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Victoria’s climate agenda: will Andrews Government deliver on its promise?

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As we hit the start of February, the beach time is over and it’s time to get serious. With the hope generated by progress in Paris, and the rejuvenation provided by a holiday, RenewEconomy readers like me started the year with a spring in our step. It was therefore frustrating but predictable to find the same designed-to-fail climate and energy policy settings of the Abbott and Turnbull government still in place.

With the internal fault lines in the Coalition nationally it is very difficult to see any serious climate or energy policies emerging at the national level until after the next Federal election. Indeed our Prime Minister has promised no significant change from his party’s direct action policy, which he has previously described as a ‘fig leaf’, in this term of government.

There is hope however that we can escape these becalmed waters and put some wind in the sails of our clean energy industry in the first half of 2016 with some leadership from state and local governments.

In Victoria the Andrews Government is in the final stages of developing its policy agenda on climate change, renewable energy and energy efficiency. All three strategies are expected in the first six months of this year with the renewable energy and energy efficiency policies expected to land ahead of the May state budget.

They can’t come soon enough, with emissions from the Victorian brown coal generators on the rise again since the repeal of the carbon price, investment in renewable energy largely at a standstill, and the Victorian economy desperately in need of clean energy jobs as parts of the old economy disappear.

We are almost one third of the way through the current parliamentary term, and the Andrews government should be keen to avoid the mistake that the Brumby government made of releasing its climate agenda in its last days in office back in 2010, never to be implemented.

Environment Victoria has contributed to the development of all three strategies. We are optimistic that they will bring Victoria back to the front of the pack in the race to decarbonise our economy. But we are also wary of the pitfalls on the road, and the loud voices of those who want to continue their carbon-producing business activities (and their supporters) who caution against state leadership on climate and intervention in energy markets.

Over the next three weeks I’ll unpack some of the key decisions confronting the Andrews Government in a series of 4 articles. I’ll start today with the Renewable Energy Action Plan, then tomorrow explore the other side of the energy supply coin in coal-fired power station retirement.

Then in 2 further articles in the next fortnight I’ll explore the Victorian Government’s Energy Efficiency and Productivity Strategy and Climate Change Framework. I’ll also make some predictions about where the Andrews Government might land. Go easy on me here though- as mercurial US baseball coach Yogi Berra once said, “Its tough to make predictions, especially about the future”.

Victorian Renewable Energy Action Plan

Energy Minister Lily D’Ambrosio has been busy laying the ground work for the release of a Victorian Renewable Energy Action Plan ahead of the May state budget. Of the three strategies, (renewables, energy efficiency and climate) the Andrews government and the Premier himself seem most confident when talking about renewable energy and its job creation potential.

Victoria lost billions of dollars worth of wind projects as result of the Federal government cutting the RET from 41,000 GWh to 33,000 GWh, and the government seems keen to ensure those lost projects still proceed.

Last year the government released its renewable energy roadmap- essentially a green paper for stakeholder feedback, and also launched its $20 million New Energy Fund. The roadmap made a commitment to a state renewable energy target of at least 20% by 2020- an increase on renewable energy’s 12% market share in 2014, but hardly transformational.

The roadmap also asked for feedback on what Victoria’s 2020 and 2025 renewable energy target should be. Most of the submissions and public feedback the government received on its roadmap suggested a higher target was critical if it was to deliver any additional renewable energy projects for Victoria.

What should the renewable energy target be?

In Environment Victoria’s submission to the roadmap we outlined 2 scenarios. In one, Victoria could beat a 20% target by 2020 with no investment beyond what is required by the RET – that is, with the Andrews government doing very little. In the other scenario, the 20% target is almost achieved just thorugh the retirement of one of the four Latrobe Valley coal generators and little or no new investment in large scale renewables projects. Clearly if Victoria is to join the ACT and South Australia as renewable energy leaders we need a higher target.

Ensuring that the State’s renewable energy strategy both accelerates renewable energy investment and begins to remove some of our most polluting coal generation makes possible the adoption of a much higher target.

For instance in our submission we outline a scenario with increased Victorian government support for both solar and wind and the planned retirement of one Latrobe Valley generator (e.g. Hazelwood) by 2020 and another (e.g. Yallourn) by 2025 which would see Victoria achieve a 30% target by 2020 and 49% renewable energy by 2030. More ambitious targets again are possible with extra energy efficiency drivers. These scenarios suggest that the Victorian government could be aiming for at least 30% renewable energy by 2020 and 50% by 2025.

What should the renewable energy policy mechanisms be?

Setting a target is one thing but actually delivering policy that drives renewable energy investment is the essential component. The Federal RET prevents states from adopting their own certificate-based schemes that mirror the national scheme. Unfortunately amendments moved by the Greens to remove this barrier were not supported by either Federal Labor or the Coalition during the RET review process. Therefore it is highly likely that Victoria’s state renewable energy target will be non-binding, serving to act as an indication of the necessary ambition of supporting policy measures.

While there are a number of possible mechanisms for supporting large-scale renewable energy investment, including feed-in tariffs and baseline and credit schemes, the ACT’s successful reverse auctions seem to have generated significant enthusiasm in Victoria, possibly because that scheme bankrolled the Ararat and Coonooer wind farms in western Victoria (as Yes2Renewables’ Leigh Ewbank highlighted here).

Commercial players also seem to be favouring a tender-based model for new renewable energy projects with forthcoming auctions by Alinta and Ergon energy. An advantage of this approach is that it appears to work alongside the RET without interference.

Renewable energy auctions should be funded by a small charge to consumers rather than through state budgets. This is critical to ensure adequate funding for a sufficiently ambitious renewable energy target.

From a consumer perspective renewable energy auctions will help keep wholesale electricity prices low, so any cost impost may well be offset by suppressed wholesale prices. We’ll talk more about protecting low income Victorians when we come to the Energy Efficiency Strategy in this series of articles.

For small-scale renewable energy projects Victoria needs to overhaul its pathetically low feed-in tariffs. The Andrews government has asked the Essential Services Commission to review feed-in tariffs and to ensure that they reflect network, environmental and any other benefits. This review is now underway and should lead to higher feed in tariffs. The key question will be whether the Essential Services Commission is up to the task of properly valuing social and environmental and health benefits of distributed generation. If Harvard researchers can quantify the health costs to the Latrobe Valley community from the 4 coal generators at $660 million annually it should be possible to determine the avoided health expenditure benefits of renewable energy.

Finally the Renewable Energy action plan should outline a commitment to greening government through procurement. The percentage of Victorian Government electricity consumption that has been purchased as GreenPower has fallen from a peak of 27 percent in 2010-11 to just one percent in 2013-14 under the Baillieu-Napthine Government. The Andrews Government should immediately return to its 2010-11 levels of GreenPower and establish a timeline for increasing to 100 percent GreenPower.

But the Andrews Government could implement all these measures to support renewable energy and the State’s emissions could still rise unless we retire our dirtiest power stations like Hazelwood and Yallourn. So in tomorrow’s instalment we explore policy options linked to the renewable energy strategy to support the planned and phased closure of Latrobe Valley power stations and a transition plan for workers and the Latrobe Valley community.

To be continued.

Mark Wakeham is CEO of Environment Victoria, one of Australia’s leading environmental charities.

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