Victoria will miss 2032 offshore wind targets, likely to face electricity shortfalls: report

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

In a report tabled to parliament on Wednesday, the Victorian Auditor-General’s Office assessed Victoria’s renewable energy transition and found it was on track for its 2025 generation targets and likely to meet its ambitions for 2030, but that it would not meet its offshore wind targets.

The Allan government’s goal of having two gigawatts of offshore wind by 2032 is a fundamental part of the state’s efforts to offset the closure of coal-fired power.

The report noted that there was still no port approved to support the assembly of wind turbines and that the government had also delayed its offshore wind auctions, which were meant to start this year.

“Under an optimistic scenario Victoria could build two gigawatts of offshore wind capacity by the end of 2033. But there is a risk of further delays,” it said.

The auditor-general also said the Australian Energy Market Operator (AEMO) anticipated Victoria had enough supply to meet its needs until 2030.

But the report said this depended on key projects being delivered on time and did not allow for higher-than-forecast demand and other risks such as gas shortages, planned maintenance and difficult weather conditions.

“If these risks are not successfully managed, Victoria would be more likely to face electricity shortfalls after Yallourn coal-fired power station closes in mid-2028,” it said.

An additional challenge to ensuring supply, the report said, was the fact that key transmission line projects VNI West and Western Renewables Link, which could provide the state with access to continuously available “firm energy”, have been delayed.

“It is now expected that these projects will not be in service until at least 2030, two years after Yallourn closes,” the auditor-general said. “This means that Victoria will not have expanded access to electricity from the planned hydropower station, Snowy 2.0, when Yallourn closes.

“Without access to long-duration storage, Victoria may not always have enough electricity available during periods of peak demand if weather conditions are unfavourable for wind and solar.”

Under the government’s own risk management policies, there was a severe to “almost certain” risk of a disorderly energy transition that could result in job losses, supply disruptions and volatile prices for households and businesses, the report said.

It said AEMO and the Australian Competition and Consumer Commission were also concerned there wouldn’t be enough gas to contribute to electricity generation needs, adding to the risk of shortfalls.

The auditor-general found the energy department had limited short-term options to address these shortfalls and was waiting on the federal government’s Capacity Investment Scheme (CIS) to improve supply by 2030.

“But in the interim from 2028, Victoria will need to rely on AEMO to safeguard Victoria’s electricity supply until enough CIS projects become operational.”

However, the report said Victoria was on track to meet its 2030 aims for battery storage, which would mean 2.6 gigawatts of power are available to the grid.

Opposition energy spokesman David Davis said the government had botched the energy transition.

“Victoria faces real challenges after 11 years of Labor in Victoria of meeting secure and reliable electricity standards,” he said. “The offshore wind fiasco means Victoria will not meet its targets and meeting further renewable targets from 2030 will become increasingly difficult under Labor.”

Energy Minister Lily D’Ambrosio disputed that there were looming issues for energy supply.

“The independent AEMO is the industry standard for dynamic modelling for energy reliability, and they do not forecast reliability issues in Victoria over the next decade even in the most conservative scenario – this is because of our record investment in renewable energy,” she said.

“Victoria is still on track to meet its target of 95 per cent renewable energy generation by 2035, more than 42 per cent of the state’s electricity was produced by renewable energy last financial year and Victoria consistently has the lowest wholesale power prices in the country, helping to slash energy bills for families and businesses.”

In a written response to the report, the Department of Energy, Environment and Climate said it accepted the report but disputed some of its arguments.

The department rejected claims it had not planned for Victoria’s energy transition, pointing to an increase of 14 per cent renewables to 42 per cent while maintaining reliability.

“These outcomes would not have come about had DEECA and its predecessor agencies not managed and advised the government on how to tackle the many emergent risks which have been confronted along the way,” the department said.

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