Daniel Andrews plans to revive the State Electricity Commission. What will it mean for Victoria’s power?

A move to bring back the publicly owned SEC shows governments are not confident the private sector can decarbonise quickly enough, experts say

The Victorian government has announced it will revive the publicly owned State Electricity Commission and bring forward its net zero emissions goals if it is re-elected in November.

The premier, Daniel Andrews, described the move as Victoria’s “most significant energy announcement” for 30 years.

It includes a $1bn investment to deliver 4.5 gigawatts of renewable energy capacity, to be owned by the state and run by the rekindled SEC.

“Those power stations won’t be for profit, they’ll be for people,” Andrews said.


What is the SEC?

First established in 1918, the SEC had by 1972 become Victoria’s sole provider of electricity generation, transmission and networks, and even ran shops selling appliances. The electricity sector was privatised in the 1990s by the Liberal premier Jeff Kennett, a decision Andrews said had failed consumers and driven up power bills.

The Andrews Labor government plans to spend $20m to revive the commission and open an office in Morwell, in the Latrobe valley – the heart of Victoria’s shuttering coal industry. The state will keep a 51% stake in the agency and its wind and solar projects. “Like-minded entities”, such as industry super funds, would be the preferred investors for the remaining share.

The SEC will “consider all options” to operate profitably, Andrews said, including becoming a retailer.

What does this mean for the energy market?

It’s “much more modest than the original SEC”, said Alan Pears, an energy expert at RMIT University who worked in government agencies in the 1980s.

Its restoration shows governments are “no longer confident that the private sector can deliver” the scale and speed needed to decarbonise the power sector, Pears said.

However, Tennant Reed, lead energy analyst for the AiGroup, said “SEC Mark II” was largely symbolic. While “not insignificant”, the $1bn investment was a “toe in the water” when compared with the forecast $180bn needed to be spent in coming decades across the industry, he said.

“This is a new book, not just a new chapter,” said Bruce Mountain, head of the Victoria Energy Policy Centre. He said Victoria already faced “extremely tight timelines” to expand clean energy capacity to cover coal plants as they exited.

What are the government’s new emissions targets?

Victoria has brought forward its net zero target by five years to 2045, tugging it in line with the ACT.

The state’s previous target was to reduce 2005-level emissions by 28%-33% by 2025, and 45%-50% by 2030. It will now seek to legislate the 2035 goal of a 75%-80% cut.

Victoria also lifted its target for 95% of electricity to come from renewables by 2035, from a previous goal of 50-65% .

Those higher goals were “a lot more significant” than the SEC revival, Reed said. “It’s well beyond business as usual.”

How do the emissions goals stack up?

New South Wales and South Australia both have targets to halve 2005 emissions by 2030, on the way to achieving carbon neutrality by mid-century. Queensland’s aim is for a 30% cut by 2030 and net zero 20 years later. The ACT’s aim is for a 65%-75% reduction by 2030 and 90% by 2040.


International comparisons include California’s 47% emissions cut by 2030 and a similar 2045 net zero goal. The UK, one of the more ambitious nations, has a 2030 goal of cutting 1990-level emissions by 68%.

Environment Victoria’s chief executive, Jono La Nauze, said Thursday’s announcement marked a “monumental shift” of “global significance”.

Australia’s goal of a 43% cut from 2005 levels by 2030 and net zero emissions by 2050 will also be aided by Victoria’s accelerated efforts.

How will power bills be affected?

Victoria is just one part of the National Electricity Market, so it depends how other states act. Queensland has previously said retaining state control over electricity assets gives it an edge in the shift to renewables, which allows it to offset the impact of higher energy prices.

That’s because the generation costs of renewable energy, even adding the costs of firming the power supply in the form of storage, are increasingly competitive against ageing coal and gas-fired power plants that also face rising fuel costs

However, Sarah McNamara, CEO of generator lobby group the Australian Energy Council, described Victoria’s move as a “retrograde step” that would “destabilise future investment plans”.

Jeff Dimery, CEO of Alinta Energy, which owns the coal-fired Loy Yang B power station that now faces an exit by 2035, has raised concerns about how the state will support coal workers as the industry closes down.

“We’ve taken strong steps to prepare for the transition, and have one of the most well-advanced renewables and storage project pipelines,” he said. “But we need to understand more about how the government intends to manage the cost of the expedited transition, [and] protect communities and workers.”

Pears said the government had a big incentive to succeed. “If the lights go out, it’s the state government that loses power,” he said.

What’s next?

Victoria’s determination to intervene in the market may form part of a growing trend of market intervention to achieve emissions reductions targets, Reed said.

Other interventions include the Turnbull-Morrison government’s wielding of the commonwealth-owned Snowy Hydro to build a massive pumped-hydro venture and a gas-fired power plant, and the NSW government’s energy roadmap which aims to attract investment in renewables.

Mountain said governments should prepare for the transition by reviewing the role of overarching bodies – the Australian Energy Market Operator, the Australian Energy Market Commission and the Australian Energy Regulator – while putting the Energy Security Board “out to pasture”.

“There’s a huge frustration with the way the NEM has moved,” Mountain said. “States are increasingly doing their own things.”


Peter Hannam and Benita Kolovos

The GuardianTramp

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