The outlook for Victoria’s energy market is bright

CEDA – VIC Energy Market Outlook


Good afternoon, everyone.

I acknowledge the Traditional Owners of the land on which we are meeting, the Wurundjeri People. 

I pay my respects to their Elders, past and present and Aboriginal Elders of other communities who may be here today.

I’m delighted to be here this afternoon – and thank you to the Committee for Economic Development Australia for inviting me to this Victorian Energy Market Outlook event.

The outlook for Victoria’s energy market is bright, much like our broader economy.

Deloitte Access Economics forecasts Victoria’s economic growth will lead all states over the five years to 2027-28, at an average annual rate of 2.3 per cent.

Underpinning this strong growth is our energy transition, that will deliver affordable, reliable and secure renewable electricity for all Victorians.

The energy transition will also drive the achievement of our ambitious climate targets for reducing emissions by 28-33 per cent by 2025, 75–80 per cent by 2035 and net zero emissions by 2045.

But this is an enormous undertaking – we’re effectively transforming our electricity system and economy in a process that had its beginnings nearly two decades ago and has roughly that much further still to go.

It requires around 28GW of new capacity to be built by 2035, roughly a quarter of that behind the meter. Its an enormous undertaking.

To give confidence to the public and investors about how we will achieve this, we have legislated a comprehensive set of targets. These give enormous clarity and transparency about our decarbonisation plans.

These targets include;

  • 65 per cent renewable electricity by 2030, and 95 per cent by 203
  • At least 2.6 gigawatts of energy storage targets by 2030 and at least 6.3 gigawatts by 2035.
  • Also 2 gigawatts of offshore wind capacity by 2032, 4 gigawatts by 2035 and 9 gigawatts by 2040.

Victoria is well on its way to meeting these targets, thanks to 4.2 gigawatts of new large-scale renewable energy from the 59 different projects that has been commissioned to date.

Victoria’s renewable electricity generation rose to 39 per cent across 2023 – it was about 11 per cent when we came to office.

And so its no surprise that Victoria’s emissions have fallen by more than 30 per cent – one of the fastest rates of decarbonisation of any comparable jurisdiction.

We know Victoria has historically had one of the most carbon intensive economies in the world, but rather than see that as an excuse to be a laggard, we’ve embraced it as an opportunity to strive for leadership.

We’ve done this while keeping Victoria’s electricity costs more than competitive. Wholesale electricity prices in Victoria have consistently been the lowest, or close to the lowest, each year for the last four years – and futures contracts have Victoria at least $20 per MWh lower then our nearest competitor (Qld) in the latest AEMO Quarterly Energy Dynamics Report, so our price advantage will only grow.

The ‘Renewables Big Build’

Premier Allan has recognised that along with Victoria’s transport and housing Big Builds, is the ‘Renewables Big Build’, and she’s not wrong.

Our Government is committed to ensuring the ongoing affordability, reliability, and sustainability of Victoria’s electricity system – not in spite of the transition to renewables, but as a result of it.

The inescapable fact is that our coal fired power plants are aging, and need to be retired.

So we have adopted a pragmatic position. By 2035 we will have 95 per cent of our electricity coming from renewable energy, because these technologies are the cheapest forms of new build electricity generation.

But obviously, the other 5 per cent will non-renewables. It will be gas peakers, roughly the same level of fossil gas peaking as we use in Victoria today.

There’s no dogma here – its about what works.

Obviously, gas fired power is expensive and comes with carbon emissions, so we need to minimise it’s use as much as practicable, but there is still an important role for it to play.

Similarly, the transition doesn’t work without private sector investment – lots of it – and we’re putting in place clear statutory and policy frameworks to derisk that investment.

However, strategic government participation in energy investment can also improve outcome for consumers. That’s why we’ve brought back the SEC.

I’m pleased that we have Chris Miller here today who will speak about this soon, so I’ll just say that the SEC’s critical role is to accelerate investment in 4.5 gigawatts of new renewable energy and storage projects.

Bringing on more renewable capacity, faster, means lower bills for consumers. It’s that simple, although some people work hard not to see it. 

