Victoria Gas Networks Promote Renewable Gas While Planning for Electrification

Victoria's gas distribution networks are promoting renewable gas derived from biomethane and hydrogen as a viable long-term household energy option, even as their own financial plans submitted to the regulator allocate A$461 million for electrification risk mitigation against only A$19 million for hydrogen readiness. IEEFA warns the campaigns expose consumers and investors to significant reputational, legal and financial risk.

Victoria's gas distributors have submitted plans to the Australian Energy Regulator requesting recovery of A$461 million in accelerated depreciation costs over five years — a clear signal they are preparing for asset stranding as customers shift to electricity. Of this, A$333 million was approved by the regulator, equal to nearly 7% of the networks' total asset base. In contrast, proposed expenditure on hydrogen readiness stands at A$19 million, with a further A$6 million allocated to renewable gas promotional campaigns that would be partially charged back to consumers.

The campaign messaging is inconsistent with the networks' own statements to the Australian Energy Regulator, which reflect an awareness that electrification is the most likely household energy pathway under net zero. IEEFA notes that switching to all-electric appliances is significantly cheaper and more efficient than biomethane or hydrogen, with no associated indoor air quality concerns. Both biomethane and hydrogen face serious practical and technological constraints for household use, and most existing gas appliances would not be compatible with hydrogen in any case.

IEEFA warns that consumers persuaded to purchase gas appliances under renewable gas campaign messaging could be left with stranded assets worth billions of dollars once electrification proceeds. The Australian Consumer and Competition Commission has issued warnings against misleading conduct, placing the networks at risk of regulatory investigation. IEEFA recommends that investors factor these risks into capital allocation decisions, and calls on Australian governments and regulators to ensure promotional activities comply with consumer law and that expenditure on renewable gas campaigns is not approved where it is not in consumers' long-term interests.

Key figure — A$461 million — accelerated depreciation costs requested by Victorian gas networks from consumers over five years, compared with A$19 million for hydrogen readiness.