Making sure the renewable boom delivers for Victorians - MAXIMISING THE BENEFITS OF VICTORIA'S RENEWABLE ENERGY TARGET
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Making sure the renewable
boom delivers for Victorians
MAXIMISING THE BENEFITS OF VICTORIA'S RENEWABLE ENERGY TARGET
September 2018
TABLE OF CONTENTS
Executive Summary 3
State of the renewables sector in Victoria 5
What has driven renewable energy investment to date? 6
How much does the Victorian Renewable Energy Target cost
Victoria? 8
How does the VRET support Victorian jobs? 9
What do you need to build a wind farm and a
solar farm? 10
How do you build a wind farm? 10
How do you build a solar PV farm? 11
Driving more renewable energy into Victoria 12
Scenario 1: Continuing with current VRET structure 13
Scenario 2: Maximising certainty within the VRET 15
Scenario 3: Cancelling the VRET 18
Conclusion: creating a strong future for Victoria's
renewable energy sector 19
Lead authors: Dean Rizzetti and Erwin Jackson
Contact: d.rizzetti@environmentvictoria.org.au | +61 466 310 377
Authorised by Mark Wakeham, CEO, Environment Victoria
www.environmentvictoria.org.au
This report was printeed on 100% reycled paper.
Environment Victoria is located on Wurundjeri land and works across many Aboriginal nations.
We pay our respects to Aboriginal elders past and present, recognise their continuing contribution to caring for country, and acknowledge
that sovereignty was never ceded.
Cover photo: Ararat wind farm. Photo credit: RES group
MAXIMISING THE BENEFITS OF VICTORIA'S RENEWABLE ENERGY TARGET
EXECUTIVE SUMMARY
Over the past six years Victoria has This investment in renewables will also
experienced a renewable energy drive down electricity prices. Modelling
boom. Across the state there are shows that renewable energy should
1585 megawatts (MW) of large-scale halve wholesale energy prices by 2025,
wind and solar energy projects in reducing energy bills for all Victorians.
operation, with another 2518 MW
However, there is a serious risk that this
under construction or financed.
momentum could be undermined. The
Growth in Victoria’s renewable energy policy decisions made in the next four
sector has been supported by the months will shape whether renewables
Victorian Renewable Energy Target in Victoria continue to thrive or grind to
(VRET), which mandates that Victoria a halt.
will source 40 percent of its energy
The 2018 election gives all parties a
from renewable sources by 2025,
chance to show how they will make
and also by the federal government’s
sure there is ongoing investment in
Renewable Energy Target (RET). These
new renewable energy projects. These
mechanisms have combined with
plans should drive a consistent pipeline
falling technology costs and Victoria’s
of work for Victorian manufacturers,
excellent renewable energy resources
helping to ensure that the jobs created
to drive new projects across the state.
through renewable energy are kept in
This growth in renewable energy Victoria.
is creating new jobs in Victoria. By
This report analyses three scenarios
building 5050 MW of new renewable
for the future of the Victorian
energy, the VRET will create over
Renewable Energy Target:
9000 jobs. Similarly, there has
been significant growth in Victorian Scenario 1: Continuing with the
businesses that supply components current VRET structure
to renewable projects. For example,
tower manufacturer Keppel Prince has Scenario 2: Maximising certainty
already invested $2m in its Portland within the VRET
facility and intends to invest a further
$11m if Victoria continues to build Scenario 3: Cancelling the VRET
new renewable energy projects.
Similarly, Nexans Olex has spent $10m
upgrading its Lilydale facility.
Environment Victoria | 3
Making sure the renewable boom delivers for Victorians
VRET SCENARIOS
SCENARIO 1: CONTINUING WITH CURRENT VRET
STRUCTURE
While the VRET is driving renewable energy investment in Victoria, the current
structure cannot provide sufficient certainty. More is needed if Victoria is to
unlock its potential for investment in renewable energy. The risk is that we return
to ‘boom and busts’ in the renewable energy industry.
SCENARIO 2: MAXIMISING CERTAINTY WITHIN THE VRET
The best way to maximise economic development in Victoria is to embed
certainty at the centre of the VRET. To do this, the government should legislate
a Renewable Energy Guarantee to ensure that at least 1000 MW of renewable
energy is constructed every year between 2019 and 2024. This would create
approximately 12,200 new jobs.
