Transformations don’t come much bigger than that proposed in Victoria by Daniel Andrews last week.
At the time of typing, about two-thirds of the electricity generated in Victoria comes from burning brown coal – basically mud – in old, sometimes failing, generators in the Latrobe Valley. It is the most polluting form of large-scale power generation.
If the Andrews Labor government wins a third term at next month’s state election, which seems likely, it has promised to legislate a target that would mean shutting the remaining coal plants and replacing them with renewable energy and back-up generation by 2035 – and probably earlier.
It would be one of the fastest transitions from a high-pollution power grid to a near zero-emissions system anywhere in the world. Just as significantly, the announcement by the Victorian premier and his climate and energy minister, Lily D’Ambrosio, accelerated the state’s emissions reduction plans with a promise of a 75-80% cut by 2035 (compared with 2005 levels).
Victoria also has a new timeframe in which it is pledging to reach net zero emissions – 2045, rather than 2050. These commitments far outstrip what is promised nationally and could put the state within reach of what is required to play its part in attempting to limit global heating to 1.5C, as national leaders promised in Paris in 2015.
There are important questions to be answered about how this will be achieved and what it will mean for households and businesses, but the goals should be acknowledged and applauded. This is the path governments are supposed to be setting.
Part of the commitment is piggybacking on other announcements. The rise of cheap solar energy in the middle of the day has quickly been making ageing coal plants less viable, and the owners of two of Victoria’s remaining three generators – Yallourn and Loy Yang A – have already brought forward their closure dates to 2028 and 2035 respectively.
It means the new bit in Andrews’ promise of 95% renewable energy by 2035 is really that the final plant, Loy Yang B, will shut by then, and not in 2047 as currently scheduled. This was apparently news to the owner, Alinta Energy, and its staff. But few people following the energy market believe it could have lasted as long as claimed anyway.
The coal closures will do a big chunk of the heavy lifting in meeting Victoria’s more ambitious emissions reduction targets, but not all of it. The state will also need to do more in the next term to cut pollution in other areas – transport, industry, manufacturing and agriculture – than currently proposed. And it will also need to rapidly reduce homes and businesses’ reliance on gas for heating and cooking.
Probably the least remarkable part of the Victorian promise is the section it chose to emphasise as the most important – the revival of the State Electricity Commission, which owned and ran the coal plants and poles and wires until then premier Jeff Kennett broke up and sold the system in the 1990s privatisation mania.
Andrews and D’Ambrosio said this move would be “putting power back in the hands of Victorians”. One newspaper headline went further, saying the premier was “nationalising electricity”. The reality is noteworthy but a bit more anodyne, for a couple of reasons.
What is proposed is a much smaller operation than the old SEC, and the government is not (at least at this stage) taking back control of the state’s existing power plants, poles and wires or retailers. The rebooted commission would instead be a new player in the market, effectively competing with private companies. The government would initially kick in $1bn as it starts the process of building 4.5GW of new renewable energy capacity. It expects further investment in SEC projects from “like-minded entities” such as industry super funds, but the government would retain a controlling stake.
It is a significant commitment, but just a fraction of what the state will need to replace its coal plants. A major focus appears likely to be the establishment of an offshore wind energy industry in Gippsland. The government has set substantial targets for offshore wind generation, but turbines are more expensive when built kilometres off the coast than in a paddock, and are unlikely to be competitive initially without public support.
Ignore the historic connotations of the SEC’s name and the Victorian commitment can be seen as just the latest in a wave of announcements, mostly by state governments, that have upended expert thinking of how the future electricity system would – or should – be rebuilt.
The long-held idea that investment in the new clean grid would be driven by an overarching national policy, such as a carbon price, with governments otherwise mostly taking a hands-off approach seems increasingly quaint. It was killed off as the federal Coalition spent years blocking climate action, and isn’t coming back.
Instead we have a messy, bottom-up approach in which governments working in the same general direction make their own commitments. Last month, the Queensland government said it would spend an extra $4bn on transforming the energy system, building at least 2,000 more wind turbines and 35m solar panels by 2030 to end its reliance on coal by about 2035. The New South Wales Coalition government is working on underwriting 12GW of new renewable energy and 2GW of energy storage and the treasurer and energy minister, Matt Kean, has said the state could be out of coal power by 2030.
Everyone is choosing their own adventure. The difference since May is that the commonwealth and states are pulling in the same direction, with the Albanese government committing to accelerate the transition by committing billions in funding for new transmission connections, including the Marinus link between Tasmania and Victoria announced last week.
It is a process that drives economists and energy market purists slightly mad, but a version of it was probably politically inevitable. Big change rarely comes smoothly, and premiers get votes for building things.
Most people won’t care about these structural and ownership issues. The big questions the Victorian government and others will have to answer in the years ahead are more basic. Will the new system deliver the reliable, clean and affordable electricity promised? And will coal-reliant communities be supported through what will be a historically abrupt change?
Reliability and emissions reduction goals will not be easy but are technically achievable. Cost is a separate question.
New solar and wind are clearly the cheapest forms of energy available and a system that mostly runs on them should lower generation costs, but someone will have to pay for the vast amounts of new transmission being built. Expensive gas-fired power is likely to also push up prices for as long as it is used alongside an expanding storage network to fill gaps in supply. .
The cost of a renewably powered electricity grid will be lower than a system that runs on coal or nuclear, but that does not mean it will necessarily be cheap – and consumers will not see that comparison. Governments should be careful what they promise.
