For most Australian food manufacturers, gas is invisible until the invoice arrives. It heats the kettles, raises steam for CIP and retorts, fires the bakery ovens and runs the fryers. It is also, increasingly, one of the most volatile and strategically important inputs in the business.
The Australian Energy Market Operator's (AEMO) 2025 Gas Statement of Opportunities warns that southern Australia faces peak-day gas shortfall risks from 2028 and structural annual supply gaps from 2029, as legacy Bass Strait fields decline. The headline delay compared with earlier forecasts sounds like good news. Look closer and it is driven partly by falling demand, including industrial users who have already curtailed production or left gas altogether because of price.
This guide explains what the east coast gas outlook means for food processors, how to quantify your exposure, and the practical options for contracting, efficiency and electrification of process heat.
Why Gas Matters So Much to Food Manufacturing
Food and beverage processing is one of Australia's most heat-intensive manufacturing sectors. Unlike many industries, most of that heat is needed at low to medium temperatures: hot water, pasteurisation, cooking, blanching, drying and cleaning.
| Process | Typical temperature | Common energy source today |
|---|---|---|
| CIP and wash-down hot water | 60–85°C | Gas boiler / steam |
| Pasteurisation (dairy, juice) | 72–90°C | Steam from gas boiler |
| Cooking kettles and blanching | 85–100°C | Steam or direct gas |
| Spray and drum drying | 150–250°C | Direct gas burners |
| Baking ovens | 180–300°C | Direct gas |
| Frying | 160–190°C | Gas-fired thermal oil |
| Retort sterilisation | 115–130°C | Steam from gas boiler |
That temperature profile matters. A large share of food-plant heat sits below 100°C, which is exactly where electrification technologies are already commercially proven.
What the 2025 GSOO Actually Says
AEMO's outlook covers the interconnected east coast market: Queensland, New South Wales, Victoria, South Australia, Tasmania and the ACT.
- Southern supply is falling. Production from southern basins, dominated by the Gippsland fields that feed Longford, is forecast to decline sharply over the coming years.
- Peak-day risk arrives first. Cold winter days, when heating, gas-fired power generation and industrial demand coincide, are forecast to create shortfall risk from 2028.
- Annual gaps follow. Without new supply, storage or import terminals, AEMO projects annual supply gaps from 2029.
- Export linkage persists. The majority of east coast gas production is exported as LNG from Gladstone, which links domestic prices to international markets.
AEMO has repeatedly stressed that timely investment in new supply, storage and pipeline capacity, or LNG import terminals, is needed to close the gap.
The Price Problem Is Already Here
Even without a physical shortfall, food manufacturers have felt the price shock. Before 2015, east coast wholesale gas commonly traded at $4–6/GJ. Since the opening of LNG export trains, and especially after the 2022 global energy crisis, wholesale prices spiked well above $30/GJ at points before the federal government introduced a $12/GJ price cap on new wholesale contracts under the Gas Market Code, administered by the ACCC.
The cap moderated the worst extremes, but $12/GJ is still roughly double historical norms, and many smaller manufacturers buy through retailers whose delivered prices add transmission, distribution and retail margin on top.
Here is what that means for a typical mid-sized processor:
| Scenario | Annual gas use | Delivered price | Annual gas cost |
|---|---|---|---|
| Pre-2015 baseline | 25,000 GJ | $8/GJ | $200,000 |
| Current contract | 25,000 GJ | $16/GJ | $400,000 |
| Tight-market renewal | 25,000 GJ | $22/GJ | $550,000 |
A renewal in a tight market can add $150,000 or more to the cost base of a single plant, with no change in output. For a business running at 5–8% EBIT margins, that can wipe out a significant share of annual profit.
Step 1: Quantify Your Gas Exposure Per Product
Most manufacturers know their total gas bill. Far fewer know how much gas each product consumes. Without that, it is impossible to tell which lines are most exposed or to pass costs through credibly in retailer negotiations.
- Sub-meter major users. Boilers, ovens, fryers and dryers should be metered separately where practical.
- Allocate energy to batches. Link energy use to production records so each SKU carries its own gas cost per kilogram.
- Build energy into recipe costings. Energy should sit alongside ingredients, packaging and labour in your cost model, not buried in overheads.
- Model price scenarios. Test the impact of $16, $20 and $25/GJ on margin per SKU.
This analysis frequently reveals that a handful of energy-intensive products, often baked, fried or dried lines, carry a disproportionate share of risk.
Step 2: Contract Smarter
Gas contracting has become a strategic procurement exercise rather than an annual renewal.
