State energy plan blows in the wind

State energy plan blows in the wind

DETAILS of Victoria’s proposed renewable energy encouragement scheme could be delayed in the lead-up to the state election, despite the fact the energy industry wants to have the detail as quickly as possible to allow for planning.

The plan was to have been launched in the middle of the year but a Government spokesman has now told The Age it would not be released for months. That would put it close to the state election later this year.

The scheme is modelled on the Federal Government’s Mandated Renewable Energy Target, which requires power retailers to buy specified amounts of renewables and spread the extra costs across their customer base. It is being introduced because the federal scheme has reached its target, but the renewable industry remains undeveloped in Victoria.

Designing the scheme has involved a lot of horse trading. Initially Victoria wanted to boost renewable generation to 10 per cent of the total by 2010. However, as energy minister Theo Theophanous did the rounds of the power sector, he started to hit resistance.

It came from coal-fired generators, who feared their profits would be cut if the scheme was too aggressive. This is because wind power is a direct competitor with base-load generation and the scheme will result in rapid growth in the wind industry.

Wind farms operate whenever the wind blows, and are not influenced in production levels by power prices. As a result, they would pump power into the system at times of very low prices while enjoying the subsidy the scheme would deliver them. That will push down power prices, much to the chagrin of base-load generators already struggling with low prices.

As a result the Victorian Government has done a deal that will slow the trajectory of renewables growth. Like the Federal Government before it, it has converted the 10 per cent target into an absolute energy output. The Federal Government turned a 2 per cent initial target into 9500 gigawatt hours for its MRET scheme. As a result of faster-than-expected power usage in the national market, that initial 2 per cent target by 2010 will in fact be around half a per cent.

In Victoria’s case the 10 per cent figure is believed to have been converted into its energy equivalent, about 3000 GWh. But the sting for the renewable energy businesss is that the date for this figure to be reached will be pushed back to around 2015 to 2017.

As a result of growth in the market during the extension time, 3000 GWh will amount to a lot less than 10 per cent of the state’s power market by the time it is reached.

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