The revived State Electricity Commission will invest in projects the private market is still unsure about as it tries to close a huge gap in the amount of renewable energy needed by 2035 and the current rate of construction.
Interim SEC chief executive Chris Miller on Wednesday explained how Labor’s signature election commitment would operate over the next decade, declaring the rate of battery installation in Victoria would need to double to help the state meet its climate targets.
Victoria needs significantly more renewable energy to meet its targets.
Experts have previously criticised the SEC’s ability to deliver on the government’s ambitious election promise to reduce power prices, and questioned whether it could succeed in the cut-throat private market while competing on a level playing field.
But speaking at the Committee for Economic Development of Australia’s Victorian Energy Market Outlook seminar, Miller said the SEC’s purpose was not to crowd out the private sector as the state sought to be reliant on 95 per cent renewable energy by 2035, but to invest in areas where the market was uncertain and provide confidence to prompt more spending.
Miller said there was a five-gigawatt gap between the current trajectory of renewable and storage projects set to be delivered by 2035 and where Victoria needed to be, according to the Australian Energy Market Operator’s model.
“What we’re observing in Victoria, as well as nationally, is that some investors are holding back on renewable investment in the current market,” he said.
Victorian Energy Minister Lily D’Ambrosio and interim SEC chief executive Chris Miller in 2022.Credit: Wayne Taylor
“The prevailing investment signals aren’t generating investments in new generation and storage at the speed and scale we need.
“There’s a need for a pragmatic and bold investor to help with this and light the way. This is where we think this SEC can play a really important role.”
Miller said battery storage was an example of how this agenda would work.
“We need to double the current rates of installation of battery capacity across the system,” he said.
But Miller said the SEC wouldn’t crowd out private investment.
“We’re here to partner, amplify and accelerate that investment. As a government-owned energy company, I see the SEC as an important bridge between private and public efforts,” he said.
“The scale of the SEC’s targets are significant. The 4.5 gigawatts we are charged with helping to deliver are 20 to 25 per cent of what Victoria needs.”
The first project the commission funded last year was a battery farm in Melbourne’s west with the capacity to power 200,000 homes. The SEC’s $245 million investment represents 38.5 per cent of the 600-megawatt project.
An artist’s impression of the Melbourne Renewable Energy Hub, a large battery farm in the city’s west.
But it differed from Labor’s initial election pledge for the SEC to take a majority stake in each renewable project it funded. The party also committed to spend $1 billion delivering 4.5 gigawatts of power.
Tennant Reed, the director of climate change and energy at the Australian Industry Group, said the SEC had a range of different roles added to its remit since it was first announced, including assisting homes with electrification.
“It is very plausible that some bits of this turn out to make much more of a difference than others,” Reed said.
“For the wholesale side of electricity, they do seem to be trying to add to confidence.”
Reed agreed the current rate of investment in renewable energy was not keeping up with where it needed to be, and there was a role for government to support this.
“For example, really big [battery] storage is something that the system definitely needs and there have not been terrific ways to turn that into revenue as yet,” he said.
“One thing that can help is that role for public investments and public co-investments.
“[But] the biggest barriers to that investment right now are not timidity over clean energy assets, it is the lack of transmission and the slow processes for getting transmission for other energy projects approved.”
Energy Minister Lily D’Ambrosio, also speaking at the seminar, said the government would take a pragmatic approach to the energy transition, and acknowledged gas peakers would provide 5 per cent of the state’s power generation in 2035.
“There’s no dogma here, it is about what works,” she said.
“Gas-fired power is expensive and comes with carbon emissions. So we need to minimise its use as much as practicable, but there is still an important role to play.
“Similarly, the transition doesn’t work without private sector investment, lots of it, and we’re putting in place a clear set of statutory rules and policy frameworks.”
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