Victorian auditor-general casts doubt on state achieving renewable energy targets in coming decade

Not only will Victoria struggle to achieve its renewable energy targets over the coming decade, a decision to close coal-fired power stations and a gas shortage could trigger blackouts, the state’s auditor-general said.

By 2035, Victoria aims to generate 95 per cent of its electricity from renewable sources while the Yallourn coal-fired power station in the Latrobe Valley closes in 2028 followed by the nearby Loy Yang A power station in 2035.

A scathing report released on Wednesday suggested Victoria would meet its 40 per cent renewable energy target this year but then struggle because transmission lines to connect green power won’t be ready before coal power stations are shut.

“Victoria is on track to meet its renewable energy target in 2025, but meeting future targets will be more difficult,” the report said. “Key projects have been delayed, risking electricity shortages.”

The Victorian Auditor-General’s Office suggested the State would have trouble meeting its 65 per cent renewable energy target in 2030 despite financial support from the federal government’s Capacity Investment Scheme, designed to accelerate generation from solar and wind sources by underwriting revenue for investors to reduce financial risk.

A shortage of natural gas is shaping up as a major obstacle to Australia transitioning from coal to renewable energy, despite natural gas being the nation’s third biggest export after iron ore and coal.

The lack of gas exploration in Australia is limiting domestic supply and leading to the need for imports.

“If forecast gas shortfalls persist or south-eastern Australia experiences prolonged drought conditions, Victoria will face constraints on gas-powered and hydro-electric generation respectively,” the report said.

“This could mean that the current pipeline of generation and battery projects will not be enough to offset Yallourn’s closure from mid-2028.”

Transmission delays

The VNI West and Western Renewables Link, connecting renewable power from New South Wales and western Victoria via new transmission lines, are not due to be in service until 2030, two years after Yallourn closes.

Dan Tehan, the Coalition’s shadow energy minister at a Federal level, said Victoria’s struggles with meeting renewable energy targets would have national implications.

“Victoria’s transition is a complete and utter mess. Everyone knows they need gas for it,” he told The Nightly.

“They’re already extending the life of coal-fired power stations and projects like VNI West are hopelessly behind and have no community social licence and energy prices continue to rise like they do nationally.”

The Australian Energy Market Operator and the Australian Competition and Consumer Commission have also expressed concerns about a gas shortage affecting the national electricity market.

The latest concerns about the renewable energy transition in Victoria, Australia’s second most populated State, could potentially undermine the Federal Government goal of renewable energy making up 82 per cent of the nation’s energy needs by 2030 under a plan to reduce carbon emissions by 62-70 per cent by 2035.

Debt crisis

Victoria is also in a fiscally precarious position, with net debt expected to reach $187 billion by 2028.

This would be significantly higher than the New South Wales forecast of $130.7 billion and Queensland’s equivalent $93.2 billion, with Victoria having to raise taxes on property investors to pay for Melbourne’s world-record COVID lockdowns.

University of New South Wales economics professor Gigi Foster said Victoria would be increasingly reliant on Commonwealth help to meets its renewable energy targets.

“I do expect, because the Commonwealth Government is so committed to this net zero stuff that probably it will want Victoria to preferentially use its scarce dollars to try to meet some renewable target,” she told The Nightly.

“So, it may very well be they end up going cap in hand to the Commonwealth for more borrowing.”

Its reliance on the Federal Government to help it with the energy transition is reminiscent of Canberra having to come to Victoria’s rescue in 1991 following the State Bank calamity caused by its merchant banking arm Tricontinental losing $2.7billion.

Back then, the Commonwealth Bank was privatised to fund help a bailout.

More than three decades later, Federal Government spending is at the highest level since 1986 outside of COVID, making it harder for the Commonwealth to spend even more on the renewable energy transition with State Governments.

“Victoria has been digging itself into a big hole,” Professor Foster said.

Former Labor premier Daniel Andrews’s government legislated renewable energy targets out to 2035 under the Renewable Energy Act in 2017.