Victoria has had the cheapest energy on the East Coast for many years. The VIC government likes to crow about it.
But there is a problem. This is not renewable energy. VIC has had cheap energy thanks to abundant gas and brown coal resources, which still comprise 60% of output.
Even worse, it is only possible because the corrupt VIC government secretly subsidises brown coal power.
Worst of all, it is running out of gas.
When we put these two together, the future of VIC energy is no longer cheap. Indeed, it will likely become the most expensive energy state on the East Coast, and one of the most expensive energy states anywhere in the world.
How can this be? Let’s ask the Energy Minister, via Renew Economy:
“We’ve met every single target. In 2020, we met our 25% target. We are effectively meeting our 40% renewables energy target in 2025 and our target for 65% by 2030 is absolutely doable. That’s why we set the targets as we do, 95% definitely by 2035 that is absolutely achievable.
“We won’t be relying on any coal generators by then. The generators themselves have got exit plans, and this is about making sure that we manage this in a way that the market understands where it’s going.
“That’s why I’ve got structured transitional arrangements with both Energy Australia for Yallourn, and AGL for Loy Yang A, because telling the market that these plants won’t be there by certain dates means that the market steps in and builds knowing that they’re going to have people wanting to buy their electricity.”
Let us be kind to the minister and run with her assertions. If VIC does close its secretly subsidised coal output by 2035, then it will simultaneously become more reliant on gas-fired power to stabilise peak demand periods.
What is the plan for this? There are big plans for batteries, which is great.
But that won’t be enough, notably so during Dunkelflaute. Gas will have to fill the gap. Sadly, there isn’t any.
So, VIC will import it, via the AFR:
The Allan Labor government has cleared the way for building a gas import terminal in Victoria, as state and federal energy ministers prepare to grant the market operator the power to underwrite support for new gas supply in July.
And here is where the problem of price comes in. Imported LNG will cost about $22Gj versus local gas at $12Gj today. The moment LNG imports begin, the East Coast gas export cartel will restrict supply even more to turn LNG imports into the marginal price setter for local gas.
This will skyrocket gas and power bills in VIC, as well as everywhere else.
VIC will have the most expensive energy on the East Coast, shifting from low-table a decade ago to mid-table now to roughly on par with the UK when LNG imports begin. This was never part of any “plan”.
This will crush living standards. Again.
Of course, none of this needs to happen. VIC could just import gas from QLD very cheaply via domestic reservation, and power prices will collapse.
But no, that gas has to go to China because Xi told Albo he has no choice.
And doomed Victorians agree.
