The Victorian government has introduced legislation to enshrine its renewable energy targets in law and establish a reverse auction mechanism to build 650 megawatts worth of new projects.

The premier, Daniel Andrews, announced the Victorian renewable energy targets (VRET) of 25% renewable energy by 2020 and 40% by 2025 in June 2016.



If Andrews can negotiate it past the upper house, the legislation introduced to parliament on Wednesday will make Victoria the first state to enshrine both its renewable energy targets and its commitment to invest in renewable energy in law.

That will send a strong signal to investors, environment minister Lily D’Ambrosio said, and provide certainty for both the energy industry and electricity consumers.

“These are ambitious yet achievable targets and this is the policy certainty and it’s the right policy that industry has been deeply searching for to make sure they can actually make the right decisions to invest in our state,” D’Ambrosio said.

The VRET will rely on a reverse auction to encourage the construction of new wind and solar projects in Victoria. D’Ambrosio said modelling by the state government showed it would reduce household electricity bills by $30 a year over the life of the scheme and drive a 16% reduction in greenhouse gas emissions by 2034.

“In a pure economics sense more supply means cheaper prices and that’s what we will be modelling it on,” she said.

Leading experts agree that renewable energy is the cheapest form of new power generation, D’Ambrosio said.

Victoria has already held a limited reverse auction to commission two new solar plants designed to power Melbourne’s tram network.

The successful tenders, announced on Wednesday, are the 100 megawatt Bannerton Solar Park near Robinvale in north-west Victoria and a 38 megawatt solar farm at Numerka, near Shepparton.

D’Ambrosio said the new projects would provide 138 megawatts of solar power and create jobs in regional areas. Expressions of interest for the reverse auction for 650 megawatts of renewable energy power generation – enough to power 389,000 homes or the combined residential areas of Geelong, Ballarat, Bendigo and the Latrobe Valley – will open in October.

Victoria has long been critical of the Turnbull government’s commitment to a clean energy target and threatened to work around government “indecision”. The current federal renewable energy target expires in 2020.

“What we know is that in the absence of policy certainty and leadership in Victoria it’s up to states like Victoria to fill that void, to make sure that we’re doing everything that we can to drive the transition that is incredibly important,” Andrews said.

Environmental groups praised the decision, saying it led the way for other states and territories to enshrine their own targets in legislation and send a strong message they were transitioning away from fossil fuel power.

The Australian Conservation Foundation climate change campaigner, Suzanne Harter, said leadership was particularly important because of a “policy paralysis at a federal level”.

“The mechanism that the Victorian government is using is a tried and true mechanism,” Harter said. “Coupled with the targets, it sends clear signals to investors and to the sector.”

The Environment Victoria campaigns manager, Nicholas Aberle, said the legislation showed the promise to get to 40% renewables was not an “aspirational target”.

“It’s one thing to want more renewable energy but it’s another thing to create a mechanism to make it happen,” he said. “The federal government does not have the monopoly over energy policy and if they are going to continue to not take climate change seriously then states are going to step in.”

Aberle said new renewable energy projects would have to be spread throughout Victoria to fit within the limits of the existing electricity network and to provide energy security, preventing one severe weather event from taking out the power for the whole state, as a storm did last year in South Australia.

Some places, like the Latrobe Valley, have significant unused transmission capacity because of the closure of the Hazelwood power station, making them an ideal site for windfarms.

In March the Andrews government announced a $20m tender to build 100mw of battery storage in Victoria by 2018, in time to store power generated by the as yet commissioned renewable energy plants. Three months later, Tesla founder Elon Musk committed to build in South Australia the world’s largest lithium ion battery to store renewable energy.

Aberle said the speed with which battery technology was developing had put the goal of 100% renewable energy within reach.

“This is a really disruptive technology that’s going to completely reshape what our energy sector looks like in the future,” he said. “It’s going to shape it in a really positive way because it’s going to allow us to get to 100% renewable energy much more quickly.