The Labor government in Victoria on Wednesday announced a new policy that will aim for 25 per cent renewable energy share by 2020, and 40 per cent renewable energy share by 2025.
That will result in another 5,400MW of large scale wind and solar plants built in less than a decade, in the state which plays host to the country’s last remaining brown coal generators.
In this interview, Victoria energy minister Lily D’Ambrosio explains why Victoria is following a model championed by the ACT Labor government, and why it expects costs to be minimal to consumers.
RenewEconomy: Lily D’Ambrosio, thanks for joining us. Why has Victoria chosen to go beyond the national renewable energy target?
Lily D’Ambrosio: We think this is an ambitious target but a very achievable target, and it is what this state needs. In Victoria, there has been no new construction (of large scale renewables) in the last 12 months just on back of the national renewable energy target. The only things that have started construction (the Coonooer Bridge wind farm and the Ararat wind farm, where this announcement was made) was courtesy of ACT government reverse auction scheme (which aims for 100 per cent renewable energy by 2020). That is an indication of federal government policy uncertainty that has knocked the confidence out of the industry in terms of investment. We are facing a real risk of not meeting the 2020 target set by the federal government. This annoncements today will give long term certainty.
RE: What will the cost be?
D’Ambrosio: We have done some preliminary analysis. There will be no cost to households and business before 2020, and after that we talking about price increases in the order of cents per week. It will have a very marginal cost flow through, but it will generate 3,000 jobs by 2020.
RE: Is the cost of the new technologies offset by the expected fall in wholesale prices?
D’Ambrosio: That is one element. The other element is that the current slump in investment in renewables means that this is the best time to invest because of the higher price of renewable energy certificates. The added cost of these projects to going to be marginal.
RE: Is the intention that VRET (Victoria renewable energy target) be additional to the national scheme?
D’Ambrosio: From 2020, it will be additional, it will be additional.
RE: It seems to me that you are taking on ACT model for reverse auctions. Will you be using contracts for difference as they do in the ACT?
D’Ambrosio: That is one option, but we will finalise details after consultation with industry in July and August. And we will also finalise then what the technology split will be. We intend to hold separate auctions for large scale solar and other options, will be technology neutral. Those details will need to be worked through with stakeholders. But by 2017 we intend to introduce legislation, targets and the mechanism to have that target. That means we will be the first state that won’t just have an aspiration (for high renewables), but it will be backed up by legilstion.
RE: So what are you aiming to have built by 2020?
D’Ambrosio: The first auctions will be held in 2017, and we are looking at getting 1,800MW of new capacity built by 2020, that is what we are aiming for.
RE: That sound ambitious.
D’Ambrosio: It is doable. Our analysis shows that this is achievable.
RE: What about small scale solar and battery storage? What plans do you have there?
D’Ambrosio: Rest of action plan not realsing until later this year. More to say on battery storage and small scale later this year.
RE: And the impact on the big brown coal generators?
D’Ambrosio: In terms of initial analysis there is no real impact on the existing generators. They (the owners), of course, have made pronouncements about where they see themselves in future. So there is no real impact on that front. As for the transition for the Latrobe Valley, the government announced in its recent state budget a $40 million assistance fund to assist industries in the Latrobe Valley to diversify, and for new jobs to come from that. It (the transition) is not going to happen overnight, but we have made some initial investments.
RE: But brown coal has to go eventually?
D’Ambrosio: The indications are that we will see significant and concerted uptake of renewable energy and reliance on renewable energy generation, and at a point in time we will see reduction in brown coal, in fact that has started now in Victoria with brown coal falling from 92% to 85% of generation. Given the pronouncements by the global businesses owners that they have to move away from coal fired generation to renewable energy, we anticipate that that will happen.
RE: So are you anticipating that it will be mostly wind energy to be built in Victoria?
D’Ambrosio: We do anticipate that wind will dominate. We will have a specific target for solar, and we will be keen to hear from industry on their views, but it is fair to say that overwhelmingly it will be wind, with a significant amount of large scale solar.
RE: Do you have an idea of the possible targeted solar share – will it be 10%, 30%?
D’Ambrosio: We do have a number in mind. It will be more than 10%. It will be significant. But we don’t want to share that number now because we need to have these consultations.
RE: And what sort of pushback do you expect (The Murdoch media was quick to focus on costs of 60c/week per family after 2020):
D’Ambrosio: I presume the state opposition will support it because they have a renewable energy spokesman, so if they don’t that it will give a lie to that position.
RE: What about industry groups and energy users?
D’Ambrosio: Industry will welcome this and can be confident that the cost flows will be minimal and easily managed. There will be no cost impacts at all between now and 2020. And what happens after that will be minimal.
Giles Parkinson is a journalist of 30 years experience, a former Business Editor and Deputy Editor of the Financial Review, a columnist for The Bulletin magazine and The Australian, and the former editor of Climate Spectator.