Reports that the Victorian Government will undertake an auction in August for the underwriting of offshore wind energy based on a yet to be developed subsidy scheme raises more questions about what the cost to Australian taxpayers will be.
The Victorian Government has claimed that a new Electricity Services Entry Mechanism (ESEM) will be required to deliver viable offshore wind developments off the Victorian coastline.
The announcement that an auction will go ahead in August when there is no finalised agreement of how the ESEM will work and how it will be funded, seems more like Lily D'Ambrosio, the Victorian Minister, trying to keep her dream of Victoria being the first state to have offshore wind on life support – via the Australian taxpayer.
If offshore wind cannot attract private investment without government intervention, Australians must be told exactly how much this policy will cost, who benefits, and how long taxpayers will be on the hook.
Now the Victorian Government wants the Australian taxpayer to provide longer term subsidies through the ESEM so that the Victorian Government can try to revive offshore wind projects.
There has been clear evidence that offshore wind projects in Victoria are not commercially viable on their own. Three major energy companies, AGL, RWE and BlueFloat Energy, have now abandoned plans to develop offshore wind in Victoria citing commercial and financial risks. AGL was the most recent to withdraw from a proposed project in Gippsland.
Last year’s National Electricity Market (NEM) Review led by Dr Tim Nelson proposed an ESEM where the government would step in as a financial intermediary, using taxpayer funds to purchase and warehouse long-term energy contracts, to artificially guarantee a price for electricity generated by new projects.
By extending the ESEM to offshore wind projects that have already been deemed commercially unviable, the Federal and Victorian governments are proposing to further subsidise renewables that would not proceed on their own merits.
ENDS