The Guarantee would ensure a strong pipeline of projects, driving down power
prices for households and business and providing Victorian manufacturers with
the certainty they need to expand their facilities and employ more staff in Victoria.
SCENARIO 3: CANCELLING THE VRET
Cancelling the VRET will see investment in new large-scale renewable energy
projects cease after 2020, because the federal Renewable Energy Target (RET)
has been met and there is no national policy to support investment in new wind
or solar facilities in Victoria. This will mean Victoria misses out on 12,200 jobs
across the state.
4 | Environment Victoria
MAXIMISING THE BENEFITS OF VICTORIA'S RENEWABLE ENERGY TARGET
State of the renewables
sector in Victoria
Over the past decade Victoria has seen energy is currently in early stages of the global average temperature to
a significant increase in renewable development. Data from Green Energy well below 2°C above pre-industrial
energy. Victoria has 20 major wind Markets shows that over 4400 MW levels and to pursue efforts to limit the
farms already in operation, providing of renewables projects in Victoria temperature increase even further to
1525 MW of new capacity, and are currently in development. These 1.5°C". Recent science shows that 2°C
one solar farm providing 60 MW projects could be unlocked with presents unacceptable dangers for
of generation capacity. Even more appropriate policy settings and could civilisation, and that responsible policy-
capacity is under construction, with provide enough renewable energy to making should focus on reaching a 1.5°
eleven wind farms and seven solar power over 6.6 million homes by the target.1 To stay below 2°C, all developed
farms predicted to provide a further middle of the next decade. This would countries must have halted coal-fired
2518 MW. avoid over 15 million tonnes of carbon power generation by 2030.
pollution every year and create over Other states across Australia will also
This investment in renewable energy
11,800 construction jobs and 400 need to boost the amount of renewable
has led to significant employment.
ongoing jobs in Victoria. energy they produce, which provides
According to ABS figures, 1960 people
were directly employed in installing, Victoria has set a target to reduce opportunities for Victorian companies
building and operating wind farms, its emissions to zero by 2050, to export componentry across the
rooftop solar and utility-scale solar contributing to the Paris Climate country.
projects in Victoria in 2016–17. Change Agreement, which commits
all countries to hold "the increase in
An even larger amount of renewable
12,000
10,000
8,000
MWs
6,000
4,000
2,000
0
Pre-2015 2015-18 Under In development
construc6on/1st
Auc6on
Hydro Solar Wind
Figure 1: Construction of new renewable energy
in Victoria. Data source: Green Energy Markets
1
Steffan et al., 2018, 'Trajectories of the Earth System in the Anthropocene', Proceedings of the National Academy of
Sciences of the United States of America, http://www.pnas.org/content/pnas/early/2018/07/31/1810141115.full.pdf
Environment Victoria | 5
Making sure the renewable boom delivers for Victorians
WHAT HAS DRIVEN RENEWABLE ENERGY
INVESTMENT TO DATE?
The energy sector has always relied developers, such as local content and investment in renewable energy. Figure
on government intervention and apprenticeship requirements, ensuring 2 shows the renewable generation
support, which has been delivered by that the benefits of projects stay in required to meet the RET, which is less
smoothing energy prices, providing Victoria. than total new capacity.
insurance, underwriting finance or
A large proportion of Victoria’s This lack of incentive to build
directly building energy facilities.
existing renewable energy projects renewables in Victoria will not be
While renewable energy is the were financed with the support of addressed by the federal government.
cheapest form of new generation, the federal Renewable Energy Target The current federal government has
it requires similar support. This is (RET). In June 2015, however, the effectively dropped the National Energy
commonly done by guaranteeing federal Coalition government decided Guarantee, which was its only policy to
offtake prices and accounting for to reduce the RET from 41,000 GWh reduce emissions from the electricity
environmental benefits. Because it to 33,000 GWh. As a result, Australia sector after 2020.
