Unclear how revived SEC will deliver on promises

There is little doubt that Premier Daniel Andrews’ plan to revive the State Electricity Commission played a substantive role in the size of Labor’s recent election win.

The Loy Yang power station in the Latrobe Valley.Credit:Joe Armao

In a surprise announcement made very late in the day, Andrews pledged that a renewed SEC would lead Victoria’s transition to renewables, accelerate cuts to emissions, generate 59,000 jobs, help stabilise a fracturing national electricity market, and return some of the profits from private electricity suppliers to the taxpayer.

“It’s an opportunity for tens of thousands of workers, families and communities,” Andrews said at his campaign launch in November. “We are replacing offshore profits with offshore wind renewable megawatts … and it will drive down the cost of power for Victoria and families.”

Government polling ahead of the election suggested there would be widespread support for the policy, across differences of location, age, gender and class.

As Royce Millar and Josh Gordon report today, there was something for everyone. It appealed to people concerned about climate change, particularly voters swinging between Labor and the Greens in inner-city seats. For those with long memories, it evoked nostalgia for the days when the old SEC provided thousands with jobs for life.

Promising to set up an office in Morwell, in the LaTrobe Valley, seemed to be a commitment that the new SEC might offer a future for the workers there who are facing unemployment when their steam-turbine power stations eventually shut down. And amid an inflation-driven cost of living crisis, who wouldn’t vote for cheaper electricity?

At the time of the original announcement, The Age gave the scheme its cautious support. It was right for the state government to play a role in reducing our dependence on fossil fuels. But, with little detail being provided, we were somewhat sceptical that this new SEC could achieve everything the government seemed to be claiming for it, particularly lower energy costs. Now it is up and running, with an interim chief executive and an expert advisory panel, the detail is still thin, and we still harbour reservations. Yesterday, Energy Minister Lily D’Ambrosio did say the SEC might have a wider role than was originally set out. That could include the commission selling power directly to consumers and businesses.

Eventually, it is possible that the SEC will make a significant impact on our transition from coal and gas-fired power. But claims that the revived SEC will be even bigger and better than its predecessor are pure hyperbole.

Despite how the government has sold it, the new SEC is nothing like the old one. That was a monolithic monopoly that by 1972 controlled every aspect of Victoria’s electricity supply, before being privatised in the 1990s. The revived version is just one player, albeit government-owned, in the energy marketplace, tasked with developing new sources of electricity from renewables such as offshore wind farms and battery-assisted solar.

We know it will have $1 billion in taxpayer funds to spend on new projects, including investing in joint ventures with “like-minded” entities such as industry super funds, and that any profits will be reinvested in the network. Its initial aim is to produce 4.5 gigawatts of renewable energy, the equivalent of about a third of Victoria’s current requirements, after 10 years.

What hasn’t been confirmed yet is how it will work as an organisation, whether it will operate as an energy retailer or just as a supplier, how it will deliver on the government’s promise to reduce energy prices, and, critically, whether the grid will cope with all this extra electricity it plans to generate.

The Australian Energy Market Operator says Australia will need an additional 10,000 kilometres of transmission line to move power from the new renewable sources around the country; we will also require massive investment in battery storage and back-up hydro to supply power when the wind doesn’t blow and the sun doesn’t shine. Demand will only grow as more people switch to electric cars and electric appliances in their homes.

Energy experts have generally been nonplussed. The Grattan Institute’s Tony Wood says the claim of massive job creation seems unlikely, that we shouldn’t expect big price reductions and that good policy could have encouraged the private sector to make comparable investment in renewables anyway.

Alan Pears, an energy expert at RMIT University, described the new body as “much more modest than the original SEC”. Alison Reeve, also of the Grattan Institute, said that compared with the likes of AGL and Origin, the new SEC was a very small player. “I’m struggling to see what market failure it is addressing,” she said.

To be fair, this is just the beginning. It became an official “reorganising body” only this week. With the right management structure, partnerships and investments, the retooled SEC could grow into a major supplier of our energy needs. Victorians may look back on 2023 as the year our state took the lead in Australia’s transition to renewables.

This could be Andrews’ great legacy. Or SEC Mark 2, still barely a fledgling, could very well fail to deliver on what were possibly a rash of overambitious, if well-calculated, election promises, and saddle us with yet more debt we can ill afford. For now, we’ll keep an open mind.

Patrick Elligett sends an exclusive newsletter to subscribers each week. Sign up to receive his Note from the Editor.

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