35% electrification by 2035: the challenge for Australia

At the Bonn climate talks last week, negotiators confirmed that the Global Climate Action Agenda for COP31 will include a new voluntary target: 35% of global final energy from electrification by 2035, up from roughly 20% today.

It's an important signal. Electrification is the backbone of decarbonisation, and this target gives governments, investors and industry a shared benchmark. But what does "35% electrification" actually mean for a country like Australia, and how hard will it be to get there?

Electrification means replacing machines, not just fuels

Electrification is simple in concept: replace machines that burn fossil fuels with machines that run on electricity. This includes:

• Transport: cars, vans, buses, trucks, trains, boats, planes.
• Buildings: heaters, water heaters, cooktops.
• Industry: boilers, kilns, furnaces, compressors.

Each of these machines consumes energy – in some cases it's already electricity, in many cases it's petrol, diesel, heating oil or gas. Moving from fossil fuels to electricity changes not just the energy source, but the entire efficiency profile of the system.

Why final energy matters – and why electrification slashes demand

The 35% target is based on final energy. A bit of context is helpful here:

• Primary energy: the raw energy content of a lump of coal, barrel of oil, or cubic metre of gas.
• Secondary energy: how much is left after conversion (e.g. to electricity or refined fuels).
• Final energy: what consumers receive – electricity at the socket after transmission/distribution losses, petrol or diesel at the bowser, gas in your pipe at home after losses due to leaks, etc.
• Useful energy: what is used to perform the task, for example, providing light, heat or motion.

Today's fossil fuel energy system is inherently wasteful. Extracting, processing/refining and transporting fuels consumes huge amounts of energy. Burning them wastes even more, mostly in the form of heat.

Electric technologies flip this equation. Electric motors are 3-4 times more efficient than internal combustion engines. Heat pumps deliver 2-5 units of heat for every unit of electricity (because instead of using energy to heat directly, like a flame under a kettle, they use it to move heat that is already present in the environment). Meanwhile, wind and solar don't suffer the thermal losses of fossil power plants.

This is why energy expert Paul Martin coined the term "primary energy fallacy": we do not need to replace the raw energy content of fossil fuels with an equivalent amount of renewable energy. Because electrification is so much more efficient, we need only about 40% of today's primary energy to deliver the same useful work.

What 35% electrification means for Australia

Moving from 20% to 35% electrification sounds modest. It isn't.

Australia has 27 million people, 22 million registered vehicles, around 12 million dwellings, and thousands of commercial and industrial facilities. Over five million homes have gas connections, typically with two to four gas appliances.

Getting another 15% of the way towards full electrification means replacing millions of machines in less than a decade.

But the target is not about counting machines – it's about displacing fossil final energy. And that means prioritising the machines that burn the most fuel.

Start where it counts: heavy vehicles and industrial equipment

Only 4% (~1 million) of Australia's registered vehicles are heavy trucks and buses, yet they consume over 20% of road transport fuel.

A typical family car drives about 12,000 km per year and uses ~1,200 litres of petrol. A heavy truck might drive 200,000 km and burn 110,000 litres of diesel in the same period. A large mining truck can exceed one million litres annually.

Electrifying one heavy truck can displace as much fossil energy as nearly 100 cars.

Electrifying 10,000 of the heaviest trucks would displace more diesel than electrifying one million cars.

This is where the biggest gains lie – and where the smallest number of actors can make the biggest impact.

On the other hand, the economics and behavioural incentives don't always stack up, meaning state and federal governments might need to adopt a mix of policy carrots and sticks to bring companies on the journey.

However, with diesel prices elevated – and likely to remain so – due to the current Middle East conflict, the economics are starting to look compelling, particularly when combined with energy security objectives. And the capabilities of electric trucks are also reaching a tipping point where fleets can see a path to adoption that minimises productivity or schedule impacts.

Households: the slowest part of the system

While the "business case" for replacing one's next car with an EV has never looked better – with an ever wider range of models available at minimal, if any, price premium over petrol/diesel equivalents, and far lower operating costs – the same cannot always be said for the replacement of gas or oil-burning appliances at home.

The vast majority of large home appliances (heating, hot water and cooking) are only ever replaced if they break. And when they break, the householder is generally not in the right frame of mind to pursue the added complexity of switching from, say, a gas boiler or oil furnace to a heat pump system. Especially not with the rest of the family complaining about cold showers.

This is where directive government policies are critical to achieving the rates of electrification needed to achieve 35 by 35. Let's face it, most households don't have the lazy thousands of dollars needed for discretionary replacements, so it's critical that emergency replacements of fossil appliances are made with electric.

Carrots and sticks: the policies Australia needs

The Australian State of Victoria has gone some way towards mandatory electrification with its forthcoming minimum rental energy efficiency standards, requiring that at end of life, both heating and hot water systems must be replaced with efficient electric systems. Other states and territories must follow, and extend such mandates to owner-occupied dwellings.

Existing carrots such as certificate schemes discounting the cost of efficient electric appliances should be tweaked to accelerate uptake in line with the 35% target while ensuring disadvantaged households are not left behind.

Other policies that would help include reforming the Safeguard Mechanism and tweaking tax credits, subsidies and grant programs to aggressively promote electrification of industrial processes, commercial buildings and heavy transport. For example, extending the New Vehicle Efficiency Standard to heavier vehicles and supporting the build-out of truck charging stations.

The electricity grid must be prepared to cope with new loads, including requiring demand management capabilities for electrified machines, so that loads can be dynamically shifted away from network peaks.

A national mission, not a slogan

The global 35% electrification target is a welcome signal. For Australia, it is also a test. The country has nine years to replace millions of machines – from the biggest trucks to the smallest water heaters.

The technology exists. The economics are good and improving. The efficiency gains are enormous.

What's needed is a national commitment – backed in by the right policies – to electrify at the speed required.

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