is providing support, the government met its new, lower RET in 2018, so
can also place requirements on project the target will not drive any new
9,000
8,000
7,000
6,000
5,000 Probable
MWs
4,000 CommiHed
3,000
Approved
2,000
1,000
0
Genera2on required to meet Total new capacity
RET
Figure 2: Generation capacity required across
Australia to meet the RET compared to total
generation. Data source: Green Energy Markets
6 | Environment Victoria
MAXIMISING THE BENEFITS OF VICTORIA'S RENEWABLE ENERGY TARGET
A more recent driver of investment in the amount of renewable energy Renewable Certificate Purchasing
renewables is the Victorian Renewable supported through the auction to 928 Initiative, which was used to offset
Energy Target (VRET). This target was MW. This was Australia’s largest ever the power consumed by Victorian
set in 2016, and requires Victoria to reverse auction, driving over $1.1 billion government agencies such as
source 40 per cent of its power from of new capital investment and reducing Melbourne’s trams. This has supported
renewable sources by 2025. Victoria’s greenhouse gas emissions four projects: the 31 MW Kiata Wind
intensity by up to 2.2 million metric Farm, the 132 MW Mt Gellibrand Wind
Since the target was announced,
tonnes. Farm, the 88 MW Bannerton Solar Park
there have been a number of
and the 34 MW Numurkah Solar Farm.
announcements by the Victorian The auction demonstrated a strong
government. In September 2018 the appetite to build new renewable Finally, the Victorian government has
government released the results of its energy projects, with over 3500 MW also announced a plan to install solar
first reverseauction for new renewable of proposals submitted to the auction PV on 650,000 homes across Victoria
energy. The Government initially process. by providing rebates and no-interest
planned to auction 650 MW of new loans to households. This will add 2GW
The government has also supported
supply, but due to strong demand and of additional solar PV and create over
renewable energy through the
low prices it increased 5500 jobs.
Environment Victoria | 7
Making sure the renewable boom delivers for Victorians
HOW MUCH DOES THE VICTORIAN RENEWABLE ENERGY
TARGET COST VICTORIA?
Ernst & Young undertook detailed
modelling of the VRET, comparing the
costs of building 3200 MW and 5150 Change in Victoria wholesale electricity
electricty prices
MW of renewable energy with the 17-18 18-19 19-20 20-21 21-22 22-23 23-24 24-25
cost of doing nothing. This analysis 0%
showed that the VRET will bring down
wholesale prices compared to business -10%
as usual, and the higher the renewable
energy target, the greater the reduction -20%
in wholesale prices.
-30%
Modelling for CoAG’s Energy Security
Board reinforces this conclusion. It -40%
shows that renewable investment
driven by the RET and the first -50%
VRET auction will reduce wholesale
electricity prices by around 50 percent -60%
over the next five years.
Figure 3: Change in time-weighted wholesale
electricity prices from today due to increase in
renewables and first round of VRET auction (Real
2018 $ / MWh). Data source: Energy Security Board
Analysis by EY also showed that Reduc4on in retail costs through the VRET
the higher VRET target will reduce
retail energy prices for business and -9.2%
-6.7% Large company
households. Again, the higher target -5.2% Medium company
-3.7%
led to the greatest reductions in power
prices. -4.3%
-3.1% Small business
-3.6% Large household
-2.6%
-3.6% Representa1ve household
-2.6%
-3.0% Small household
-2.2%
-10.0% -9.0% -8.0% -7.0% -6.0% -5.0% -4.0% -3.0% -2.0% -1.0% 0.0%
5150 MW impact on power bill 3400 MW impact on power bill
8 | Environment VictoriaMAXIMISING THE BENEFITS OF VICTORIA'S RENEWABLE ENERGY TARGET
HOW DOES THE VRET SUPPORT VICTORIAN JOBS?
The VRET supports Victorian This has led to manufacturing If projects are undertaken outside the
manufacturers through two key companies across Victoria investing VRET, these criteria will not necessarily
requirements that were placed on in their facilities and increasing be applied. For example, projects
projects in the Victorian Renewable their workforce. For example, cable undertaken through direct corporate
Energy Auctions: company Nylex Oxen has invested purchase agreements are not subject
$10m in their Lilydale facility to meet to local content or apprenticeship
Local Content Requirement:
demand for cables. Similarly, wind- requirements. This means that a larger
VRET Projects are required to
tower manufacturer Keppel Prince proportion of the componentry such
source at least 64 per cent of
has recently invested $2m, which has as towers or cabling will be imported.
their components from local
doubled their production capacity. Therefore, it is vital that the VRET
manufacturers.
be expanded so that it continues to
In both cases the local content
Apprenticeship Requirement: 10 per drive new renewables projects and
requirement has a key driver of
cent of the labour required to build achieve the broader benefits that are
demand and provided a basis for future
VRET projects must be undertaken so important to Victorian communities
investment.
by apprentices, trainees, or and the state government.
engineering cadets.
