Victoria will introduce new legislation that will override the national regulatory regime and fast-track priority projects like grid-scale batteries and transmission upgrades.
Amendments to the National Electricity (Victoria) Act 2005 will give Victoria the power to unlock renewable projects and improve the reliability of state’s energy supply.
Minister for Energy, Environment and Climate Change, Lily D’Ambrosio, said that the reforms will allow the government to override the complex and outdated national regulatory regime, which causes excessive delays in delivering transmission projects and fails to properly account for the full benefits of investments.
These changes – to be used in close consultation with the Australian Energy Market Operator (AEMO) – will focus on projects that deliver clear benefits to consumers, while increasing Victoria’s capacity to import electricity during periods of peak demand.
As a first step to secure additional transmission capacity, the government will ask AEMO to call for expressions of interest to increase the capacity of the Victoria-New South Wales Interconnector.
The vulnerability of the national energy network has been highlighted with Victoria, New South Wales and South Australia narrowly avoiding load-shedding in late January 2020.
“The existing national energy laws have let us down – they have failed to drive investment in our electricity system or provide a 21st century grid for all Victorians,” Ms D’Ambrosio said.
“These reforms will help keep our energy system resilient as we face hotter summers, longer bushfire seasons and increasingly unreliable coal-powered generators.
“We continue to pressure the Commonwealth, as Chair of the Energy Council, for changes to the national market rules so Victorian households and businesses are not unfairly disadvantaged when it comes to accessing more reliable, cleaner and cheaper power.”
The Clean Energy Council (CEC) welcomed the Victorian Government’s proposal to accelerate investment in transmission.
CEC Chief Executive, Kane Thornton, said he hoped the initiative would help to reverse the recent collapse in renewable energy investment and encourage the new renewable energy investment needed to replace the state’s fleet of aging coal-fired power stations, ensure the ongoing stability of Victoria’s energy system and drive power prices down.
“Our transmission network has simply not kept pace with the transition to a 21st century energy system and is causing major concerns for investors in clean energy,” Mr Thornton said.
“Across Victoria there are existing renewable generators that are having their output constrained and renewable projects that are experiencing difficulties connecting to the grid due to system strength and congestion issues.
“This is not only inhibiting the state’s transition to a cleaner, more reliable and more affordable energy supply, but has also contributed to a significant slow-down in new clean energy investment.
“Over the last year, we have seen a massive 50 per cent decrease in large-scale renewable energy investment and we know that the lack of investment in transmission is the single biggest factor preventing the deployment of new generation projects.”
The Australian Energy Council (AEC), however, fears that Victoria’s decision to bypass the national regulatory regime will result in increased costs for end users as a result of poor investment decisions.
AEC Chief Executive, Sarah McNamara, said that no industry consultation had been undertaken on the proposed Bill, nor had it been sighted.
“There is already a robust investment test for transmission in the energy sector, run by the Australian Energy Regulator (AER), which serves energy customers well. Bypassing that rigorous process is fraught,” Ms McNamara said.
“Every transmission and network investment will unavoidably affect market investments, so careful and individual assessments carried out at arm’s length from politics are necessary.
“This is critical to ensure not just the timing, but also the cost-effectiveness for customers who have to pay for new links, as well as providing a predictable framework for generation investors.”
Ms McNamara said the Australian Energy Market Operator’s (AEMO) 20-year Integrated System Plan released late 2019 highlighted a sensible, phased implementation approach for transmission infrastructure, which is widely supported by the industry.
“Major investments like interconnectors can play an important role in maintaining security of supply, but commitments to them should only occur as a result of a rigorous cost-benefit analysis overseen by the AER under a national planning approach,” Ms McNamara said.
“The kind of state-based intervention proposed by the Victorian Government will likely create instability for would-be investors in the energy market.”