Major energy market reports based on extensive sets of modelling are often a challenge to cover. Depending on the media outlet, the first best angle tends to hone in on the subject judged to be of biggest interest to that outlet’s audience at a certain point in time.
In the case of Infrastructure Victoria’s draft 30-year infrastructure strategy, published on Tuesday, Renew Economy reported on the independent body’s recommendation that the state push much harder on the uptake of home batteries and the coordination of consumer energy resources.
The Financial Review and Nine newspapers, meanwhile, focused on warnings of energy shortages and power bills “forecast to soar.”
The latter headline-grabber is plucked from the depths of the 93-page Aurora Energy Research report, which models that in one scenario of eight – a “low weather year” – prices could spike to similar highs as during the fossil fuel crisis sparked by Russia’s invasion of Ukraine (see chart below).
But what everyone seemed to miss – or overlook – is that one of the biggest threats to a reliable and affordable electricity supply in Victoria over the coming 30 years can be traced back to one man – Peter Dutton.
That’s because, according to modelling from Aurora, one of the best ways Victoria can avoid high risk, high price-driving outcomes like running its old, unreliable coal plants longer than planned, becoming a net importer of energy, or running low on renewable generation capacity, is to build offshore wind – and to build it fast.
And one of the biggest threats to the offshore wind industry is Dutton’s federal Coalition, with its promises to scrap declared development zones, including one in Victorian waters, and tear up contracts, including for a 1.2 gigawatt Victorian project that was last week awarded a feasibility licence by federal Labor.
So what does the report say? First some context. Aurora models eight different scenarios for the Victorian energy market, starting with Scenario 1 being the Base Case, where announced state renewable energy targets are achieved, using AEMO’s 2024 Integrated System Plan (ISP) assumptions.
Notably, as you can see in the charts below, it is the base case – where Victoria meets its targets of 65% renewables by 2030 and 95% renewables by 2035, including at least 2 GW of offshore generation capacity by 2032, 4 GW by 2035 and 9 GW by 2040 – that achieves the lowest electricity prices in 2050, with some fluctuations forecast along the way.
Source: Aurora Energy Research
The Status Quo scenario – a kind of renewables light, coal heavy approach that might be favoured by the conservative side of politics – briefly promises lower electricity prices in the early 2030s, according to Aurora’s modelling – but that is attributed to keeping the coal plants running for longer to allow for a slower shift to renewables.
But the lower prices don’t last long and, as the Jacobs modelling points out, relying on aged coal plants to run past their use by date is by no means a fail-safe approach.
“Where coal-fired power station retirement is delayed in response to offshore wind targets not being met or VRE resources being developed behind schedule, this has a negative impact on emissions, but might in isolation lead to lower wholesale spot prices, and greater reliability in the short term,” the Jacobs report says.
“Wholesale spot prices are seen to be on average 24% lower in the case where brown coal retirement is delayed,” it continues, adding that “these stations however would be unlikely to be operating profitability through this period, with a consequent cost for the operator and/or governments.”
In the same table, detailing the material risks to Victoria’s future energy supply, Jacobs lists “Increases in coal fired power outages lead to a 50% increase in wholesale prices and potential threats to reliability in some years” – and ranks its potential impact as “major” to both affordability and reliability.
On offshore wind, the Aurora report finds that adding this to the mix in Victoria offers a solution to many of the problems threatening reliable and affordable energy supply over the coming decades, particularly if the development of declared zones and proposed projects are put on the fast-track.
To this end it models two scenarios: Scenario 7, Removal of Vic Offshore Wind, and; Scenario 8, Accelerated Vic Offshore wind – the latter of which is the other scenario that charts a pretty good looking line on the future wholesale electricity price scenario comparison graph above (dark blue line).
“Without offshore wind, Victoria will become a major net importer following coal plant closures as the state becomes reliant on local onshore wind and solar electricity,” the report says in section of the report analysing the outcomes of scenario 7.
“The consistent generation profile of offshore wind plays a crucial role in maintaining grid stability, and without it, the grid faces increased price volatility and higher costs.”
For Scenario 8, Aurora models a hypothetical scenario where Victoria’s offshore wind buildout is brought forward five years earlier than current state targets, to an ambitious 9 GW by 2035.
“Accelerating offshore wind development could reduce the need for rapid onshore renewable energy expansion, easing land use pressures while still meeting state targets,” the report says.
“If Victoria rapidly expands offshore wind deployment, grid stability may be improved with access to more reliable wind resources, potentially reducing fluctuations in supply.”
On prices, it says “Forcing offshore wind to be deployed earlier in Victoria could place downward pressure on both wholesale and renewable generator capture prices in the 2030s.”
And it concludes: “Faster offshore wind buildout could significantly reduce Victoria’s reliance on Tasmania’s electricity imports, potentially creating a more robust energy supply.”