Environment Victoria | 9Making sure the renewable boom delivers for Victorians
What do you need to build a wind farm
and a solar farm?
How do you build a wind farm?
A wind farm is made up of a number of layer. The foundation is constructed • Wind turbines also require a
wind turbines linked into the electricity entirely on site. range of other materials such as
grid. The wind farm may be connected transformers, substations and
• Wind towers can be made out of
to on-site batteries or may feed directly cabling. Many of these components
tubular steel, concrete or steel
into the grid. can be made locally or imported.
lattice. These towers can either
To build the project, developers need be made locally or imported. Building a wind farm requires many
to construct new roads, develop Australia’s largest manufacturer of construction and operations workers.
transmission connections, pour wind towers is based in Portland in For every 50 MW in capacity, a
concrete foundations, undertake western Victoria. wind farm directly employs up to 48
extensive landscaping of the construction workers, with each worker
• The nacelle sits at the top of the
surrounding area and, of course, erect spending approximately $25,000 in the
tower and holds the gears, shafts,
the turbines. local area, and five staff on an ongoing
generators and brake. Nacelles are
basis, bringing $125,000 to the local
A wind turbine is made up of four main not made in Australia.
economy. Wind farms also bring up
components: the foundation, the tower,
• The rotor and blades are the parts to $250,000 per year to farmers in
nacelle and the rotor, which consists of
of the turbine that are driven by land rental income and $80,000 on
blades and a central hub.
the wind to create electricity. Wind community projects each year. It can
• The foundation holds the turbine turbine blades range in size from take between 12 and 24 months to
in place and requires extensive 34 to 55 meters. Rotors were once construct a wind farm.2
excavation, the construction of a made in Australia, but are now
reinforcing cage and a concrete imported.
2
Clean Energy Council, Wind Farm Investment, Employment and Carbon
Abatement in Australia, Australia, 2012.
10 Waubra
| Environment Victoria
wind farm being constructed.MAXIMISING THE BENEFITS OF VICTORIA'S RENEWABLE ENERGY TARGET
How do you build a solar PV farm?
Solar PV farms are large arrays of solar direct current generated by solar into manufacture panels in Australia.
photovoltaic panels that provide a large the alternating current required by the Similarly, inverters can be imported or
injection of solar power into the grid. grid. Solar farms require the installation manufactured in Australia. Tracking
Panels are mounted on steel frames of substations, fencing and remote systems are currently developed by
across paddocks, with panels covering monitoring. Victorian companies.
approximately 30 percent of a site.
Solar PV farms can also be connected
Tracking systems can also be used to
to batteries, which can firm up the solar
follow the sun to maximise solar output
production and allow the farm to sell
from the panels.
power at times when prices are higher.
Like household solar PV, solar farms
Solar panels are often imported,
employ large inverters to convert the
although some companies
Environment Victoria | 11Making sure the renewable boom delivers for Victorians
Driving more renewable energy
into Victoria
If Victoria is to avoid dangerous climate To understand the future of the VRET,
change, we need ambitious plans to Environment Victoria analysed three
reliably deliver large-scale renewable scenarios:
energy projects. The VRET can position
Victoria as the pre-eminent state in Scenario 1: Continuing with the
Australia for building renewable energy current VRET structure
and manufacturing the components
Scenario 2: Maximising
required for renewables. This will
both create sustainable jobs and drive certainty within the VRET
down power prices, while cutting Scenario 3: Cancelling the VRET
carbon pollution. Realising this vision
will require certainty and ambition,
sending a clear message that Victoria is
committed to renewable energy jobs.
12 | Environment VictoriaMAXIMISING THE BENEFITS OF VICTORIA'S RENEWABLE ENERGY TARGET
Scenario 1: CONTINUING WITH
CURRENT VRET STRUCTURE
The VRET currently sets a target of 40 The VRET will finish in 2025 and CHALLENGES WITH THE
percent of renewable energy by 2025, does not provide a pathway to fully CURRENT VRET STRUCTURE
but little detail has been provided about decarbonise Victoria’s electricity sector.
