Why regular blackouts but higher energy prices are expected to hit Victoria this summer
Lily D’Ambrosio says she can’t guarantee a summer without blackouts amid warnings Victoria faces soaring heat and higher bills, as a damning report ranks the state worst in the nation for energy security.
Herald Sun, August 31, 2023
Victorians face dire predictions of regular blackouts this summer with the nation’s electricity and gas market watchdog ranking the state as the worst in Australia for energy security.
The Australian Energy Market Operator report, published on Thursday, reveals the state’s outlook has deteriorated dramatically in just six months, warning supply reliability will become even more compromised later this decade.
The damning AEMO report said that soaring summer temperatures due to an expected El Nino would seriously test supplies, with the biggest risks of blackouts in January 2024, but possible issues from November.
And it singled Victoria out as the worst in the nation, forecasting the closure of Energy Australia’s Yallourn power station by 2027-28 would exacerbate the state’s issues.
Supply shortfalls are also expected to drive higher wholesale prices that will flow through to households and businesses, leading to further hikes in Victorians’ power bills.
On Thursday, Energy Minister Lily D’Ambrosio said the state had “more than sufficient electricity to meet our needs” but could not guarantee there would not be blackouts.
She also dodged questions on why electricity prices for households continued to rise when more renewables were coming into the system.
“We continue to be a net exporter of electricity to other states, including New South Wales, and what that means, of course, is that we produce more than sufficient electricity to meet our needs,” Ms D’Ambrosio said.
“(AEMO), of course, describe, as they always do, very extreme and unlikely event of any particular shortfalls if a whole range of worst case scenarios, happened at the one time, and came together and they do that, because they want to be sure that even in the worst unlikely scenarios that they, as the responsible market operator, have sufficient reserves in place.”
The minister refused to clarify why energy prices were likely to increase, despite the government claiming renewables would see household energy bills drop.
“Well, what’s important of course is that we have a very strong ambition in growing the replacement electricity that we need as coal generators exit the market,” she said.
“But even when they hadn’t yet exited the market, they are becoming less reliable, less reliable ... and older.
“They are old clunkers.”
Daniel Andrews dismissed the “conservative” report and said it didn’t take into account the renewable projects already under way across the state.
The Premier said the reason Victoria was identified as the worst state for energy reliability was due to its current reliance on coal.
“We’ve got the oldest and most unreliable coal fired power stations,” he said.
“We are replacing them. We have a clear plan to do that.”
Mr Andrews labelled the report “very conservative” but refused to say when Victoria could benefit from lower prices - stating that more supply would lower costs.
“That report, for instance, doesn’t include and doesn’t take into account a whole lot of projects that are on the deck now … and they’ll be in the grid on the timeframe that report speaks to,” he said.
“This is a big transition … You’ve got to work hard to replace these coal fired clunkers because they’re leaving, they are going.”
Mr Andrews said he is “always concerned” about the threat of power blackouts.
“Summer is always challenging,” he said.
Shadow Special Minister of State David Davis tabled the report in parliament on Thursday morning saying “it’s an important wake-up call”.
Mr Davis said while he accepted energy policy was complex, the Andrews government had had nine years to ensure electricity security.
“This government has been in power for nine years, it pushed for the early closure of a coal fired power plant and left the state without the firming capacity that is necessary,” he said.
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“They’ve been leaping into a direction without having the backup power to ensure the security of supply.
“If the lights go out, the damage that is done will be Daniel Andrews’ fault and the fault of his cabinet and the Labor cabinet over the last nine years.”
Australia has already endured two consecutive years of price rises about 20 per cent, straining households and businesses already grappling with high inflation and soaring interest rates.
AEMO chief Daniel Westerman described the situation as increasingly urgent.
“Quite simply, Australia‘s energy transition is happening at pace. Our coal fired power stations are closing down at the same time as demand for electricity is increasing and without urgent and ongoing investment in new sources of electricity, and the transmission that we need to connect it to consumers – there are significant risks to reliability,” he said.
The Andrews government’s controversial decision to ban gas in new homes from next year could put pressure on winter consumption, the report found.
AEMO further flagged that limited wind farm generation during the warmer months when breezes were lighter in Victoria could undermine supply.
And the pace of the state’s renewable projects pipeline was slammed.
Much of the hesitancy of renewable energy developers to commit to projects, AEMO said, was due to uncertainty over transmission which had emerged as the biggest bottleneck to Australia’s energy transition.
About 10,000km of new lines must be built before 2030 nationwide, but their development has been hampered by funding constraints and community opposition.
“While new wind, solar and battery storage developments continue to connect in Victoria, South Australia and interconnected regions, these developments are not yet sufficient to offset expected generator retirements and the forecast increases in electricity demand,” the report added.
“Delays to the delivery of any of the identified projects, relative to the dates envisioned by the schemes and proponents, have the potential to result in periods of high risk throughout the 10-year horizon.”
The increasing switch to electric vehicles would also help contribute to a 31 per cent spike in residential electricity consumption, the report warned.
Concerns have previously been raised about a deterioration in the condition of coal-fired generators, in large part due to inadequate investment because of the phase-out leading to more unexpected maintenance.
“To ensure Australian consumers continue to have access to reliable electricity supplies, it’s critical that planned investments in transmission, generation and storage projects are urgently delivered,” Mr Westerman said.
Ai Group chief Innes Willox on Thursday said there was no room for delay in Australia’s electricity buildout
“The latest AEMO electricity reliability projections are a dire warning that again alarms industry and sends a strong message to policy makers to get on with building the energy infrastructure we need,” Mr Willox said.
“As we have been warning for years, if we fail to deliver the full slate of new transmission, generation and storage projects, we will see supply fall far short of demand every summer.
“Delaying retirements of old coal generators is an obvious stopgap, albeit with large risks of its own. AEMO underlines that the overall reliability of the coal fleet has been increasingly poor, particularly in 2022-23. We shouldn’t close assets before we’ve replaced them. But geriatric generators are making themselves unavailable, whether we are ready to decommission them or not.
“The only thing that can break us out of this downward energy spiral is to build and activate new energy resources, including both large centralised transmission, generation and storage projects and much more and better-coordinated demand-side assets like distributed generation, energy storage and smart energy use.”
Five key facts
1. Victoria is facing more regular blackouts
2. Coal, gas and diesel shortfalls have been identified as a “material risk” to the grid
3. The Andrews government’s ban on gas will have a significant impact on winter consumption
4. Victoria’s concerns will spike with the closure of the Yallourn power station in 2027-28
5. Transmission projects coming online aren’t keeping up with the pace of traditional coal fired power stations closures