Managing the transition away from fossil fuels – a deep dive into our key actions

As Victoria’s ageing coal-fired power stations retire in the coming decades, they are being replaced by a pipeline of renewable generation and storage projects. In Cheaper, Cleaner, Renewable: Our Plan for Victoria's Electricity Future,?we outline the actions we are taking to ensure a safe, reliable and secure electricity supply is maintained as this clean energy change takes place.

Managing closures of coal-fired power stations

A key action is the orderly transition of Victoria’s coal-fired electricity generators over the long term. This approach supports workers, businesses and local communities who may be impacted by the transition to renewable energy and is particularly important for regional communities whose economies have historically relied on employment through the power stations and coal mining. ?

The Victorian Government was approached by EnergyAustralia and then AGL Energy who sought to bring forward the closure dates of their Victorian coal fired power stations significantly, with Yallourn seeking to retire 4 years early from 2032 to 2028, and Loy Yang A seeking to bring forward its retirement 13 years early, from 2048 to 2035. The Victorian Government negotiated and entered into Structured Transition Agreements with these operators to see these assets do not close any earlier (or after) 2028 and 2035, respectively.

Critically, confirmed and public closure commitments are intended to boost market confidence that these large power stations are closing to a defined schedule, with long notice periods, signalling to investors to deliver replacement renewable generation and energy storage capacity in time. These confirmed closure dates also provide assurances to the community in respect of the transition timetable.

The Victorian Government has not paid these power stations to close - and is not paying them to stay open.

Under the Structured Transition Agreement with EnergyAustralia concerning the Yallourn power station, the Victorian Government secured a commitment that EnergyAustralia will build new storage capacity through a 350 MW, four-hour, utility-scale battery project that will be completed in 2026. This helps to ensure that energy system reliability is maintained when Yallourn exits and contributes to our legislated targets of at least 2.6 GW of energy storage capacity by 2030 to firm increased renewable energy in Victoria.

Maintaining targeted gas use – Victoria’s Gas Substitution Roadmap

With the release of the Gas Substitution Roadmap in 2022, Victoria became the first state in Australia to clearly articulate the journey needed to move away from fossil gas. In just a few short years, a considerable number of commitments have been delivered.

In 2024, these included:

• All new homes requiring a planning permit to be all-electric
• Strengthened national efficiency standards for new homes, including an increase to 7-star and introduction of a whole-of-home energy budget comes into effect
• The Solar for Apartments program
• Gas connection incentives ended
• Victorian Energy Upgrades extended and heat pump water heaters and electric induction cooktops added to offerings
• SEC Victoria Electric Home Planner
• Victorian Large Energy User Electrification Support launched

The Gas Substitution Roadmap 2024 Update outlines our progress to date and upcoming actions, including the Building Electrification Regulatory Impact Statement, now open to feedback.

The Update outlines how we are:

• Empowering households to electrify by delivering a wide range of initiatives to help Victorian households to use less gas, slashing energy bills immediately.
• Working with business and industry, acknowledging that energy security is critical to commercial confidence, driving future investment, job creation and economic growth across Victoria. We are taking a pragmatic approach of reducing fossil gas demand where it makes sense, while accelerating transitional supply to deliver reliable energy to Victoria’s commercial and industrial sectors.
• Working closely with industry and the community to explore options for scaling up Victoria’s renewable gas sector and outlining our preferred policy direction in Victoria’s Industrial Renewable Gas Guarantee - Directions Paper.?

Enhancing energy safety and network resilience

As severe weather events become more frequent due to climate change, the Victorian Government is supporting a stronger electricity distribution network that is more responsive to energy outages and puts Victorian homes and businesses at the heart of emergency responses.

The independent Network Outage Review, commissioned after the February 2024 storms that left over 530,000 electricity customers without power, made 19 recommendations. The Victorian Government has fully or partially supported all 19 recommendations, including improving coordination with critical infrastructure operators like telecommunications and water providers, and is now working on implementation.

Implementing these recommendations will ensure Victoria’s privately-owned electricity transmission and distribution businesses are better equipped to prevent, prepare for, and respond more effectively to support communities when large outages occur.

The Victorian Government is focused on working through those recommendations that aim to achieve change quickly and with certainty, including:

• The introduction of generator quick connection points by electricity distribution businesses in areas prone to recurrent outages, including Dandenong Ranges, to keep the main street running during prolonged outage events.
• Enhancing multi-sector coordination; ensuring distribution businesses participate in emergency exercises to test implementation of these recommendations; and
• Installing a formalised resource sharing arrangements between all network businesses to ensure they have the right staff in the right place for a quick response to outages and reduce restoration times for customers.

These outcomes, and more to come, will foster a proactive and resilient approach to network reliability and improve response mechanisms to minimise the impact of future outages.

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