Scenarios are an essential tool for exploring and understanding the future gas outlook depending on global emissions reductions pathways, based on varying assumptions. Scenarios are not predictions. Instead they allow comparisons of potential future versions of the energy landscape to support decision makers to understand potential trade-offs.
This strategy relies on quantitative scenarios and qualitative information received through the public consultation process and continued discussions to understand the future of gas in Australia and in our region. The Analytical Report has built on existing scenarios produced by the International Energy Agency (IEA) and the Australian Energy Market Operator (AEMO). These scenarios are well known and tested, and reflect policy decision and intentions both globally and in Australia. Read more about the scenarios used in the analytical report in Section 4 and Appendix B of the report.
LNG modelling
The IEA produces three main scenarios that have been used alongside our in-house modelling, which uses the Nexant World Gas Model. The three IEA gas and LNG scenarios used in the strategy are:
- Net Zero (NZE) (1.5°C), which sets out a pathway for the global energy sector to achieve net zero CO2 emissions by 2050. This normative scenario shows what actions could be taken for the world to achieve net zero by 2050. The scenario presents a narrow but achievable pathway to Net Zero by 2050.
- Announced Policy Steps (or Announced Pledges – APS) (~1.8°C), which assumes climate commitments made by governments around the world will be met in full and on time. This exploratory scenario shows how close current commitments get the world to limited global warming to 1.5°C and highlights the ‘ambition gap’ that needs to be closed to achieve the 2015 Paris Agreement goals.
- Stated Policies (STEPS) (~2.6°C), which reflects current policy settings based on the assessment of sector and country-specific policies that are presently in place around the world. This exploratory scenario investigates existing policy settings, as opposed to current commitments, highlighting the ‘implementation gap’ between commitments and actions.
In addition to these three scenarios produced by the IEA, we used the Nexant World Gas Model to forecast longer-term forecasts for gas production, exports and consumption to 2052 that are specific to our region and major trade partners. The assumptions that create the results for the three IEA models are used to produce the analysis from the Nexant World Gas Model.
AEMO has developed scenarios for Australia’s domestic gas markets that broadly align with the IEA’s scenarios. The AEMO gas market scenarios can be aligned to IEA scenarios for Australia’s east coast gas. West coast scenarios reflect supply and demand with reference to emissions, so do not align to IEA scenarios.
West coast gas market modelling
AEMO west coast gas market scenarios that outline WA’s gas supply, demand and infrastructure needs out to 2033. AEMO uses three main west coast scenarios:
- Low. This scenario includes only existing gas supply and demand sources and therefore represents a conservative forecast.
- Expected scenario (medium). This scenario is considered most likely or expected.
- High. This scenario builds from the expected scenarios and includes more uncertain supply and demand sources, including backfill gas fields for existing production facilities. The scenario assumes coal fired power station that leads to higher gas demand and the addition or renewable power after 2030 that slowly brings down gas demand slowly.
East coast gas market modelling
AEMO East coast gas market scenarios outline gas supply, demand and infrastructure needs out to 2043. AEMO uses several scenarios with additional sensitivity analysis to capture the complexity and uncertainty of Australia’s east coast gas market.
- Green Energy Exports (1.5°C) assumes very strong decarbonisation activities, contributing to limiting temperature increases to 1.5°C, in alignment with IEA’s NZE. Main drivers are rapid changes in Australia’s energy sectors, including strong use of electrification, green hydrogen and biomethane.
- Step Change (1.8°C) scenario is the central scenario that achieves a scale of energy transformation consistent with Australia’s contribution to limit global temperature rises to below 2°C compared to pre-industrial levels. Electrification is a key enabler of change, with consumer actions
- Progressive change (2.0+°C) meets Australia’s current Paris Agreement commitment of 43% emissions reduction by 2030 and net zero emissions by 2050. The scenario has higher gas consumption that reflects more challenging economic conditions, reduced investment in decarbonisation and supply chain challenges.
Sensitivity analysis helps explores specific circumstances where gas demand or supply is impacted by particular events such as changes in the weather or market conditions. These sensitivities build on the above AEMO scenarios and help examine the impact on gas use if that specific circumstances were to happen. For example, prolonged droughts affect large hydro generation. The re-occurrence of the ‘millennium drought’ of 2006–2007 would see annual GPG forecast to be 60% higher compared to the Step Change scenario, depending on deployment of variable renewable energy.