The Victorian Government Department of Energy, Environment and Climate Action (DEECA) has sought feedback on proposed new activities in the Victorian Energy Upgrades (VEU) to support gas-reliant businesses to decarbonise their industrial heat production.
Climateworks welcomes the consultation’s focus on the important opportunities that the electrification of industrial heat represents, both in managing the energy transition and in meeting national decarbonisation targets.
Outside the context of these targets, existing pressures on current fossil fuel use – including declining domestic gas supplies and commensurate rising costs, even prior to the impacts of the ongoing crisis in Iran – represent a threat to continued industrial profitability.
The electrification of industrial heat can provide long-term energy security and increase investor confidence in Australian businesses.
This is particularly true for technologies that can harness electricity flexibly, such as electrothermal energy storage (eTES), which can facilitate lowered operational costs while ensuring industrial productivity remains unchanged.
Indicatively, based on historical pricing, Climateworks research has shown that eTES deployment in a single industrial region could not only reduce industrial operating costs by up to $3 million a day, compared to the use of non-flexible electrified technologies, but also fundamentally alter the energy landscape at a statewide level – lowering peak wholesale electricity prices by as much as 60 per cent for grid-connected consumers.
While technologically mature, a lack of existing deployment in Australia means that in the short term, these technologies will need financial support to encourage increased uptake; this will allow supply-chain and learning-curve difficulties to be overcome, ultimately leading to cost reductions across the market.
The VEU’s industrial heat consultation paper presents a meaningful opportunity to identify both the value of eTES technologies as a practical tool for industrial decarbonisation, as well as the level of support required to facilitate accelerated adoption.
Submission summary
The electrification of industrial heat can provide long-term energy security and increase investor confidence in Australian businesses.
Indicatively, based on historical pricing, Climateworks research has shown that eTES deployment in a single industrial region could:
- reduce industrial operating costs by up to $3 million a day, compared to the use of non-flexible electrified technologies
- lower peak wholesale electricity prices by as much as 60 per cent for grid-connected consumers.
Summary of recommendations:
- Climateworks supports the inclusion of eTES technologies in the VEU program.
- Climateworks research suggests that there are two key barriers for the near-term adoption of eTES technologies in Victoria:
- The high upfront costs to businesses for sufficient on-site transmission infrastructure to support facility electrification.
- Current network tariff structures that penalise businesses for high peak loads, even if these peak loads do not add to periods of high grid congestion.
- Climateworks supports the creation of a new specified measurement method (SMM) to demonstrate the energy savings achieved through the installation of eTES technologies.
- Climateworks recommends that the VEU program recognise off-site purchased renewable energy for eTES, to minimise financial, administrative and land-availability burdens on businesses seeking to implement eTES technologies.
- Climateworks supports the proposed approach to use the surrender of large-scale generation certificates (LGCs) and renewable energy guarantee of origin certificates (REGOs) as renewable energy certificates (RECs) to verify off-site renewable energy generation in Victoria.
- Climateworks agrees that an ‘avoided energy savings’ calculation is suitable to determine greenhouse gas emissions savings when using eTES technologies to replace fossil-fuelled heating sources.
- Climateworks agrees that the proposed input variables for the greenhouse gas emissions savings calculations are largely suitable, with the exception of the use of an ‘accuracy factor’
More detail can be found in our submission [PDF 0.2mb].