ENERGY FOR VICTORIA ENERGYA Statement by the Minister for Energy and Resources FOR ENERGY FOR VICTORIA – A Statement by the Minister for Energy and Resources DEPARTMENT OF NATURAL RESOURCES AND ENVIRONMENT VICTORIA © The State of Victoria, Department of Natural Resources and Environment, 2002 ISBN 1 74106 298 5 Photographs on pages 12 and 32 courtesy of Origin Energy, 2002. Find more information about the Department of Natural Resources and Environment (NRE) on the Internet at www.nre.vic.gov.au or call the NRE Customer Service Centre on 136 186. This publication may be of assistance to you but the State of Victoria and its employees do not guarantee that the publication is without flaw of any kind or is wholly appropriate for your particular purposes and therefore disclaims all liability for any error, loss or other consequence which may arise from you relying on any information in this publication. INTRODUCTISECTION 1 | INTRODUCTION Energy underpins our economy and our way of life. Our households, businesses and community facilities depend on energy supplies that are secure and reliable, efficiently 1 produced and used, competitively and affordably priced, and environmentally sustainable. SECTION 1 Since coming to office, the Bracks Government has implemented important measures to maintain and improve our energy supplies and increase the efficiency of our energy use. We have more policy initiatives under development. Through the 1990s, energy policy was focused on dividing and privatising the former State- owned businesses and introducing competitive energy markets. These markets now play a | key role in delivering our policy goals. However a broader approach is needed to develop an INTRODUCTION energy system that can meet future challenges and ensure affordability, security and sustainability. In Growing Victoria Together, the Government stated its commitment to ‘triple bottom line’ policies that promote economic development that is socially responsible and environmentally sustainable. Our energy policy reflects this commitment, and the breadth of our approach is demonstrated by the achievements and plans that are described in this Statement. These include: Upgrading our electricity link with New South Wales and facilitating new electricity and gas supplies. Developing ambitious proposals to reform the National Electricity Market. Establishing a safety net for consumers entering the new energy retail markets, and the Essential Services Commission to protect the long-term interests of energy consumers. Introducing a range of sustainable energy measures in the Victorian Greenhouse Strategy, and creating the Sustainable Energy Authority to promote renewable energy and energy efficiency. Because of initiatives such as these, Victoria currently enjoys a secure, reliable and affordable supply of energy and can expect to do so for some time. This Statement also foreshadows further initiatives including: Extension of the consumer safety net beyond the current sunset dates; The development of proposed new governance arrangements for the southeast Australian gas market; and A proposed increase in the Commonwealth’s Mandated Renewable Energy Target. Meeting Victoria’s energy needs in the first half of the 21st Century poses new long-term 2 challenges and opportunities for governments, households, communities and businesses. Our consumption of energy is forecast to keep growing. Community concerns about new energy infrastructure are increasing, and concerns about the enhanced greenhouse effect and other environmental impacts of our energy use continue to grow. The Bracks Government will continue to responsibly address the challenges and realise the opportunities that we face. In June 2000 I stated that, “This government came to power with a clear view of the importance of the energy and resources sector and the particular challenges that must be met if the industry is to continue to make a valuable contribution to the wealth and well-being of all Victorians”. Much has been achieved since that time, but more remains to be done. This Statement is both a record of our achievements and a signpost to the future. I welcome your interest in this important topic. Candy Broad Minister for Energy and Resources CONTENTSCONTENTS 1 Introduction 1 3 2 Energy for Victoria – An overview 5 CONTENTS Victoria’s energy policy 5 The evolving role of Government 6 3 The Government’s record and plans 13 Supply security and efficiency 13 Supply reliability and safety 19 Access to affordable supplies 22 Sustainability 25 4 An energy policy for the future 33 Appendix A – Victoria’s energy system 43 Primary energy 44 Secondary energy 47 Access to energy supplies 55 Energy prices, expenditure and affordability 56 Appendix B – Governance framework for energy 65 The division of responsibility between Commonwealth and State 65 The role of other institutions 66 Appendix C – Contact details 75 Glossary 81 O 4 OVERVIEWSECTION 2 | ENERGY FOR VICTORIA – AN OVERVIEW VICTORIA’S ENERGY POLICY 5 Energy is essential to our well-being, both as individuals and as a community. It powers, heats and cools our industries, businesses, transport, homes and recreational facilities. Energy, and SECTION 2 the services it provides is the basis of our lifestyle and economy. The sustainable, secure, reliable and affordable supply of energy is a critical policy focus for Government. Energy policy settings can have significant impact on the supply of and demand for energy in all its forms. Energy policy is part of Growing Victoria Together, a policy framework that provides a vision | for Victoria in 2010. ENERGY FOR VICTORIA – AN OVERVIEW Objectives of energy policy The key objectives of Victoria’s energy policy are to: Ensure an efficient and secure energy system. This requires ongoing investment in both supplies and the efficient use of those supplies. We need to provide for the state’s economic and social well being as cost-effectively as possible. Ensure those supplies are delivered reliably and safely. The reliable distribution of energy – particularly electricity, which cannot be stored on a significant scale – is an ongoing challenge. Fossil fuels and electricity are inherently hazardous, so they must be distributed and used safely. Ensure consumers can access energy at affordable prices. The Government is committed to ensuring all consumers, especially low income earners, can access essential energy services at affordable prices. Ensure our energy supplies and the way we use them are environmentally sustainable – and in particular less greenhouse intensive. Achieving sustainability is a key challenge for Victoria. We generate most of our low cost electricity from brown coal, which brings major economic benefits but also contributes about half of our greenhouse gas emissions. We have to find ways to ensure our mix of energy sources and our use of them minimises damage to the environment and economy and in particular reduce the intensity of our greenhouse emissions. What you will find in this Statement This Statement outlines the evolving role of Government in the energy sector and the characteristics of Victoria’s energy system. It reports on the Bracks Government’s energy policy objectives and achievements and the challenges and opportunities of supplying energy services to Victoria in the first half of the 21st century. THE EVOLVING ROLE OF GOVERNMENT 6 The role that Government plays in meeting the energy needs of Victorians has changed considerably over time. Some of the biggest changes took place in the last two decades, in response to global market forces, new energy demands and national policy commitments. GROWING VICTORIA TOGETHER Victoria’s energy policy is part of the Government’s wider policy framework outlined in Growing Victoria Together. Growing Victoria Together expresses the Government’s broad vision for the future. It identifies: the issues important to Victorians; the priority actions we need to take next; and the measures we will use to show progress. It is a basis for involving all Victorians in our ongoing challenge – working together to build a fair, sustainable and prosperous future. Growing Victoria Together is not concerned with economic growth alone; it recognises that we need a broader measure of progress and common prosperity. It demonstrates a way of thinking, a way of working and a way of governing that values and aims to balance our economic, social and environmental goals. Growing Victoria Together describes a vision for Victoria in 2010 in which: innovation leads to thriving industries generating high quality jobs; protecting the environment for future generations is built into everything we do; we have caring, safe communities in which opportunities are fairly shared; and all Victorians have access to the highest quality health and education services all through their lives. The vision and action areas described in Growing Victoria Together are the foundation of Victoria’s energy policy. In the past For several decades Victoria’s electricity and gas industries were mostly managed by integrated, self-regulated Government monopolies, specifically the State Electricity Commission of Victoria and the Gas and Fuel Corporation of Victoria. Only the supply of transport energy and the production of natural gas were controlled by the private sector. In the 1990s, industry reforms led to the disaggregation and privatisation of the monopolies. The reforms introduced competition into energy production and retailing and established economic and safety regulators