- Start renewals 12–18 months early. Tight markets reward early buyers.
- Stagger contract terms. Avoid having all supply expire in the same year.
- Understand the structure. Separate commodity, transport and retail components to see where you can negotiate.
- Consider aggregation. Buying groups and industry consortia can access wholesale terms that individual SMEs cannot.
- Review take-or-pay clauses. Minimum volume obligations can become costly if you reduce gas use through efficiency or electrification.
Step 3: Cut Gas Use Through Efficiency
The cheapest gigajoule is the one you never buy. Common food-plant opportunities include:
| Measure | Typical gas saving | Typical payback |
|---|---|---|
| Steam trap survey and repair | 5–15% of steam use | Under 1 year |
| Insulating valves, flanges and pipework | 3–10% | 1–2 years |
| Boiler combustion tuning and O2 trim | 2–5% | 1–2 years |
| Condensate return upgrades | 5–10% | 1–3 years |
| Economisers and flue heat recovery | 4–8% | 2–4 years |
| Heat recovery from refrigeration | Variable | 2–5 years |
Ranges are indicative and depend heavily on site condition. A professional energy audit is the best starting point.
Step 4: Electrify Low-Temperature Heat
Industrial heat pumps can now deliver hot water up to around 90°C efficiently, with high-temperature units reaching beyond 120°C. Because a heat pump moves heat rather than generating it, it typically delivers three to four units of heat for every unit of electricity at the temperatures common in CIP and pasteurisation.
The Australian Renewable Energy Agency (ARENA) and the Australian Alliance for Energy Productivity (A2EP) have published case studies of food and beverage sites electrifying process heat. Common lessons include:
- Pair heat pumps with heat recovery. Waste heat from refrigeration plant is an ideal heat source.
- Use thermal storage. Hot water tanks allow heat pumps to run when electricity is cheapest or solar is available.
- Electrify in stages. Begin with CIP and wash-down water, then move to pasteurisation and cooking.
- Check electrical capacity early. Network upgrades can be the longest lead-time item.
The federal Energy Efficiency Grants for Small and Medium Sized Enterprises have funded equipment upgrades in past rounds, and state programs such as NSW's Energy Savings Scheme and Victoria's Energy Upgrades program can provide additional support.
Step 5: Build Energy Into Your Commercial Story
Energy cost is a legitimate basis for cost justification with retailers, provided you can evidence it. Product-level energy data allows you to demonstrate exactly how a gas price change affects each SKU, rather than relying on generic inflation claims. It also supports Scope 1 emissions reporting, which major retailers increasingly request from suppliers.
Common Mistakes to Avoid
- Treating gas as fixed overhead. It hides which products are genuinely profitable.
- Renewing contracts late. Leaving negotiations until the final months removes leverage.
- Electrifying without data. Sizing a heat pump without metered load profiles leads to oversized, expensive equipment.
- Ignoring maintenance. Failed steam traps and missing insulation silently waste gas every day.
Frequently Asked Questions
Will the $12/GJ price cap protect my business? The cap applies to new wholesale contracts under the Gas Market Code and has exemptions and conditions. Smaller manufacturers buying through retailers typically pay delivered prices well above $12/GJ once transport, distribution and retail costs are added.
Is electrification realistic for a small food business? For hot water and wash-down, yes. Heat pumps for low-temperature duties are proven and increasingly affordable, particularly when combined with grants and on-site solar. High-temperature processes such as baking and frying are harder to electrify today.
A 90-Day Energy Action Plan
| Timeframe | Actions |
|---|---|
| Days 1–30 | Gather 24 months of gas invoices, map contract expiry dates, identify the top five gas-using assets |
| Days 31–60 | Commission an energy audit, complete a steam trap survey, begin allocating energy to products |
| Days 61–90 | Model price scenarios by SKU, shortlist efficiency projects, scope a heat pump feasibility study and review grant eligibility |
The Bottom Line
The east coast gas outlook is not a distant problem. Prices are already structurally higher, and AEMO's shortfall warnings mean winter supply risk will grow from 2028. Food manufacturers who understand their energy use at product level, contract strategically and begin electrifying low-temperature heat will protect both margins and supply security.
Those who keep treating gas as a fixed overhead will discover their exposure at the next contract renewal.
References
- AEMO – Gas Statement of Opportunities 2025
- ACCC – Gas Market Code
- Australian Energy Regulator – Wholesale gas market statistics
- ARENA – Industrial process heat projects
- Australian Alliance for Energy Productivity – Process heat resources
- business.gov.au – Energy Efficiency Grants for SMEs