SEC to sell power to manufacturers, but likely struggle to bring down bills

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Victoria’s 10-year vision for the State Electricity Commission cannot guarantee that the election policy will deliver on the promise of bringing down power bills, energy experts say.

Premier Jacinta Allan and Energy Minister Lily D’Ambrosio unveiled the government’s strategic plan for the SEC on Thursday, providing key details for the first time of how the revived commission will operate over the next decade.

Premier Jacinta Allan speaks at the Clean Energy Council conference in Melbourne.Credit: Eddie Jim

It will invest an initial $1 billion towards setting up 4.5 gigawatts of renewable energy – enough to offset to closure of Loy Yang A in 2035 – while also operating as a state-owned company that will generate profits and invest that money into further projects.

To achieve this, it will become a retail business selling 1.2 gigawatts of power already purchased through agreements with smaller wind and solar farms onto government services and later to commercial and industrial customers. There are currently no plans to sell energy to households.

But Allan also revealed on Thursday that the SEC would become a “one-stop shop” to help Victorians electrify their homes, upgrade to more efficient appliances and install solar or battery systems.

Labor’s pledge to revive the SEC came as the cost of living emerged as a key issue ahead of the 2022 election campaign, with the Andrews government promising it would bring down power bills amid soaring prices. This year, Victoria’s default offer, setting the standard for basic deals, rose by 25 per cent – an average increase of $352 annually for a typical household.

Bruce Mountain, the director of Victoria University’s energy policy centre, questioned whether the government could deliver on its promise to lower power bills through the SEC under the model it had put forward.

“To make good on their commitment, it’s a foregone conclusion that they need to they need to sell to the customer directly,” he said.

“They’ll find that the commercial and industrial sector is the one bit of the electricity market that works well. Customers are informed, there’s a thriving advisory sector that ensures that obvious mistakes are not made. So I don’t think there are easy dollars to be had.”

Mountain said it appeared the SEC was being set up to “learn the ropes” before making big steps in the sector, and that this was sensible.

Director of Victoria University’s energy policy centre Bruce MountainCredit: Eamon Gallagher

“There’s some gap between perhaps what voters might have imagined the SEC would be about and, and so far, where they’ve got to. Not that I think that that’s necessarily a bad thing,” he said.

“The electricity industry is a devilishly difficult industry. Working out where the government has a competitive advantage is challenging.”

Alison Reeve, deputy director of the energy and climate program at the Grattan Institute, said the vision for the SEC appeared to be tempered compared to what was announced at the election.

The government has previously argued it would drive down prices by increasing the supply of renewable energy in the market, but Reeve said investing $1 billion likely wouldn’t be enough to achieve this.

Renewable energy’s share of the electricity grid is growing.

“They will run into the same problems that everyone else who’s trying to build new generation is running into at the moment,” she said.

“Having $1 billion dollars and being government-owned doesn’t fix the supply chain disruption that’s going on globally, it doesn’t fix the fact that inflation is blowing out everybody’s costs, it doesn’t fix the workforce issues [and] it doesn’t fix the community opposition to transmission lines.”

A pilot program will begin next year to guide people through the process of finding suitable products and accessing rebates to electrify their homes. It is not yet decided whether this could function as a website, hotline or door-to-door service.

An SEC Centre of Training Excellence will work with educators and employers to grow the workforce needed for the renewable energy sector.

Minister Lily D’Ambrosio, Atlassian chief executive Mike Cannon-Brookes and Victorian Premier Jacinta Allan at the SEC announcement.Credit: Eddie Jim

D’Ambrosio said a key way the SEC would also drive down power bills was through the electrification of homes. The Victorian government estimates a typical detached home can save $1400 a year on energy bills if it goes electric and an extra $2700 with solar installed.

By the end of the year, the government will announce an update to its gas substitution road map, which is expected to detail further incentives to help people pay the cost of replacing their appliances.

“This is about really addressing cost of living and in a way that is significant and enduring,” D’Ambrosio said.

“The SEC will help with that and also make sure that they can trust the information [on rebates and products]. Navigating this complex system is something that our government wants to fix.”

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