Victoria has announced a dramatic intervention – and set the stage for an interesting COAG meeting of state energy ministers next month – after announcing a split from national electricity rules in a bid to fast-track urgent grid upgrades and to unlock more large-scale renewables and encourage more big batteries.
Victoria energy minister Lily D’Ambrosio said on Tuesday that the state Labor government had decided to seek amendments to the National Electricity (Victoria) Act 2005 to override the current “complex and outdated” national regulatory regime.
“The existing national energy laws have let us down – they have failed to drive investment in our electricity system or provide a 21st century grid for all Victorians,” the minister said.
“These reforms will help keep our energy system resilient as we face hotter summers, longer bushfire seasons, and increasingly unreliable coal-powered generators.”
The intervention comes after a dramatic summer which has seen most of the state’s solar farms have their output cut in half, another half dozen completed large scale renewable energy projects told that they may not be able to connect until later this year, and others warned they may have to wait years for grid upgrades before beginning construction.
The issues in Victoria, which also affect south-west NSW, are the result of complex and questionable new connection rules, and also the slow pace of grid infrastructure upgrades to address issues which have been flagged for the best part of the decade.
Victoria is clearly frustrated, and has had enough. D’Ambrosio said the changes would be made in close consultation with the Australian Energy Market Operator, and would focus on projects that delivered benefits to consumers, while increasing the state’s capacity to import electricity during periods of peak demand.
As a first order of business, the state would ask AEMO to call for expressions of interest to increase the capacity of the Victoria-New South Wales Interconnector, to better allow the two states to share electricity. An EOI will go out, possibly as soon as next week, with one of the potential solution being a big battery on the Victoria side of the connection.
It will be one of a number of projects that Victoria wants fast tracked to alleviate the blockages in the state.
There has already been a commitment to $370 million in network upgrades and extensions recommened for Victoria by AEMO back in mid-2019, an investment in Victoria as critical – and noted it would unlock nearly $670 million in “market benefits”.
However, federal energy minister Angus Taylor responded mostly with outrage, remarking only that AEMO’s findings were evidence of the states’ “reckless” encouragement of renewable energy investment and development.
AEMO is also pushing for a new link called VNI West to boost capacity in western Victoria. It remains to be seen if the Victoria move will succeed in accelerating that process.
The disconnect between the states and the federal Coalition on what is considered to be urgent energy market reform has long frustrated D’Ambrosio, who flagged her state’s plans to “go it alone” on energy market reforms back in November.
In a letter to Taylor – penned before the November COAG meeting, which was the first gathering of its kind for the year – D’Ambrosio called for a commitment to greater cooperation between federal and state governments, progress on the implementation of AEMO’s last Integrated System Plan and a commitment to reform Australia’s electricity reliability standards.
“As it currently stands, our nation’s reliability standard fails to recognise changes in climate, our energy network, the way Australians consumer power and ageing and less reliable coal generators,” D’Ambrosio said in the letter.
“It’s why at the upcoming meeting, Victoria will be seeking the support of all jurisdictions to task the Energy Security Board to develop a new reliability standard which accurately – and actually – reflects our current energy needs.”
AEMO has regularly warned that Victoria’s network had key areas that were not strong enough to support the state’s planned renewable investment – which at that time amounted to some $10 billion, built up around the 50 per cent by 2030 renewables target.
And as we have reported extensively over the past few months, this is already having serious consequences. In Victoria the roughly 2,600MW of large-scale renewables currently under construction or being commissioned is at risk of constraints or connection delays due to network issues.
Some wind and solar farms operating in the affected areas – dubbed the “rhombus of regret” for the shape of the network and its limitations – have had their outputs curtailed, while others have been required to add new machinery known as synchronous condensers to ensure “system strength” is maintained.
D’Ambrosio said on Tuesday that the vulnerability of the national electricity market had been highlighted in recent months, with each of Victoria, New South Wales, and South Australia narrowly avoiding load-shedding in late January.
“Extreme heat has created unprecedented demand for electricity while ageing, coal-fired generators repeatedly let Victoria down. The transmission system is also vulnerable to bushfires and severe weather events, like the mini-tornado that brought down the Heywood interconnector this summer,” she said.
“We continue to pressure the Commonwealth, as Chair of the Energy Council, for changes to the national market rules so Victorian households and businesses are not unfairly disadvantaged when it comes to accessing more reliable, cleaner and cheaper power.”
The Clean Energy Council said on Tuesday that it welcomed the Victorian government initiative and hoped it would help to reverse the recent collapse in renewable energy investment.
“Our transmission network has simply not kept pace with the transition to a 21st century energy system and is causing major concerns for investors in clean energy,” said CEC chief Kane Thornton.
“Across Victoria there are existing renewable generators that are having their output constrained and renewable projects that are experiencing difficulties connecting to the grid due to system strength and congestion issues. This is not only inhibiting the state’s transition to a cleaner, more reliable and more affordable energy supply, but has also contributed to a significant slow-down in new clean energy investment.”
“Over the last year we have seen a massive 50 per cent decrease in large-scale renewable energy investment and we know that the lack of investment in transmission is the single biggest factor preventing the deployment of new generation projects. Today’s announcement is a welcome step towards unlocking this roadblock.”
However, the intervention has not pleased everyone. The Energy Users’ Association of Australia (EUAA) said it was concerned by Victoria’s plan to “go it alone” on grid augmentation.
“While there is certainly potential to improve the rules governing the energy market and regulated grid investments, they are in place to protect consumers from poor decision made by others,” said EUAA Chief Executive Officer, Andrew Richards.
“If the Victorian government want to have their version of Brexit, a Vicxit, and bypass important consumer protections and ignore the rules, how will consumers be protected?