‘Drastically increase network costs': Top energy expert says Victorian gas bans to hurt small businesses and shrink manufacturing capabilities

Sky News AU

25-06-2025

Top energy experts have condemned the Victorian Allan government's sweeping gas bans arguing that as households are weaned off the system manufacturers and small businesses will consequently bear the brunt of the rising costs to extract gas.
The Allan government announced on Tuesday it would move to scrap its policy to force owner-occupiers to switch from gas heating to electric systems when they expire after receiving intense backlash from consumers and industry magnates.
The Victorian government unveiled a number of measures in 2023 which sought to phase out the use of gas in the state, yet has since softened multiple pieces of the policy.
The draft plans would have forced hundreds of thousands of Victorians still reliant on gas heaters and cooktops to shift to electric models as part of the government's net zero emissions pathway.
However, the government is continuing to persist with numerous elements of the policy raising the ire of energy analysts.
These include requiring all gas hot water systems to be replaced with electrical alternatives once they break down and all new homes and commercial buildings having to be built completely electric from 1 March 2027.
While Premier Allan claimed the move would push down household electricity bills, Senior Energy Analyst at MST Financial Saul Kavonic said that despite minor amendments being made, the policy would significantly reduce the states manufacturing base which is already at record lows.
'What is telling in this backtrack in Victoria and a big part of it is what's starting to dawn on the Victorian government is if they actually were successful in going down their path of reducing gas usage for heating, what it actually does is it starts to drastically increase the network costs on the manufacturing base,' Mr Kavonic said.
Mr Kavonic who has worked in the sector for over 15 years said that the remaining manufacturers in the state would 'then have to cover a much larger portion of that fixed infrastructure amortisation,' as the cost of gas became more expensive as demand decreased.
'You'll see an even further hastening of the deterioration of the manufacturing and small business sector in Victoria,' Mr Kavonic reiterated.
Energy analysts outlined that if hundreds of thousands of homes were swapped over to electricity-based services, then the grid would be overloaded in the short term, potentially putting the viability of the entire system at risk.
The government back down delayed all changes to energy rules which were set to commence next year to March 1, 2027.
Victoria faces crippling gas shortages by 2029 according to the Australian Energy Market Operator as existing supplies in the Bass Strait have dried up.
Mr Kavonic said the government's alternating position risked threatening investment in critical gas exploration projects further.
'A lot of industry folks over the last 12 hours have been questioning if the energy minister in Victoria Lily D'Ambrosio has effectively been overruled by her own party in this, because she's been one of the biggest advocates of demonising gas use and getting our customers off gas,' he said.
'What's really important is if Victoria actually wants to fix their gas supply security issue they need to have a very clear statement backed up by actions that they see a role for gas in the future.'
Mr Kavonic said the appetite for investment into gas security was "still not going to return" given the Allan government was "ultimately sitting on the fence here and only partly walking it back".
The government says that by 2029 there will be a reduction of 12 petajoules of gas in every household and business which they argue will help fuel industrial capacities.