Ms D’Ambrosio says Victorians would also be suffering from rising energy bills were it not for the state Labor government going its own way with ambitious targets for renewable energy and emissions reduction, and hugely popular – but costly – initiatives such as the Solar Homes program that help households save on their energy bills.
Victoria had the lowest wholesale electricity price of any state in the National Electricity Market in the March quarter, according to the Australian Energy Market Operator – although prices still jumped from 12 months earlier, as elsewhere, and UBS is forecasting Victoria’s average prices this year will more than double from 2021. The state also had the lowest retail price in April, although only by a marginal amount, according to comparison website Canstar Blue.
The minister says Victorians are well-placed to avoid price shocks even if tech billionaire Mike Cannon-Brookes has his way and forces the early closure of AGL’s Loy Yang A plant in the Latrobe Valley, which is currently scheduled to run as late as 2045.
“The market will do what the market does,” said Ms D’Ambrosio, who is also Minister for Solar Homes in the Andrews Labor government, where her portfolio also includes environment.
“But what’s important is that governments play a big leadership role in managing a transition. This is where leadership at a national level has actually failed all of us.”
She wouldn’t comment on AGL’s proposed demerger more broadly, saying: “That’s a matter that I think is best left to shareholders – and I’m not one.”
Last year’s deal setting the closure of the 1480-megawatt Yallourn generator for mid-2028, four years earlier than planned, has been criticized for distorting competition in the National Electricity Market. It is thought to involve a commitment by the Victorian government to partly pay for repairs if the plant breaks down, or to provide a floor price for its owner to avert an even earlier closure that could lead to blackouts.
The deal came amid worries among generators about the risk of a messy transition away from coal power, which still meets over 60 per cent of demand, and a lack of progress on reforms to the market system that could help keep supplies secure.
Ms D’Ambrosio is unapologetic for the deal: “By having a negotiated set of arrangements around the retirement of that coal generator we’re able then to invest and encourage further investment in the replacement, renewable energy projects … and in storage technologies , which are very significant here in Victoria,” she said.
“So this is how we manage it. Doing it so that we actually have a smooth transition where we don’t have the power shocks that existed in the past. But we’re also creating the jobs and, of course, delivering those reduced emissions.”
She says that the agreement has incentivized new investment in clean energy, rather than put it off, with many new project proposals.
“What it has done is confirmed an early closure date, thereby signaling to the market that now is the time to invest in Victoria because you know that you won’t have Yallourn power station providing power after 2028,” she said.
“That’s a sure sign of confidence for investing, and we’re seeing investors respond.”
Victoria has a target to halve emissions by 2030 and is consulting with the community about a 2035 target on the way to net zero emissions by 2050. It overshot on its 2020 target for renewable energy, which hit about 32 per cent of the total electricity mix rather than 25 per cent, and Ms D’Ambrosio says the 2050 target of 50 per cent will be “well and truly bust open”.
It has also taken a lead on offshore wind power, setting huge targets that have raised eyebrows again around potential costs, given the sector is still nascent in Australia, in contrast to Europe. Victoria has also pushed ahead on transmission, partly sidestepping the national regulatory process, investing $500 million in upgrades of its network to help cheap new renewable generation better reach customers.
The new targets for offshore wind – of at least 2 gigawatts by 2030, 4 GW by 2035 and 9 GW by 2040 – have also brought a crowd of international investors “knocking on my door”, Ms D’Ambrosio said.
“They know they have a friend in this government when it comes to investing in technology that will absolutely transform our energy system,” she said.
But they have also increased doubts around the long-planned Marinus Link interconnector with Tasmania favored by the Coalition government, which remains stalled amid a lack of agreement on how costs would be shared between states.
Ms D’Ambrosio confirmed Marinus was a lower priority for her government than the KerangLink/VNI West link that would expand transmission between Victoria and NSW, and help power from the Snowy 2.0 pumped hydro project flow south.
“Our priority as identified by the market operator [AEMO in its Integrated Systems Plan] is to have KerangLink built ahead of Marinus Link, she said. “We need that additional interconnection, other states need it.”
But there again, she says, there is “a question mark” over federal government support for KerangLink/VNI West, despite its commitment to Snowy 2.0, which now may be completed before its interconnections are completed.
Ms D’Ambrosio says that it would be different under a federal Labor government, with its Rewiring the Nation plan to accelerate critical grid expansion handle increased renewables.
“When you have look at what federal Labor is proposing, they understand the importance and the need for having a transmission grid that is ready to take power from areas where it is being built to all parts of the country,” she said.
“And I would only hope that, at some point, our federal government will understand that infrastructure transmission is a critical part of the story in managing the transition in a way that is smooth.”
When it comes to the growing crisis in natural gas supply in Victoria, Ms D’Ambrosio has few answers for the short-term problem where spot prices reached $40/GJ on Wednesday, spelling pain for manufacturers.
She acknowledges Victoria’s energy efficiency and electrification programs will only help around the margin, and its gas substitution road map only longer-term. Meanwhile, AGL Energy’s Crib Point LNG import project was blocked by a planning body, while Viva Energy’s Geelong terminal is in doubt amid a full environmental assessment process and strong opposition from green groups.
Again, Ms D’Ambrosio wants action from Canberra, saying the federal government needs to trigger the Australian Domestic Gas Security Mechanism, something that many manufacturers have also been calling for. She said Victoria had urged a domestic gas reservation policy to be put in place, which would have ensured reasonable domestic prices.
“They didn’t do that. They chose to adopt a mechanism which they have failed to trigger at any stage,” she said. “There is nothing stopping them right now triggering that mechanism so that we have sufficient gas to meet our needs at the right price.”
As for the cost of the $1.3 billion Solar Homes project, which is aiming to increase the number of households with either rooftop solar, solar hot water or batteries to 770,000 over 10 years. Ms D’Ambrosio says that sort of initiative is vital to take households along in the transition.
“You can’t make climate change valuable to Victorians unless you show Victorians that you understand there is a need to make it easier for them to be able to get the benefits of it in the short term.”