Victoria has everything in place - time to go big on VRET | RenewEconomy

Victoria has everything in place – time to go big on VRET

It’s budget week in Victoria, and there’s a simple question to be asked: if there’s so much renewable energy ready to go, then why not go bigger?


Earlier this month, RenewEconomy reported on Victorian Energy Minister Lily D’Ambrosio’s speech to the Commission for Economic Development of Australia, with the Minister saying the response to the VRET reverse auction had been “overwhelming”.

More than 15 proposals had come through the door, offering 3,500MW of new wind and solar projects. This would exceed the capacity of Snowy Hydro 2.0, but would be built in years rather than a decade.

As we head into the maelstrom of budget week in Victoria, there’s a simple question that needs to be asked: if there’s so much renewable energy ready to go, then why not go bigger?

Why not admit that 650MW was just a start and instead declare that the first auction will drive investment of 1500MW of new clean energy.

We know that the projects being put forward are ready to be built. The Minister herself said that these are “firm proposals, with approvals in place, ready to go”.

Industry insiders have suggested that the rates being put forward are highly competitive, around $60/MWh, which is no surprise given the pent-up demand in the system.

Given that these bid prices are significantly lower than average wholesale prices, the moment that these projects produce energy they will be making money for the government and lowering energy bills for Victorian families and business.

We also know that cumulative emissions matter – we are over-spending a carbon budget with implications that will reverberate through human society for decades and probably centuries. A tonne of carbon that we avoid today will do less damage than a tonne avoided in the future.

If we’re serious about tackling climate change then there’s no time to sit on solutions – we need to move as quickly as possible and embrace every opportunity to reduce emissions.

We’ve also seen the political benefits of being seen as a leader on renewable energy. Polling commissioned by Environment Victoriashowed that voters in the seats that will determine this year’s state election unequivocally support renewables and know that coal is yesterday’s energy source.

Our polling also showed that voters believe the most powerful barrier holding renewables back is a lack of political will – not cost or reliability. What better way to show political will than to fully embrace an opportunity when it walks through the door?

And of course, the benefits of renewable energy can’t come quickly enough. EY modelling showed that embracing a target of 5150MW by the mid 2020’s would deliver over 9000 jobs and reduce energy bills.

We know that energy prices sit at the top of Victorians concerns about cost of living – so why wouldn’t we embrace every opportunity to drive down prices?

The naysayers may counter that it is better to be modest the first time around. But we already know that reverse auctions work, because we’ve seen them operate so well in the ACT.

Victoria has access to excellent advice on reverse auctions, going so far as to bring Simon Corbell, the architect of the ACT’s system, on board as Victoria’s renewable energy advocate.

Australia’s response to climate change has been tarred by timidity, hesitance and fear, but right now the Victorian Government has every reason to feel ambitious.

Over the last three years, the Andrews Government has shown that it wants to be a leader on climate change but has only made modest investments to clean up our energy supply.

As the Treasurer steps to the dispatch box on Tuesday he can put his money where his mouth is, and fast-track Victoria’s transition to cleaner, cheaper energy.

Mark Wakeham and Dean Pizzetti are campaigners for Environment Victoria

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  1. john 3 years ago

    There is no reason that the daytime supply of energy can not be supplied with the use of PV, concentrated solar thermal and to a lesser extent wind.
    The CST and PHES can mitigate the evening peak and with wind as an average better at night supply the energy need.
    Yes of course some degree of chemical storage with its inherent fast response aspect.
    If the network is able to cope with these kind of suppliers of power spread over a large area this has to be doable.
    Let us not discount household and commercial PV with storage who can also reduce demand.
    If the outcome is a lower cost of power for everyone especially those who can not be part of the story so much the better.
    This country has the best solar resources of perhaps any of the advanced developed countries, it has the expertise, it has the work force, but does it have the will?
    I think it does.
    Yes I know at State level it does, but frankly disregard the Federal level to much a joke to consider presently.

  2. Peter F 3 years ago

    While $60/MWh is below the current wholesale cost it is not below the operating cost of Victorian coal plants. Yallourn can mine coal and pay operational and maintenance expense and royalties for about $ 30 per MWh. There is enough hydro and gas in Victoria to provide firming for coal
    Once firmed up with additional gas, CST, pumped hydro or batteries the $60 for wind and solar becomes about $75-90.
    While I agree with your sentiments your economics are incorrect

    • Mark Wakeham 3 years ago

      Not sure I understand your point Peter. If the wholesale price is around $80MWh and the strike price for VRET projects is $60 MWh why would the wholesale price not fall as more renewables supply is added? You seem to be assuming that all new renewables would need firming. I don’t think that’s the case, at least until some years away when Yallourn retires. We made it through last summer without Hazelwood and next summer we’ll have more renewables and more storage, so why would the first VRET auction need additional storage?

