Three things Vic Labor should do to kick-start renewable energy construction

There are several thousand megawatts of shovel-ready renewable energy power projects in Victoria that should be under construction and creating jobs according to the existing letter of the law. 3 straightforward changes that cost consumers little could make them a reality.

Victoria is now back in the hands of a party that has seriously supported the development of renewable energy in Australia. The thing is, they never moved fast, but now they have to do that which is unprecedented to get the industry back on its feet.

Here’s three things the Andrews Labor Government needs to do in order to revive the renewable energy sector in the state and the associated construction jobs that go with them.

1. Remove the 2km wind turbine right of veto

Before the end of the year Labor must remove the ridiculous red tape of granting households veto over a wind turbine within 2km of their property, and instead bring it in line with Europe which has buffer zones of round 800m on average without a special agreement with a house owner.

2. Offer power price contracts for difference to renewable energy projects to overcome uncertainty surrounding the RET

Victoria has several thousand megawatts of shovel-ready large scale renewable energy projects (mainly wind farms) that should be proceeding based on the letter of the law under the Renewable Energy Target. 

However thanks to the Abbott Government completely undermining confidence in its long term future (while still publicly pronouncing that it supports renewable energy), the market has collapsed for renewable energy certificates, also known as LGCs, which are the currency through which retailers comply with the Renewable Energy Act.

To overcome this uncertainty the Andrews Labor Government can institute Contracts for Difference auctions early in the New Year. Under such a scheme large-scale power projects would be selected based on the lowest offered price per megawatt-hour. Those that won the auction would be given the difference between their bid price and the combined value of the wholesale electricity price and the Renewable Energy Certificate, or LGC, price.  

As an example, wind farms probably require something close to $90MWh to be a viable investment and would bid this into the CfD auction. If the wholesale power price is running at about $40 and a Renewable Certificate was worth $50 then Victorian electricity consumers would pay nothing additional to have projects built in the state, probably even offering the state an advantage over other states. 

If, however, the LGC price remained depressed, due to some adverse action from Tony Abbott’s government with the support of some anti-wind senators who have got into bed with the crazies – such as Nick Xenophon – then a levy on Victorian electricity consumers would underwrite these projects. This would probably then fall away if Labor were returned to power in the 2016 federal election.

On the upside, if the 'wholesale price plus certificate price' rose above the CfD agreement price, then the state’s electricity consumers would get paid the difference. After the scheme commences at any time a wind farm project could leave the scheme and choose to be exposed just to the market. They would then not be able to reenter the scheme for that project/site.  

It is most likely that this would just restore confidence to the sector and the renewable energy certificates would do all the work with the Victorian CfDs just sitting in the background as a safety net that isn’t actually required. It shouldn’t add extra costs to consumers beyond what would happen if the law was operating as intended.

This CfDs would cover up to 4000MW of wind in Victoria and more if other states such as South Australia and perhaps even NSW and Tasmania backed up their rhetoric with action and joined in. 

3. Emissions intensity pollution requirements for power plants

Labor can announce emissions intensity targets for power stations that would effectively retire capacity at Anglesea, Morwell and Hazelwood power plants.  These power plants are all long past their use-by date and if they can’t meet modern emissions requirements, similar to those implemented by Obama in the US, then they should close without compensation.

Tony Abbott has put the renewable energy industry on a knife’s edge, with lay-offs of skilled people already having occurred or imminent along with shareholder write-downs.

But we’ve seen this before.

Post its Tambling review of the RET, which recommended an increase in the target, the Howard government decided to abandon an expansion of the program and effectively shutter the renewable industry.  

The Victorian government stepped into the breach keeping the sector alive with a Victorian Renewable Energy Target.

There’s no reason why they couldn’t do the same again with this three-point action plan generating thousands of jobs in short order while costing consumers and taxpayers little.

Matthew Wright is executive director of Zero Emissions Australia, technical director at Efficiency Matrix and resident columnist at Climate Spectator.