Funding boost for Victorian clean energy projects

Articles Written by Peter Rose (Partner), Cloe Woodward (Associate)

Earlier this month, the Victorian Government announced plans to test interest and capacity for a minimum of 600 megawatts of new solar, wind and other renewable generation projects state wide, in a bid to drive the state’s economic recovery from the COVID-19 pandemic. The new generation will be used to power Victorian schools and hospitals, Melbourne’s train network and a range of other government infrastructure and services.

On 5 September around 300 investors were briefed on the market sounding process, ahead of the commencement of the formal auction process.  The Clean Energy Council supports the announced plan, after its recent analysis showed that large-scale renewable projects had stalled.

Under the proposed program, the government will enter contracts to buy power from project developers at a fixed price, providing revenue certainty to secure debt and enable developers to proceed with projects. The process will also explore the potential for industry players and businesses to purchase renewable energy alongside the government.

The proposed new generation will make a significant contribution to meeting the Victorian Renewable Energy Target (VRET) for 2025 of 40%. This tender process is the second under the VRET. The first tender, launched in 2017, sought 650 megawatts of renewable energy (2017 VRET auction). Due to the high volume of bidders it exceeded the target, delivering six wind and solar projects totalling 927 megawatts.

News of the second renewable energy auction does however come at a time when Victoria is facing significant issues accommodating existing renewable capacity on its grid. Currently, there are major delays to the commissioning of a number of projects, which largely came about through the 2017 VRET auction.

According to RenewEconomy, the issues faced in Victoria, which are also prevalent in south-west NSW, are the result of complex connection rules, and the slow rate of grid infrastructure upgrades which are required to respond to long-standing grid issues. Back in February of this year, the Commonwealth Government introduced reforms to national energy laws to address these issues. The Victorian Government has also indicated support for streamlining of the grid connection process and the development of a renewable energy zone model for the second VRET auction, targeting future VRET areas which are not affected by immediate grid constraints, and areas where grid issues are being effectively resolved, such as Gippsland.


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