Being pragmatic also means recognising that a power grid dominated by renewables must be diverse, which is why we’re Australia’s leaders in offshore wind. It’s not a nice to have, it’s essential to providing the generation capacity we’ll need in the 2030s and 2040s.

All this new capacity is simply not feasible without expanding and modernising our transmission network, and that’s why we created VicGrid.

It’s been decades since we built major transmission infrastructure in Victoria and the old ways of doing it are not appropriate today.  We need a transmission planner that ensures the hosting capacity is in place before it is needed.  We need community engagement that happens upfront, not at the end of the process.

So we’re overhauling the planning and approvals process through the introduction of the Victorian Transmission Investment Framework.

In all these areas we are committing to work with Traditional Owners in new ways that supports their self-determination and enables benefit sharing, into the future.

We will also continue working with the Commonwealth on the Capacity Investment Scheme, to ensure it complements our approach in Victoria.

Empowering households & businesses to lower energy bills 

That’s a very quick look at the utility scale end of the electricity market. But a lot of really critical changes are happening right down the other end, behind the meter, in homes and businesses.

Which brings me to the topic of gas.

I’m proud that Victoria is doing the hard work to address our heavy reliance on fossil gas, through the Gas Substitution Roadmap and its updates.

The Victorian Government is the only political actor with a pragmatic gas policy.

The Opposition want to pretend that we’re living in the past, and the Greens want to skip ahead to the future, and neither want to deal with the facts we face today.

The facts are that our once cheap and plentiful sources of fossil gas are now fast declining and increasingly expensive. New gas production in Victoria won’t happen at sufficient scale or speed to change the overall trajectory of the sector.

This is because of geology, not ideology.

But we need to also acknowledge that change will take time, and be difficult for some current gas users.

So what is the sensible response to those facts?

Pragmatism dictates that we look at each segment of gas users individually, and do what makes sense for them.

For households, the evidence is overwhelming – all-electric homes are now cheaper to run than dual-fuel homes. That hasn’t always been true, but it is now.

A significant number of our businesses will also find electrification makes economic sense.

We’re supporting pilots and trials of renewable gases – such as biomethane or renewable hydrogen which provide a substitution pathway for some business and industry us.

But as we’ve always said, there are some gas users who simply need to continue using gas for the foreseeable future.

This includes industries using fossil gas as feedstock or for high-heat applications.

Even in those cases, the gas substitution agenda will help them by assisting those who can switch away from fossil gas, we free up supplies for those who need to keep using it.

Pretending there is some plentiful source of conventional gas that has been ‘locked up’ by the government is just a myth.

There is no ban on conventional onshore or offshore gas exploration on Victorian land or in Victorian waters.

Taken together its hard to see a more pragmatic approach.

Of course, phasing down our use of fossil gas will take many years, and as the Australian Energy Market Operator identified, there are significant challenges to East Coast gas market supply from as early as 2028 onwards.

A sensible response would address supply risks while avoiding creating expensive stranded assets like major new pipelines. Gas import terminals can meet these needs, under the right circumstances, and we have an open mind.

But a terminal would need to meet all of Victoria’s rigorous planning and environmental requirements for major infrastructure.

It might seem incongruous that we need new supplies of gas while we transition away from fossil gas use, but its simple math.

The rate of decline in gas production is faster than the current rate of demand reduction, so some additional interim supplies will be needed to maintain the balance.

We take that seriously, and that’s why we have supported the current five offshore and nine onshore exploration permits to search for new sources of conventional gas in Victoria.


With a transformation this big, there will be enormous demand for workers, skills and a robust supply chain.

To address this we are developing the Victorian Energy Jobs Plan, which identifies the skills and training needed to support Victoria’s renewable energy industries.

We’ve estimated that there will be 59,000 jobs created in the transition to 95 per cent renewable electricity by 2035, and this a huge challenge and opportunity.

There are a lot of challenges, and it it won’t be easy.

But I’m immensely optimistic about what we can achieve when we work closely with local communities, investors, industry and of course our Traditional Owners.

We will keep doing what needs to be done.

We’ll ignore distractions and pipe dreams, we’ll deal with the facts, and we’ll always put the Victorian public first.

Thank you for coming along today and I look forward to the discussion we’ll have soon.