how this will be achieved. If Victoria is to meet the global goal to • While the current VRET sets a
keep temperature increases below 2°C, broad target for renewables in
The target itself has been set as
it will need to transition the vast bulk of Victoria, it does not provide a
a percentage, rather than a fixed
its energy supply to renewable energy pipeline of projects
megawatt target, which means
by 2030.
that it is not certain exactly how • Without a pipeline of
much renewable energy will be This lack of certainty restricts
projects, it is difficult for local
needed. investment in Victoria’s manufacturing
capacity. For example, Keppel Prince manufacturers to justify large-
Furthermore, there is no schedule of scale investment.
have stated that an additional 1000
auctions for the VRET or milestones in
MW of auctions would likely justify
the delivery of the mechanism. Indeed,
a significant new investment in their
it is unclear if Victoria will hold another
business.
auction after the initial 928 MW auction.
This increases risk for investors and
reduces the incentive to invest in
renewable energy manufacturing in
Victoria.
Credit: Doug Gimesy
Environment Victoria | 13Making sure the renewable boom delivers for Victorians
CASE STUDY 1:
WILSON TRANSFORMER COMPANY
Wilson Transformer Company SMA Germany to develop a range
(WTC) is a family-owned business of solar power skids for the large-
that manufactures and installs scale solar market in Australia.
transformers. The company
Ed Wilson, the owner of Wilson
started in South Melbourne in
Transformers, says: “A strong VRET
1933, and now operates in Glen
is a critical ingredient for Victorian
Waverley and Wodonga. It has
manufacturers as it encourages
provided transformers to major
renewable energy project
projects across Victoria, such
developers to look first towards
as the Waubra, Ararat and Mt
local manufacturers. It’s then up
Gellibrand wind farms.
to local manufacturers to provide
WTC have seen significant growth a competitive solution and value
in demand for their renewable proposition for the developers to
energy componentry. consider.”
The local content requirement in
the VRET has played a key part
in this, and the projects coming
through the first auction were
an important ingredient in the
company’s decision to invest $10m
upgrading its Wodonga facility. The
emphasis on local content has also
encouraged stronger partnerships
with global companies. For
example, WTC has worked with
14 | Environment VictoriaMAXIMISING THE BENEFITS OF VICTORIA'S RENEWABLE ENERGY TARGET
Scenario 2: MAXIMISING CERTAINTY
WITHIN THE VRET
To maximise the benefits of the VRET, legal framework of the Renewable reliable pipeline of work, and would
the state government could improve Energy (Jobs and Investment) Act 2017. allow Victorian businesses to upgrade
the mechanism to give Victorian The Minister is currently required to equipment. It would also ensure that
businesses certainty to expand report annually to the Parliament on the other benefits of the VRET such
their manufacturing capacity while progress towards meeting the VRET. as the local content guarantee and
continuing to deliver low-cost, clean A Renewable Energy Guarantee would apprenticeship requirements are applied.
energy. This could be done through a take the current VRET process a step
Importantly, the Renewable Energy
Renewable Energy Guarantee, which further: if the pipeline of renewable
Guarantee would not require the
would ensure that at least 1000 MW energy projects fell short of 1000 MW
government to fund the whole of
of renewable energy is brought online a year, the Minister would announce
Victoria’s energy transition. In years
each year over the next four years. policy measures to bring new renewable
when the private sector independently
This would provide a clear pipeline for energy capacity online over the next
meets the Renewable Energy
delivering renewable energy investment twelve months to ensure the 1000 MW
Guarantee, the government will not
in Victoria. annual target was achieved. This could
be required to intervene. Where the
be done through reverse auctions,
Data from Green Energy Markets pipeline is not sufficient, however, the
power purchasing agreements,
shows there are over 4400 MW of government will be able to draw on a
cooperation with industry associations
projects in the development stage range of mechanisms to continue to
or by requiring electricity retailers to
in Victoria. These projects would be drive Victoria’s energy transition, reduce
purchase green power.
unlocked through the Renewable power prices and provide workers and
Energy Guarantee, creating over 11,800 The Renewable Energy Guarantee industry with certainty.
construction jobs and over 410 ongoing would give industry certainty and
jobs in Victoria, powering over 6.6 million clarity. Benefits of the Renewable Energy
homes and avoiding over 15 million Guarantee:
It would ensure that companies
tonnes of carbon pollution a year.
serving renewable energy projects, • Provides workers and industry with
The Renewable Energy Guarantee such as tower manufacturers and long-term certainty by ensuring a
could be incorporated into the current solar mounting companies, have a guaranteed pipeline of projects
• Ensures that Victoria is the obvious
12,000 destination for investment in the
manufacture of renewable energy
10,000 and associated componentry
• Is most consistent with Victoria’s
8,000
goals of decarbonisation.
