Victoria’s 50% renewable target, a flight of fancy?
In a world where the appearance of doing SOMETHING, as opposed to actual effective achievement, it comes as no surprise that Daniel Andrews is being hailed a hero.
The last Monday of October witnessed the usual flurry of press releases, selling the story of what the State government is delivering, or aiming to deliver in Victoria. One of these powerfully declaring “A Stronger Renewable Energy Target for Victoria”.
Stronger certainly, only so far as the target itself goes.
The State government declaring, Victoria’s new renewable energy target of 50% by 2030, is now enshrined in law. They further suggest this will create thousands of jobs, putting more energy into the grid and driving down energy prices.
Lily D’Ambrosio, Victoria’s Minister for Energy, Environment and Climate Change, is quoted saying “Victorians voted overwhelmingly in support of increasing our renewable energy target – today we’ve delivered on our promise.”
It is true that the State Government went to the last election with a promise to lift the target to 50 per cent by 2030, it is equally noteworthy that people voted for local members, not individual policy. If policy itself could be voted on, would blue collar workers, the Howard battlers, or the silent majority, give this target any support knowing the increases in power bills.
“Enshrining a VRET [Victoria’s Renewable Energy Target] of 50 per cent by 2030 sends a clear signal to industry to keep investing in renewables and creating jobs – particularly in regional Victoria. This legislation will help boost jobs, reduce emissions and drive down energy prices for Victorian families,” the minister further stated.
The government suggests this new target will create around 24,000 jobs by 2030. It is true the target provides certainty specifically in the renewable energy industry and with it, investor confidence. The government believes this will create an additional $5.8 billion in economic activity in Victoria. But at what cost? What jobs will other industries not create?
Recent experience within this sector tells a different story. Power prices have not fallen with the onset of rapid renewable energy investment. Power supply is not a certainty anymore. Due to Government Policy, some Solar installation operators are struggling to keep businesses afloat in Victoria. In the state of appearing to do good, the reality is vastly different.
Power prices have skyrocketed across Australia. This is especially true in Victoria and South Australia, which are both leading the country on power prices. It is also true to say that South Australia is leading the country on renewable energy.
According to the Australian Energy Regulator in its State of the Energy Market 2018 report, “Victorian prices set a new state record at almost $100 per MWh after the Hazelwood closure.”
That record was smashed in the first quarter of 2019. The Australian Energy Market Operator reported Victoria’s quarterly average spot wholesale electricity prices of $166/MWh was the highest on record.
Hazelwood was purportedly the most emissions intensive power station in Australia. Even though it was over 50 years old its closure was significant. At the time, it supplied 5 per cent of the National Electricity Market’s total output, and given the escalation of power costs, has had an impact on consumer prices. We all know with current government policy, further coal plant closures are likely in the future.
Of the mainland states, South Australia has led the charge on renewable energy. The Clean Energy Council reported the state sourced 53% of its energy from renewable sources. With the courage and wisdom of Don Quixote, South Australia’s efforts have yielded very debatable results.
The level of impact policy had on the South Australia Blackout of 2016 is still argued over. What is agreed is a combination of severe weather, catastrophic failure of transmission infrastructure and generator performance all contributed to the state being blacked out for several hours. Despite these issues, its prices are escalating.
As the following graph shows, since 1999, energy prices have soared, especially from 2013. It is in the last 5 years where we see an increase of renewable energy investment. Late July, the Clean Energy Regulator released The Acceleration in Renewables Investment 2018 report, which found that Australia was installing more renewable generation per capita than any other country.
There have been warnings about reliability before. Finkel’s review, as an example, warned that coal fired plant closures may create risks to Australia’s power system reliability and security. This was in part since wind and solar plants replacing coal have not been well integrated into the system, given their dependence on the weather (as South Australia demonstrated).
The Australian Energy Regulator reported, “While power system reliability incidents rarely result in load shedding, power system security issues have become more common, closely linked to higher levels of variable wind and solar generation. The older fossil fuel power plants that are retiring helped maintain power system security by providing frequency, voltage, inertia and system strength services that kept the system in a secure technical state.”
While we should certainly strive for better technologies and energy that is affordable and sustainable, we need to ensure targets that are set are achievable as well. Putting undue price pressure on our poor will not led to good social outcomes. Proceeding with a system with too much volatility could very well end up in another South Australia blackout but in Victoria.
It was only two months ago that the Australian Energy Market Operator warned of the risk for Victoria. It “forecasts tightly balanced supply and demand in several NEM regions for summer 2019-20, with all regions other than Victoria expected to meet the current reliability standard.”
That report highlighted Loy Yang and Mortlake pose a significant risk of insufficient supply. If no additional supply was secured, involuntary load shedding may be experienced during extreme weather events, potentially over multiple events, equivalent to up to 1.3 million households being without power for four hours.
Building a sustainable future is fine. Aiming to conserve our resources for generations to come is laudable. But tilting at windmills is not. When we know the risks in Victoria are present right now, government policy should not be building even more uncertainty. Take the uncertainty around the Solar industry in Victoria. Where rebates are capped each month, and installers might not see work for months on end. Staff and bills still need to be paid. When money runs out, what do these businesses do. They go bust.
I hope my concerns are unfounded. I hope the government has a well crafted model that will reduce power prices and encourage renewable energy investment. But as the tracking of spot prices show, these hopes may be the first steps on the road of disappointment.