On 20 October 2022, the Victorian Government made several significant announcements regarding Victoria's energy transition which will be implemented if the Andrews Labor Government is re-elected in November. The headline items are:
- revival of the State Electricity Commission (SEC);
- a $1 billion investment in renewable energy projects
- public ownership of energy resources; and
- a major scale up in both emissions reduction and clean energy targets.
There is limited information available at this stage as to the specifics of how these changes will operate, however they signal a potentially major shakeup in Victoria's energy markets, with the Government seeking to take a much greater hands-on role in Victoria's energy transition. We expect, if implemented, they will inevitably lead to further regulatory changes around clean energy.
A summary of what is known about the proposals is set out below.
Revival of the SEC
The revived SEC will be based in Morwell, with an initial $20 million investment to stand the organisation up. The (old) SEC was set up in 1918 and privatised in the 1990s, but has retained some functions as a public entity, notably in the supply of energy to aluminium smelters in the west of Victoria. The revived SEC could be an expansion of the existing entity, however it is likely to remain smaller than it was before privatisation.
In terms of electricity supply, the Government said that it will "consider all options", including becoming a state-run retailer, partnering with an ethical retailer or remaining solely on the wholesale market.
Investment in renewable energy
Another key plank of the announcement is the investment of $1 billion in renewable energy projects. This is a significant statement of intent. The Government has stated that:
- the SEC will be responsible for delivering these projects;
- the State will hold a controlling (51%) interest in each of these projects; and
- the balance of funding will be sourced from "like minded entities – such as industry super funds".
This initial investment will be targeted deliver 4.5GW of power through renewable energy, with the stated intention being to replicate the output of Loy Yang A, which is closing in 2035.The scale of investment and stated intent to maintain a controlling interest is also indicative of the Government's desire to drive the development of renewable energy in Victoria.
Revised targets
Also announced were significantly more ambitious targets for both renewable energy and emissions reductions. These targets, if adopted, will be the most ambitious in Australia:
- Net zero: bringing forward (and legislating) the net zero emissions target by five years to 2045; and
- Renewable energy: establishing a renewable energy target of 95% by 2035 (and 65% by 2030).
Given the scale of these new targets, it is likely that additional legislative and regulatory changes will be required. This may include (among other things) direct imposition of targets on business (either through legislation or approval conditions) and an expansion of the considerations to which regulators must have regard in assessing and determining approval applications. Softer mechanisms, such as the establishment of additional subsidies to support investment, may also be implemented, but are unlikely to be sufficient on their own to achieve the Government's targets.