      • Mike Westerman 3 years ago

        Especially since most demand is during the day. The addition of more solar will depress the daytime price, encouraging demand to shift that way further, but also will produce enough incentive for thermal and PHES storage to meet the evening peak.

      • Peter F 3 years ago

        The market price is not the cost.

        With only about 330 MW of wind and 3-400 MW of solar added in the last 12 months, the market price in Victoria was down 20% in March and 30% in April compared to last year. At current rates of behind the meter installations and large scale projects under way there is another 1,200 MW of wind and a similar or greater amount of solar will come on line in the next year or two. This can only depress prices further, particularly as generation in SA, Tasmania and NSW is also increasing. Thus the average price will continue to slide until it gets closer to the marginal cost of the next major fossil fuel generator. The medium term cost of operating Loy Yang is about $30-40/MWh depending on how much maintenance it needs. The short term marginal cost is probably less than $18

        If 1,000 MW of large scale wind and solar is added to the grid it will add about 3 TWh to a 44 TWh annual supply. Most of that will come at the expense of gas but in any case it will depress the price. If the price goes back to $45, the coal generators are still making money but the Victorian government will be losing about $45 m per year compared to market prices if it signs up at $60/MWh.

        Of course Victorian consumers would be much better off and the government might claim the the $45m subsidy has enabled savings of 44,000,000 x $35 for the Victorian economy but you have still not made much of a dent in the economics of brown coal. At best Victorian brown coal will displace NSW black coal

        It is true that we don’t need more on grid storage yet but until we know what the shape of new demand and supply patterns are, we will need to budget for firming capacity, whether it is gas, pumped hydro, batteries or demand response it still costs money

        • Malcolm M 3 years ago

          With the 1300 MW of wind currently under construction in Victoria we will soon move beyond the capacity of Basslink and the NSW inter-connectors to soak up excess production at times of high wind and low demand. With the Vic government bearing the risk of low prices at these times for 650 MW of new renewable capacity, a good investment would be grants for studies on storage, similar to what the Weatherill government announced as one of its last acts before its last election. In the Victorian market there are several existing hydro facilities that could easily be upgraded to pumped storage with the addition of pump generators – Eildon (currently 135 MW), Dartmouth (150 MW) and Murray (1500 MW) all have upper and lower dams, which could be used to soak up excess wind at night or solar power during the day.

          • Peter F 3 years ago

            I am completely with you on enhanced hydro, even small systems at small dams such as Eppalock and enlarging the systems on the Thompson etc. However I am beginning to wonder if rooftop solar and behind the meter storage are going to steal most of the market. We can already economically store all the heat and power we need for space heating/cooling, hot water and lighting and private transport, all we need is a micro 1414 system for cooking.

    • Andy Saunders 3 years ago

      Not correct, I’m afraid. “Firming up” is really a system issue, not an individual generator issue. Big coal plants don’t have firming-up contracts, do they? If they did, their operating costs would be higher…

      • Peter F 3 years ago

        That is true. However the system does need firming and while we know that sometimes three out of eight of Victoria’s coal generators can go off at once on fairly rare occasions, 97% of wind can go offline reasonably often (like now) so you need more firming capacity in a wind and solar dominated system than you do in a coal dominated system. Therefore while the current coal plants are on line we have about enough firming capacity with gas, hydro and imports. If for example Yallourn goes off line we will have to invest in more firming capacity as well as more wind and solar. The investment has to be paid for and that will add to costs

      • Mike Westerman 3 years ago

        WInd and solar farm owners have a financial incentive to firm up as the price for their product drops with added supply. The evening peak is increasingly seeing gas set the price with significant hydro supply. The marginal cost of solar plus PHES is already lower than gas, so there’s a margin to be made.

  3. Jon 3 years ago

    The majority of the early morning and evening consumption peaks is private households, with the apparently fairly high uptake of batteries with new solar installs there should start to be a bit of a shift in the price of domestic size installs over the next few years which will further increase their uptake.
    Battery prices aren’t going to drop until the supply demand balance tips to an oversupply, none of the manufacturers are going to drop prices while that are selling as quickly as they can manufacture.
    With more solar coming into the market it really is time to start looking at moving hot water systems onto smarter “off peak” control like ripple or preferably wireless network (choose your favourite system, wifi, mobile phone network) control so that your chosen retailer can turn it on and off to suit their supply demand profile.
    The average HWS needs power for 8-10 hours per day, it really doesn’t care when, a smart retailer would shift that time slot around daily depending on what supply is available. Take S.A. for example pays a lot more for import power than it gets for its export power, if the retailers could supply “off peak” when exporting it would reduce both exports and imports and be better off.

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