MWs
6,000
The success of the Renewable
4,000 Energy Guarantee would require wind
and solar farm developers to continue
2,000 to deliver affordable projects. There is
already strong demand in the wind and
0 solar sector, which will put downward
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 pressure on prices, but to ensure prices
stay low the Victorian government
Current and under construc:on VRET 1st Auc:on Currently at risk can expand the role of the Victorian
Renewable Energy Advocate to monitor
Figure 4: Opportunity that can be delivered renewable energy costs and actively
through the Renewable Energy Guarantee identify opportunities to build and invest
2015-2025 (excluding old hydro). in manufacturing facilities in Victoria.
Environment Victoria | 15Making sure the renewable boom delivers for Victorians
CASE STUDY 2:
KEPPEL PRINCE
Keppel Prince is an engineering investments that will make it the equipment and the creation of 50 full-
company based in Portland. They pre-eminent supplier of wind time jobs. In the coming months with
specialise in the construction, towers across Australia. the VRET we will be able to further
fabrication and maintenance of streamline our business processes
The company recently invested
wind towers, which are used to and reduce our manufacturing costs.
$2m in expanding production
mount turbines and blades. These These improvements are absolutely
capacity to meet the demand
towers are made of rolled steel and vital if Australian manufacturers are
from the RET and the first round
are approximately 85m to 120m to compete with businesses in Asia.
of the VRET auction. This has
tall. They are the largest part of
doubled their production capacity “But this growth is just the
a wind farm, and can be made in
and ensured that they are able to beginning. With more certainty and
Australia or imported from Asia.
supply Victoria with towers to meet ambition from the state government
Keppel Prince has been at the fore the first VRET auction. we’ve got really big plans. If we can
of the wind sector in Australia, be sure that there will be consistent
However, if sufficient demand is
which means they have had to demand for wind towers, then we’ll
brought online through the VRET,
negotiate the last decade of chaos be able to double our manufacturing
Keppel Prince has the capacity to
in Australia’s energy market. The capacity to build much bigger
significantly increase investment,
company grew significantly in the towers, which are quickly becoming
with $11m worth of upgrades and
2000s but was then devastated industry standard. An ambitious
a significant increase in staff to
by the halt in wind turbine VRET is vital to helping us make this
build the large towers that are now
construction that resulted from the investment.
standard in modern wind farms.
new planning controls the Baillieu
"This investment will double our
government imposed in 2010, Dan McKinna, Assistant General
workforce in Portland, and help
essentially making it impossible to Manager, Keppel Prince has said:
position Victoria as Australia’s pre-
construct new wind farms. “The importance of certainty for
eminent state for manufacturing
our business cannot be overstated.
Today, however, Keppel Prince renewable energy components."
We have projects locked in for the
is again expanding, putting on
next 18 months, which has led to a
more workers and planning the
$2M (AUD) investment in plant and
16 | Environment VictoriaMAXIMISING THE BENEFITS OF VICTORIA'S RENEWABLE ENERGY TARGET
"This investment will double our workforce in
Portland, and help position Victoria as Australia’s
pre-eminent state for manufacturing renewable
energy components" - Dan McKinna, Assistant
General Manager, Keppel Prince
Environment Victoria | 17Making sure the renewable boom delivers for Victorians
CASE STUDY 3:
NEXANS OLEX
Nexans Olex is an Australian headquartered in Melbourne’s the company’s decision to invest
manufacturer of electrical cables CBD has manufacturing facilities $10m to expand its Lilydale facility,
supplying many industries: building in Lilydale (Victoria) and New which kept manufacturing jobs
& construction, infrastructure, Plymouth (New Zealand) where in Victoria and gave the company
energy resources, renewable they design, manage and install an opportunity to serve the global
energy and electricity supply. cables for projects across Victoria. market.
