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Victorian renewables target aims for certainty, but questions remain

"Victoria's goal to achieve 40% renewable energy by 2025 could underpin substantial investment at manageable cost but only if concerns around trade competitiveness, energy security and the wider market are met," Australian Industry Group Victorian Head Tim Piper said today.

"Victorian industry needs affordable, secure and sustainable power to remain competitive and continue employing hundreds of thousands of Victorians. We recognise and welcome the shift towards renewables, which is accelerating as governments move to cut greenhouse emissions and as costs decline. Building and maintaining energy infrastructure creates jobs and demand for goods and services across the economy.

"However there are three serious concerns that the Victorian Government needs to address as it develops this policy further.

"One is the competitiveness of trade exposed industry, which will be threatened if the policy imposes excessive costs. While much more policy detail is needed, our early analysis suggests the direct costs to electricity users of the Victorian policy could reach around $240 million dollars a year in 2025, or $5 per megawatt hour. That would raise prices for large industrial users by up to 5%. Victoria will need to keep costs to a minimum and ensure that trade exposed industry remains competitive.

"Costs could be even larger if the electricity market becomes insecure or uncertain. Recent rapid unplanned change in South Australia's market has seen electricity futures prices leap by $20 per megawatt hour. The technical challenges in maintaining reliable supply with variable renewables are manageable, but we can't afford to ignore them.

"Victoria is part of a wider energy market and system-wide consequences need to be taken into account. If Victoria adds more renewables it could lead existing generators to close - but likely in New South Wales, with perverse consequences for emissions.

"These interactions are why business overwhelmingly prefers coherent national policy on energy and other matters, rather than a patchwork of State-based initiatives.

"The issues of oversupply and investability in the energy market, and of managing any closures fairly for energy users and affected workers and communities, need wide and serious discussion.

"Energy policy is already far from the coherent, reliable and national ideal. Victoria can make a positive contribution if it reduces the uncertainty associated with Federal policies. But the Government will need to work closely with energy users and suppliers of all sorts to ensure that its plans minimise costs and maximise clarity. In the race to a new energy future, hitting the accelerator is good - if we make sure we're not facing a wall," Mr Piper said.

Further comment: Tim Piper 0411 430 301