Victoria’s prosperity ‘at risk’ from energy policy, says VCCI

Victoria’s chamber of commerce is warning that the state government’s energy policy has the state on a trajectory which will cause the ‘closure of manufacturing and other gas-reliant businesses’.

Victorian Energy Minister Lily D’Ambrosio and her federal counterpart Chris Bowen. Picture: NewsWire / Dan Peled

The Victorian government’s ­energy policy is not only putting the state’s prosperity at risk, but imperilling the energy security of the entire east coast, according to a chamber of commerce and ­industry policy paper.

The VCCI’s Securing Our Energy Future paper warns Victoria is at risk of gas shortages and price spikes “becoming the norm” for residential, commercial and ­industrial users.

“A lack of back-up gas-powered generation (GPG) – with its firming capacity to support ­renewable energy production – and storage capacity puts the entire east coast of Australia’s energy security at risk,” the report states. “Victoria’s energy choices impact the entire nation.”

The warning comes after the Australian Energy Market Operator told industry and gas users last week that the largest supplier of gas storage on the east coast, Lochard Energy’s Iona ­facility in southwest Victoria, could run dry before the end of winter.

The VCCI report states that the greatest threat posed by the state government’s policy settings – which include a ban on gas connections to new homes, and a “Gas Substitution Road Map” encouraging residences and businesses to electrify – “is that our current path causes the closure of manufacturing and other gas-reliant businesses, mass exodus to other states or relocation offshore”.

Victorian Chamber of Commerce CEO Paul Guerra at GMHBA Stadium. Picture: Mark Wilson

It warns that on Victoria’s “current trajectory”, the state is at risk of power outages, running out of gas, “energy insecurity and unreliability because we have chosen to focus investment exclusively on wind and solar rather than relying on market mechanisms to drive low-cost abatement and innovation”, and “rising energy prices that will leave local industry ­uncompetitive and limit new ­investment”.

Other risks include slow carbon emissions reduction driven by longer reliance on brown coal, resulting from the timing, availability and cost of the other options the state government is pursuing in place of gas; the loss of Victoria’s competitive advantage, in the form of cheap gas for industry; and a “mass exodus of businesses due to the rising cost of doing business in Victoria, causing the loss of thousands of jobs”.

VCCI further warns of the possibility of “deepening socio-economic disadvantage as the current policy settings benefit high-income earners who own their own home and can afford solar panels, electric cooktops, EVs, batteries and heat pumps, and exclude the low-income earners who are typically renters and cannot afford these costly ­appliances”.

Victorian Energy Minister Lily D’Ambrosio said the VCCI report was “factually wrong and makes arguments that are contradicted elsewhere in the same report”.

“This report argues against policies that don’t exist and then argues we adopt policies we ­already have,” she said, without explaining which policies she was referring to.

“Victoria has the cheapest wholesale energy prices in the market and with our strong pipeline of renewable energy coming online it will remain that way for the years to come.”

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

Industry leaders backed the VCCI report, with Australian ­Energy Producers director Victoria & NSW Peter Kos saying gas would “continue to play an important role long into the future by providing reliable and affordable energy for millions of Victorian homes and businesses, the manufacturing sector which employs over 260,000 Victorians, and being a reliable back-up to ­renewables”.

CEO of gas producer Cooper Energy, Jane Norman, said her company’s Otway Fields offshore project had the potential to supply 600,000 Victorian households, but warned that investors desperately needed “confidence in ­timely approvals, a stable fiscal and regulatory regime, and government support for the industry.”

“Without these, Australia will lose out on investment and become reliant on LNG imports which will inevitably be higher cost and compromise our energy security,” Ms Norman said.

“In addition to the growing demand for firming gas power generation, Australian manufacturers need gas to process raw materials here in Australia, and millions of households still need gas as an efficient energy source for heat and cooking.

“Today in Victoria, gas used directly in homes for heating, hot water and cooking is more than four times lower emissions than electrification if that power is supplied by the grid.”

Gas industry leaders backed the VCCI report.

Australian Pipelines and Gas Association CEO Steve Davies said he welcomed the Victorian government’s recent commentary about the necessity of gas in the transition to net zero and said the industry was continuing to do all it could to help alleviate forecast supply shortfalls.

“The transition to net zero cannot be built on economic demand destruction or prescriptive policy. Victoria needs more options not fewer to help households and businesses decarbonise in whatever way works best for them,” Mr Davies said.

“Accelerating the exit of brown coal is, by far, the most efficient way to lower emissions, but to do so, Victoria must take action to secure natural and renewable gas supply that will push prices down – for electricity generation, businesses and households.”

Australian Gas Infrastructure Group CEO Craig de Laine said he welcomed VCCI’s “sensible policy paper”.

“The paper highlights that there is an urgent need to shore up natural gas supply today, which will provide the certainty to industry to keep jobs in the state and for the over two million homes and small business that rely on natural gas,” Mr de Laine said.

“There is also a real and pressing need to bring renewable gas into the market, such as hydrogen and biogas. Renewable gas has the potential to bring a significant new and low carbon supply of gas to the state along with the creation of jobs to support the development of this new industry in Victoria.”