State minister says she wants to work on underwriting new power generation and KerangLink is ‘vital’

This article is more than 10 months old

This article is more than 10 months old

Victoria has asked the Morrison government to fast-track work on the KerangLink – a transmission line increasing power transfer capability between the Snowy area and Melbourne – ahead of Friday’s long-delayed meeting of federal and state energy ministers.

The request from Victoria follows a similar pitch from the New South Wales government, which has asked Canberra to underwrite new generation to replace the Liddell power station, and either underwrite or de-risk new investments in transmission that have been highlighted as urgent by the Australian Energy Market Operator (Aemo).

With Friday’s meeting looming, the federal energy minister, Angus Taylor, has signalled he wants to pursue a series of deals with the states to roll out new generation and transmission – an approach that has followed the Morrison government’s decision to ditch the national energy guarantee (Neg). The Neg was a casualty of the federal Liberal party’s leadership eruption last August.

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The Coalition initially faced pressure from some of the Liberal state governments, including NSW, to revive the Neg, which was supported by most stakeholders in the energy sector. But the states have in more recent times pursued a plan B, giving Canberra specific wish lists of projects they want assistance with.

State governments have also pursued discussions among themselves since the failure of the Neg about how they can work up a joint strategy on transmission, including rolling out the poles and wires necessary to transfer supply from the Snowy 2.0 expansion into NSW and Victoria.

Aemo has recommended a range of transmission upgrades, including boosting transfer capability between the Snowy area and Sydney through the HumeLink, which it says would “maximise the reliability and resilience benefits from Snowy 2.0 at lowest cost for NSW consumers following the 2022 closure of Liddell power station”.

The KerangLink identified by the Victorian government has also been nominated by Aemo on a similar rationale – that it would increase the reliability and resilience benefits from Snowy 2.0 “at lowest cost for Victorian consumers in time for the next expected closure of brown coal-fired generation in Victoria”.

Aemo has also nominated the Marinus Link between Tasmania and Victoria. The Morrison government earlier this year kicked in $56m in an effort to progress the new 1,200MW interconnector as part of Tasmania’s “battery of the nation” project.

The energy market operator said in July if there was more than a 20% chance of the Yallourn power station in the LaTrobe Valley closing earlier than currently scheduled, with that mothballing due in 2029, “then building KerangLink prior to the closure date would be a least-regrets strategy”.

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The Victorian energy minister, Lily D’Ambrosio, has told Taylor in a letter she wants to work with the Morrison government on plans to underwrite investments in new power generation, and she says “we believe that fast-tracking work on the KerangLink, alongside other projects, is a vital investment”.

D’Ambrosio says she also wants Friday’s meeting of energy ministers to agree to ask the Energy Security Board to come up with a new reliability standard which reflects Australia’s energy needs.

While sources say a bilateral deal with the NSW government is close, relations between the Coalition in Canberra and the Victorian government have been more fractious. Taylor is frequently critical of Victoria’s policies to pull forward investment in renewables.

On Monday he said Victoria had “gone from a very strong position to a very weak position, with the closure of Hazelwood, no replacement investment in dispatchable generation, and of course a moratorium on gas hampering the ability of new gas generators coming into the market”.

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D’Ambrosio said the federal minister needed to make up his mind about which strategy to pursue. “Angus Taylor says he wants to collaborate, but then slings mud rather than have a productive conversation about Australia’s energy future,” she said.

“It’ll be interesting to see which version of minister Taylor we see in Perth on Friday.”

Taylor told Guardian Australia he intended to be constructive with all of his state counterparts.

“There are several transmission projects that the commonwealth is keen to engage state and territories on, including HumeLink, KerangLink and Energy Connect.

“I have put a priority on working with my state colleagues on these projects”.