will Australian industry and manufacturers still need gas in the future?

Gas demand from Australian industrial users is likely to remain stable to at least 2035. Demand reduction by east coast industrial and mining consumers is expected to be modest. The west coast and the Northern Territory have a high concentration of industries which use high heat, as well as large mining and minerals processing sectors. The modest overall projected declines in gas consumption reflect how industrial and mining uses offer the most challenging prospects for abatement. 

Reducing demand may require: 

  • advancement in a range of different technologies 
  • changes in industry operations that switch from carbon-based feedstocks to alternative inputs
  • electrification of high-heat processes or switching to low-emissions gases.

The need for gas in high-heat manufacture of products such as concrete, glass and steel, will likely persist. Low and some medium heat applications are expected to be electrified as commercial alternatives scale up, and become more cost competitive and operationally reliable. Higher heat applications require technologies that need further research, development, and operational testing. Some users may also need to turn to gas to replace more polluting fossil fuels on the pathway to net zero. 

Gas as a chemical feedstock to manufacturing processes cannot be electrified and will require direct substitution. Altering the feedstock used in a process is not straightforward, as chemical processes are typically fully integrated into the facility. This means investment in new infrastructure and supply chains will be required. Transition is likely to require a change to the whole operation rather than a gradual change to the facility. Such changes involve significant capital outlays and require extensive testing and planning. 

The pathway to decarbonisation is likely to involve increased demand for gas for some users. The steel industry provides a good demonstration of this. Today’s steel production involves passing inputs of iron ore, coking (metallurgical) coal and limestone through a blast furnace and basic oxygen furnace to produce steel. Emissions per tonne of steel are 2.2t CO2. Replacing coal with natural gas in direct reduced iron and electric arc furnaces significantly reduces emissions to 1.4t CO2. As a result, the natural gas demand from steelmaking will increase, but emissions will reduce.

Our current Australian domestic consumption of network gas is around 4PJ. In addition, BlueScope also uses 28PJ of indigenous gas produced as a by-product of the steel blast furnace and coke ovens at the Port Kembla facility. Gas is also used at midstream sites in New South Wales and Victoria such as paint lines and coating lines where it is used to fire furnaces and ovens and support high heat processes above 800 degrees Celsius. Technology to electrify these processes is nascent and not currently viable. Biomethane could potentially fill this demand if sufficient volumes were commercially available. However, BlueScope will continue to be a significant gas user into the future …

BlueScope Steel

The pathway to decarbonisation is complex for gas use associated with LNG facilities. These facilities consume large volumes of gas; Australia’s emissions from the production and extraction of LNG are estimated to account for 37 million tonnes of CO2 equivalent, amounting to around 8% of Australia’s total emissions. 

The economic viability of electrifying LNG facilities is determined by a number of factors including the remaining facility life, and the emissions intensity of the connected electricity supply. Electrification, while offering significant efficiencies and operating cost reductions, would require significant capital expenditure and security of supply of electricity to the facilities. Electrification is, however, becoming more cost-effective and could offer a significant reduction in gas demand in the future.

Chevron’s WA facilities … require reliable generation to avoid plant upsets and trips resulting in large emissions increases from venting or flaring … There are also technological challenges in developing large power electrical drives capable of replacing existing gas turbine drivers. 

Chevron Australia

Through the Resources Sectoral Plan for Net Zero additional actions will be recommended, including dedicated sectoral decarbonisation targets across Australia’s LNG value chain. The Resources Sectoral Plan for Net Zero offers an opportunity to provide certainty through a long-term plan that helps drive investments in low-emissions technologies and in emissions abatement in the gas sector, including CCS. 

Decarbonisation of the Ichthys LNG facilities and its progress to net zero emissions remains a significant challenge …The key decarbonisation opportunities that are currently being pursued by INPEX in relation to the Ichthys LNG facilities are, (1) carbon capture and storage … (2) import of power with a high percentage of renewables … and (3) fuel-switching from gas to hydrogen for currently gas-fired turbines … 


In all cases, businesses will weigh facility-level infrastructure investments and end-of-life value against the cost of reducing their emissions intensity. In that calculation, businesses are more likely to switch if alternatives are reliable and cost effective. Initiatives that de-risk alternatives by quantifying whole-of-life price, performance, reliability, and safety will support industries make informed choices during the transition.

In some cases, supply-side shortages will have a flow-on effect on consumer goods. For instance, the cost of urea (a nitrogen fertiliser manufactured using natural gas) rose sharply with global gas prices in 2021-22. Gas supply shortfalls are likely to lead to further price spikes and higher import reliance for this key input to agricultural production. If sustained, these higher input costs will impact farm profitability and put upward pressure on consumer food prices.

Overall, this means some gas use may continue to 2050 and beyond. Industrial consumers may need to offset their emissions until it becomes commercial to replace natural gas with low-emission gases. 

Why will Australian households still need gas?

Energy efficient electrical appliances already exist and are readily available to replace the main household uses of natural gas: stovetops, hot water heating and space heating. Most households are likely to embrace opportunities to reduce their energy bills and emissions by switching from gas to electric appliances when existing appliances need replacing. This switch may not be technically or commercially practical in all situations. 

In some locations, the low-emissions gas market may provide a gas alternative where electrification is not feasible. This assumes that this gas can be delivered to where users need it at an affordable price.

The rising cost of remaining on the reticulated gas network can provide the economic incentive to transition for those able to control – and afford – the cost of switching. However, renters, those in community and social housing, and low-income households, have limited or no control over whether they electrify, even where they might want to transition. 

For households who use gas, shifting off gas and improving energy efficiency is the best way to lower bills, gas demand and emissions. … Our recent research report … found low-income households were supportive of shifting off gas but faced a number of barriers including those related to capital, information and trust. 

Brotherhood of St Laurence

New migrants and low-income families will need additional time and support to transition off gas. Recovering the cost of ageing network infrastructure from residential customers will leave them in a precarious situation of being stuck in a highly unaffordable energy system … which will leave a disproportionate burden on low-income households. 

Voices for Power – Sydney Community Forum

State and territory governments are active in providing information, incentives and direct support for households and small businesses. The Australian Government has a range of programs to support both households and businesses improve energy efficiency and transition from gas. The recently announced Household Energy Upgrades Fund, provides $1 billion to help finance household energy upgrades, and a further $300 million to support upgrades for social housing.

Across GPG, industry and households, gas consumption is forecast to continue beyond 2050. It will take time to develop and commercialise new technologies and processes to abate current gas consumption. In the meantime, gas is needed to support the net zero transition including in industries such as critical minerals processing. While many gas-reliant households and small businesses are able to electrify using current technology, vulnerable households and communities will require support to transition, and some households may choose to continue to use gas.