"Major energy infrastructure commitments will help Victoria meet energy users' needs in the 2030s and achieve its challenging new targets. What remains unsolved, by any level of government, is the immediate crisis of energy affordability driven by events in Europe," Tim Piper, Victorian Head of national employer association Ai Group, said today.
"Affordable and reliable electricity underpins Victoria's economy today and is even more central to the prosperous net zero emissions economy of the future.
"Age and changing economics mean coal generators are retiring much earlier than once expected. Industrial energy users have been ahead of governments in recognising that. We have also been very conscious that the transition from coal to renewables will only work if replacement capacity and the infrastructure to support it is in place first. If we fumble that handoff through poor coordination between governments, tangled approvals processes or delivery constraints we would put energy reliability and affordability at risk.
"The initiatives announced yesterday by the Victorian, Federal and Tasmanian Governments to fund and finance major transmission projects and renewable energy zones will help to ensure this transition succeeds. Social license and project delivery will require continuing attention. But the commitments announced may reduce the costs to the consumer of critical energy infrastructure and ensure that Budgets take a share of those costs, not just energy users.
"This is a major step towards replacing bulk energy from retiring coal generators with renewables, supported by interconnections to share energy across the market, energy storage, flexible demand and – critically - gas peakers. The flexibility and backup role of gas in the power system will likely last much longer than its bulk energy role.
"While these announcements will help shore up the security and affordability of the energy system of the 2030s, they do not change the dire situation confronting energy users right now. The impact of the war in Ukraine on global energy markets is leading to swingeing increases in the prices of electricity and gas across Eastern Australia. This is set to cost Victorian industry and households billions of dollars in higher wholesale energy charges over the next few years.
"It is positive that Victoria, Tasmania and the Commonwealth are working together. Recent years have seen so much uncoordinated intervention from all jurisdictions that we are in danger of having a National Electricity Market in name only. Without deeper cooperation this transition will cost more and take longer than it needs to.
"Public and private investment in the electricity system are both needed and will have to coexist constructively. We should expect predictable behaviour and good governance from Victoria's electricity activities, as we do from those of the Federal Government and the other States.
"The widely-expected and planned-for electricity transition will make a huge contribution to Victoria's announced emissions targets for 2035 of a 75-80% reduction on 2005 levels, and net zero by 2045. However fully meeting those targets will require significant transitions across industry, including stationary energy, transport, agriculture and industry. It may yet prove a difficult transition.
"State and Federal work has begun on these issues through the Gas Substitution Roadmap, the Electric Vehicle Strategy and the Safeguard Mechanism. Much more remains to be done before there are pathways for these sectors that are as solid and achievable as the electricity sector transition. Victoria will need to work closely with industry and other stakeholders as well as the Federal Government and the other states and territories to flesh out coordinated policies that will support the necessary investments.
"The current energy affordability crisis is dire and urgent. All levels of government need a convincing plan to respond to it. Work on our medium and long term energy needs is essential. But it is also essential that our energy intensive industries survive to see that future," Mr Piper said.
