The Victorian Government is under pressure from all sides as it tries to justify what Federal Resources Minister Matt Canavan this week described as a “ridiculous, stupid” energy policy.
Victoria has a ban on natural gas development and a simultaneous plan to dramatically ramp up renewable energy — a renewables priority which has caused enormous electricity supply and price problems in neighbouring South Australia.
This week it has been revealed that the recent closure of the coal-fired Hazelwood power plant in Victoria has caused a big electricity price surge, with little or no environmental gain (through lower carbon emissions).
Wholesale electricity prices are up by a quarter since the Hazelwood closure at the end of March.
In SA, gas was the solution to the State’s electricity supply problem. The Government is directly supporting gas-fired power generation and exploration for new onshore sources of natural gas. It has criticised its fellow Labor Government across the border for its anti-gas policies and welcomed any Victorian explorers to SA.
At the same time, the Federal Government offered financial incentives for natural gas exploration, but would make funds available only to States/Territories which allowed development of the resources. While this mat seem an entirely sensible approach (why offer exploration money if the State/Territory bars development?), it nonetheless prompted an indignant response from the Victorian Government, which said it was being “held to ransom”.
This kind of push and pull across Federal/State policy and geographical boundaries was described this week by Woodside CEO Peter Coleman as a brand of “competitive Federalism” which was not constructive toward the goal of cohesive and efficient use of resources.
The Federal Budget has promised $28.7 million for new east coast gas developments — provided the states remove moratoriums on onshore conventional gas exploration.
The new federal grant came a week after the Victorian Government announced it would spend more than $40 million for a study of the state’s gas reserves before its moratorium expires mid-2020.
Senator Canavan said he needed to be convinced “there is a pathway for gas” in Victoria.
“I’m willing to work with Victoria but they have to show me they’re willing to work with us,” he said.
There are no proven conventional onshore gas reserves in Victoria, but Senator Canavan pointed to Geoscience Australia estimates that there could be up to 40 years’ unconventional gas supply. He said some of that tight and shale gas — typically extracted by fracking — could potentially be extracted by conventional means, as had occurred in other states.
Victorian National Party leader Peter Walsh was coy on the topic of whether his Party supported the approach adopted by Senator Canavan. He chose instead to point to the broader energy issue in Victoria:
“The Premier is refusing to admit his government’s policies are driving up energy costs and hurting households and businesses,” Mr Walsh said.