South Australia already gets nearly half its electricity from renewables but has suffered blackouts when back-up power from coal and gas is unavailable

By Sonali Paul and Colin Packham

MELBOURNE/SYDNEY, March 14 (Reuters) - South Australians go to the polls on Saturday in a tight race with big implications for national politics and foreign investment in a state with the most wind and solar power, but the highest electricity prices in the country.

While its outcome will not dislodge Prime Minister Malcolm Turnbull, the vote presents a choice between renewable energy, pushed by South Australia's centre-left Labor government, and coal, backed by Turnbull's conservative government, which has mocked the state's "big experiment" in wind and solar energy.

South Australia's economy has suffered blow after blow in the last six years, with mining giant BHP Billiton scrapping a $20-billion plan to expand its Olympic Dam copper mine in 2012, the collapse of steel maker Arrium and a state-wide blackout in 2016, followed by General Motors' closure of its Holden car plant last year.

Labor, in power for 16 years, has turned to renewable energy luring foreign investors, such as Elon Musk's Tesla, which built the world's biggest lithium-ion battery at a windfarm run by France's Neoen, and British billionaire Sanjeev Gupta, who wants to revive steel works using solar power.

"We're sending, really, a market signal to the world to come to South Australia," state premier Jay Weatherill said at the launch of a poll campaign that targets 75 percent of state energy to come from renewables by 2025.

South Australia already gets nearly half its electricity from renewables but has suffered blackouts when back-up power from coal and gas is unavailable.

The plan is a potential bonanza for renewable energy developers as South Australia has the nation's highest power prices, which are a big deterrent to other investors, along with supply reliability concerns.

"South Australians know that Jay Weatherill is like a problem gambler doubling down to chase his losses on energy policy," Josh Frydenberg, the federal energy minister, said in an email to Reuters.

If Labor wins an unprecedented fifth term, it will be a blow to the federal government's plans for a national energy policy that has no renewable energy target but sets requirements for emissions cuts and reliability.

South Australia's Liberal party promises to cut power bills by cancelling Labor's plan for a new gas-fired power plant and fund instead a new power link to a neighbouring state, to back up wind and solar power.

"The federal government has proposed its own plan but it requires all the states to sign up. South Australia has refused to go along, concluding it could inhibit their plans for higher renewables," said David Blowers, an energy policy specialist at the Grattan Institute think-thank.

"If the Liberals were to win in South Australia, you would expect the government will get the approval it needs to proceed."

Labor and Liberals are running almost neck-and-neck, with support of 30 percent and 32 percent respectively, the latest Newspoll on the South Australian election showed.

Clean air is also the hottest issue in a federal by-election on Saturday in Melbourne, capital of the southeastern state of Victoria, where Labor is battling the Greens over the fate of a huge coal project.

A win for the Greens, Australia's fourth largest political party, would complicate the legislative agenda for Prime Minister Malcolm Turnbull, whose government holds just a one-seat majority. (Reporting by Sonali Paul Editing by Clarence Fernandez)

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