Nexans’ cables are used across
The company has pioneered Geoffrey Simpson, Director of
Victoria to connect wind and solar
technologies designed specifically Renewable Energy at Nexan Olex,
projects to the grid connection and
for Australian conditions. For says: “For factories such as our
to ensure that large-scale projects
example, Nexan’s Thomastown- Lilydale facility to remain viable, it’s
can generate power safely while
based subsidiary Austramold has vital that we have strong, reliable
maximising efficiency.
developed a specialised transition demand from renewable energy
Nexans Olex started in the 1940s and joining cabinet to be used projects in Victoria. Indecision at the
in Footscray, and over time brought across Australia to connect wind federal level has dampened global
together Australian companies farms to the grid. enthusiasm to invest in Australia’s
Nylex and Olympic Cables. In renewable sector. However, state
For Nexans Olex, the ambition
the 2000s the company was action such as Victoria’s VRET has
expressed through the VRET
acquired by the French giant, acted as a counterweight, showing
plays a key role in maintaining and
Nexans, becoming part of a global that investments in Victoria are
justifying their ongoing presence
company serving the energy still viable. The VRET has played a
in Victoria, providing a strong
industries around the world. vital role in keeping Nexans Lilydale
basis for investment and driving
operation here in Victoria and driven
Today, Nexans Olex employs over demand for their products. The
renewable energy project optimising
500 people in Australia and New increased demand arising from the
innovation.”
Zealand. The Company which is VRET was an important factor in
18 | Environment VictoriaMAXIMISING THE BENEFITS OF VICTORIA'S RENEWABLE ENERGY TARGET
Scenario 3: CANCELLING THE VRET
If the VRET were to be abolished would abolish the policy if elected. COST OF CANCELLING THE VRET
without a replacement mechanism it This will effectively halt new renewable
• Cancelling the VRET would
is highly unlikely that there will be any investment in Victoria, which will
halt investment in large-scale
major new renewable energy projects mean Victoria misses out on 12,200
renewables in Victoria
built in Victoria beyond the projects jobs and will threaten the viability of
already committed. This is because the manufacturers such as Keppel Price • This would threaten the
policies which have driven projects to who rely on projects coming through viability of Victorian
date are fully subscribed and Federal the VRET. manufacturers such as Keppel
policies coming online will not drive Prince, who rely on projects
“The Liberals Nationals will scrap
new investment. coming through the VRET to
Victorian Renewable Target - Matthew
build their businesses
In the past ten years, renewable energy Guy, Leader of the Opposition” .3
developments have been driven by • Cancelling the VRET would
The lack of bipartisan support for the
the Federal Government's Renewable increase wholesale energy
VRET also introduces short-term risk
Energy Target. This target has now prices by reducing new
for renewable energy developers, as the
been met, which means that it will investment in renewable
opposition has not confirmed whether
not drive any new renewable energy energy and forcing Victoria
it will guarantee support for projects
investment. Similarly, with no federal to rely on high-cost gas
funded in the first round of auctions.
clean energy policy for post 2020, generation.
national action will also be insufficient Cancelling the VRET will also put
to drive new projects in Victoria. upward pressure on wholesale prices,
as Victoria will see a reduction in
Therefore, without the VRET it is
investment in new low-cost generation
highly unlikely that there will be new
and will instead have to rely on high-
renewable energy projects built in
cost gas generation. This challenge is
Victoria.
further exacerbated by Victoria’s aging
This is supported by modelling fleet of coal power stations, which
undertaken by EY, which showed that are becoming increasingly expensive
without the VRET there would be to operate and are not able to work
insufficient demand to justify new wind in a modern energy market where
or solar farms. generation has to ramp up and down to
complement low-cost, clean energy.
The Victorian Coalition has indicated
that it does not support the VRET and
3 https://vic.liberal.org.au/news/2017-02-13/liberal-nationals-will-scrap-victorian-renewable-energy-target
Environment Victoria | 19Conclusion: Creating a strong future for Victoria's renewable energy sector Victoria’s renewable energy sector will be shaped by decisions about whether to keep and how to structure our VRET. Without the VRET it’s unlikely that new projects will be built and the momentum which has developed in the industry will dissipate. Conversely, if more certainty is injected into the VRET then it will be possible to drive significant amounts of new investment in Victoria. This will create new jobs in manufacturing combined with an increase in cheap, clean solar and wind for all Victorians. Authorised by Mark Wakeham, CEO, Environment Victoria Level 2, 60 Leicester St, Carlton Victoria 3053 | (03) 9341 8100 | admin@environmentvictoria.org.au | www.environmentvictoria.org.au
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