Driving Investment In Renewable Energy In Victoria - Options for a Victorian market-based measure

There is widespread recognition that a comprehensive policy framework is essential if Australia is to see the changes in energy supply and demand that will enable long term deep cuts in greenhouse gas (GHG) emissions. Origin Energy commends the Victorian Government for its clear commitment and willingness to initiate and participate in the policy debate and processes essential to achieving deep cuts in the long term.

Origin, also an active participant in the policy debate, makes a direct contribution to cutting GHG emissions in several ways, including being the largest retailer of Green Power; purchasing Green Power for our own electricity needs; being the largest underwriter of wind farm investments in Victoria; being an investor in renewable energy
technology such as solar and geothermal; having a portfolio of generation assets strongly weighted toward lower emission intensity technologies, such as gas and hydro; and seeking to develop lower emission gas-fired generation plants in Victoria and Queensland.

Origin is strongly supportive of policy instruments that provide the framework for energy consumers and suppliers to respond to the challenge of climate change. In our view, a comprehensive policy framework for achieving deep cuts in GHG emissions consists of the following components:

• a long term target for Australia’s GHG emissions that delivers deep cuts, supported by milestones to support a trajectory towards that target;

• a statement from all COAG jurisdictions that no indemnity against future carbon exposure will be provided to any new generation or energy intensive facility built in Australia;

• the introduction of a national emissions trading scheme (NETS) to drive least cost GHG emissions abatement, including appropriate mechanisms to address industry adjustment and trade-exposed sector issues;

• a statement of principles for the transition arrangements from existing jurisdiction-based greenhouse gas schemes to a NETS to minimise sovereign risk issues; and

• support for research and development and the deployment of zero and low emissions technologies including, in the case of renewable energy technologies, the full set of Tambling MRET Review recommendations.

In Origin’s view, the implementation of a Victorian-specific renewable energy scheme is inconsistent with such a comprehensive policy framework, primarily due to its narrow technology and geographic boundaries and a relatively short-term focus. Furthermore, it fails, for the most part, to deliver on the Victorian Government’s stated policy objectives. Specifically, it:

• will not deliver cost-effective GHG abatement, being up to four times the cost of that delivered by other approaches;

• is unlikely to generate investment in greater diversity of renewable energy beyond wind power, due to the relatively short-term target;

• is likely to delay investment in more economically and environmentally efficient (in cost of abatement terms) gas-fired generation in Victoria; and

• will expose Victoria to a shortfall in secure generation capacity by introducing a less reliable supply.

The Victorian Government (and other jurisdictions) can achieve their climate change and renewable energy policy objectives more efficiently and effectively by vigorously pursuing a joint-jurisdictional process, in the absence of a national approach led by the Federal Government. The aim of a joint-jurisdictional process should be to create the
intended effects of NETS and the Tambling MRET Review recommendations.

Origin realises that the Government may choose to implement its proposal despite the concerns raised in this submission. In this event, design features broadly consistent with the Federal MRET (and Tambling recommendations where possible) are strongly recommended to minimise the cost of the scheme.

In addition it is critical, should such a scheme be implemented, that unintended consequences be addressed. A policy to avoid tilting the playing field against prospective gas generation investments should be considered, and Origin would be very keen to participate in the design of such a policy.

The following submission elaborates on Origin’s position and concerns.