Budget papers show huge blowouts in Victoria’s energy department

Victoria’s energy and climate department has blown its budget by between 20 and 55 per cent over the past three years, prompting concern about its capacity to plan for the future.

Victorian Energy Minister Lily D'Ambrosio. Picture: NCA NewsWire / David Crosling

Victoria’s Department of Energy, Environment and Climate Action has blown its budget by between 20 and 55 per cent over the past three years, prompting concern about its capacity to plan for the future amid record state debt and the impending closure of coal-fired power stations.

The state’s 2021-22 budget allocated $2.89bn to the DEECA, but budget papers show the final outcome was 20 per cent higher, with the department actually spending $3.476bn.

Things got significantly worse in 2022-23, with $3.001bn budgeted, and $4.661bn spent – an increase of 55 per cent – and in 2023-24 an allocation of $2.72bn is projected to blow out by 31 per cent to $3.55bn.

With state debt on track to balloon to $187.8bn by 2027-28, the department has had its budget cut significantly, to $2.446bn in 2024-25, raising questions about how it will rein in spending at a time when pressure is mounting on the government to keep the lights on while delivering on its promise of 95 per cent renewable energy by 2035.

All three of Victoria’s brown coal-fired power stations – which supply 60 per cent of its electricity – are set to close by 2025, with Yallourn, the source of 22 per cent of state power, due to shut by 2028.

Victorian Treasurer Tim Pallas. Picture: David Crosling

At the same time, the state is facing predicted gas shortfalls and significant setbacks in its offshore wind program, with Shell, one of the world’s largest energy companies, last week revealing it has quietly shelved plans to develop an offshore wind project in Victoria, amid industry projections that power from offshore wind will cost around $300/MWh – more than five times the current wholesale cost of electricity.

The biggest single blowout in any section of the DEECA over the three years examined was a 184 per cent increase in the energy sector in 2022-23, with a projected $485.7m spend ballooning to $1.38bn.

Notably, the blowouts occurred despite significant savings being found in sectors including Parks Victoria, Statutory Activities and Environment Protection, and Effective Water Management and Supply.

Opposition energy spokesman David Davis said the Allan Labor government had “hopelessly mismanaged” the energy portfolio.

Mr Davis highlighted the Solar Homes program, which provides Victorians with rebates for installing solar panels and heat-pump hot water systems.

Despite the program coming in at between 13.94 and 18.81 per cent over budget between 2021-22 and 2023-24, it is floundering in delivering on objectives that require an average 2778 heat-pump hot water systems to be installed every day, with just 11,100 installed between 2018 and 2023.

“(Energy Minister) Lily D’Ambrosio and Labor have hopelessly mismanaged the energy portfolio, including its associated aspects such as Solar Homes, failing to achieve formal targets for many programs,” Mr Davis said.

“But most significantly, they have presided over huge surges in the price paid by Victorian households and businesses, and a massive decline in reliability.

“Labor’s pursuit of ideological objectives, such as a war on gas, rather than a practical focus on transition and the delivery of affordable power, has been a mistake which Victoria will struggle to manage.”

Mr Davis said the budget mismanagement had led to this year’s proposed spending cuts.

“The massive variations in promised delivery targets and actual delivery over recent years points directly to a failure to plan and competently deliver in energy and associated portfolio targets,” he said, highlighting the fact that 23 programs within the energy portfolio were either withdrawn or delayed in May 2023.

A spokeswoman for the Allan government said the “variations” to the initial budget were “because throughout the year we fund initiatives like the Power Saving Bonus and deliver once off additional investments into organisations including the State Electricity Commission — to drive down power bills.”

“We have an ambitious renewable energy agenda — that Victorians voted for. We’re doing the groundwork to invest to bring on more renewable energy and drive down power bills,” the spokeswoman said.