SEC fires up first public power asset since ’90s, but wind plans hit as AGL scraps Gippsland project

A giant battery, the initial project under the State Electricity Commission, is operational, the first instance of a state-owned electricity generation asset since the 1990s.

However, doubts about the viability of Australia’s nascent offshore wind sector have increased after a decision by energy giant AGL to abandon a proposal to build turbines off the Victorian coast.

On Saturday, Energy Minister Lily D’Ambrosio will reveal that the Melbourne Renewable Energy Hub, co-owned by the SEC and Equis Australia, is complete and all 444 of its battery units are online.

The Melton facility, the first project announced under the revived SEC, will deliver power for 200,000 homes during the evening peak, or 1.6 gigawatt hours of storage.

It will store surplus energy from rooftop solar and other renewables to provide more consistent power at night and periods of reduced supply.

In doing so, the government also expects it to unlock 1.8 gigawatts of new generation to connect to the grid.

“The SEC is accelerating the energy transition. This project means lower bills for Victorians and a publicly owned asset that keeps profits in the hands of Victorians – where they belong,” D’Ambrosio said.

The completion of the battery project marks the first time the state has owned electricity generation assets since most of the grid was privatised in the 1990s by the Kennett government.

Two of three battery hubs at the site are 70 per cent owned by investment firm Equis and 30 per cent commission-owned. The third and largest battery hub is 49 per cent owned by the SEC, but a contractual arrangement grants the state dispatch rights, allowing it to choose when the stored energy is sold onto the national electricity market.

This breaks Labor’s initial election pledge for the SEC, which committed that “the government will own a majority in each new project, meaning any profits will go straight back into keeping bills down for Victorians”.

The Age last year revealed that those tasked with setting up the SEC struggled to find projects for majority ownership within its $1 billion budget.

This prompted a longer-term approach in which the SEC aims to spur renewable investment by funding key projects and reinvesting profits in areas where the private sector may need support.

Victoria is on track to meet its targets for battery storage, but its ambitions for offshore wind have been challenged amid delays on projects and cancellations from potential developers.

AGL was part of a consortium that had secured a federal permit to investigate the feasibility of building wind farms off the Gippsland coast that could turn ocean wind into electricity and help compensate for the impending closures of ageing coal-fired power plants in the Latrobe Valley.

However, on Friday, the AGL-backed Gippsland Skies consortium became the third joint venture to walk away from early-stage studies for an offshore wind farm in Victoria and hand back its feasibility licence to the government. The company said it would instead prioritise investments in onshore wind farms, batteries, pumped hydropower and fast-response gas-powered generators.

In Australia and around the world, offshore wind projects have been hammered by rising interest rates, soaring equipment and construction costs, supply chain disruptions and the flow-on effects of major policy changes in the United States, where President Donald Trump has halted government support for projects and revoked permits.

AGL’s exit from the sector comes a week after the Victorian auditor-general said the state would not meet its 2032 target of having two gigawatts of offshore wind energy, a key plank of efforts to offset the closure of coal-fired power.

Delays to key projects were risking electricity shortages across Victoria, and the market operator might need to safeguard the state’s supply, the auditor-general warned.

Governments have touted the promise of offshore wind farms helping to advance the clean energy transition, while creating hundreds of new construction and service jobs in coal industry regions such as the NSW Hunter Valley and Victoria’s Latrobe Valley, which face a downturn as ageing fossil fuel-powered generators reach the end of their lives.

Placing turbines way out at sea could also harness stronger and more reliable wind than land-based wind farms, proponents say, as well as reducing the risk of developments facing objections from nearby communities concerned about visual and environmental impacts.

The Victorian government has set a target to source about two gigawatts – or 20 per cent of the state’s total power needs – from offshore wind by 2032, before doubling it to four gigawatts by 2035 and nine gigawatts by 2040.

"Offshore wind is important to the nation's energy security and pushing down energy bills for Victorian families," a state government spokesperson said.

Gippsland Skies is the third project to collapse in Victoria following withdrawals of BlueFloat Energy’s Gippsland Dawn project, proposed between Paradise Beach and Ocean Grange, and German energy giant RWE’s Kent project.

The Navigator North project, backed by Origin Energy, has also been put on hold. Nine offshore wind feasibility permits in the Gippsland region are still active.

Opposition energy spokesman David Davis accused the government of shambolic energy management.

"The decision of AGL to abandon offshore wind in Victoria is a body blow to Labor’s offshore wind plans and to critical energy supply," he said.

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