Essay by Eric Worrall
Big government backfire – the People’s Republic of Victoria attempt to accelerate the green energy transition via direct public investment has spooked the renewable industry.
‘Perilous journey ahead’ under Victoria’s energy overhaul
Patrick Durkin and Angela Macdonald-SmithOct 21, 2022 – 4.54pm
Clean energy investors have warned of an investment drought and large energy users say their survival will be threatened unless the Victorian Labor government gets its radical plan to revive state ownership of electricity supply exactly right.
Big industry fears they will be slugged with higher prices and be forced to take on more risk under the plan by a re-elected Andrews government to revive the State Energy Corporation to invest, own and retail renewable power.
The fears voiced by the group representing companies such as Brickworks and Bluescope Steel came as major renewables investors said they won’t invest the tens of billions of dollars required to meet Victoria’s proposed 95 per cent renewables target for 2035 if they are disadvantaged in any way against the new state player.
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Private investors could face being squeezed out of new investment in energy under the plan, which the industry super sector – which would co-invest with the SEC – lined up to back. Morgan Stanley labelled the plan “a net negative” for major suppliers AGL Energy and Origin Energy.
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What can I say – he who lives by the political fiat, dies by the political fiat.
I suspect what incumbents want is for the Victorian government to hand over big bags of cash, in an even handed way, so they all get to profit from even more taxpayer funding.
But there are bad memories of last time a left wing Victorian government tried to play merchant banker. Back in the late 80s, the Tricontinental scandal came close to bankrupting the entire state, leading to the forced sale and closure of the State Bank of Victoria to the Federal Government owned Commonwealth Bank, and just under a decade of Conservative rule under the Kennett government. The overnight destruction of an entire banking union was too much to swallow, even for the left leaning voters of Victoria.
I remember having a beer with some State Bank of Victoria employees at the time of the crisis. It was a running joke with the employees that all you needed to do to get a loan from Tricontinental was show up in a smart suit, and bring a suitcase for all the cash.
The Victorian state government’s track record with direct ownership of energy assets is almost as bad as their track record as a finance provider. In these days of mostly reliable electricity (for now), it is easy to forget the main motivating factors for the big privatisations of state owned energy assets were the regular blackouts, long connection wait times and high costs. At the time I was lucky to live nearby, on the same subgrid as a very large company which had a multi-million dollar penalty clause for power interruptions in their electricity contract, back when a million dollars was real money. So when it came to load shedding, someone else usually took the hit.
With memories like this, it is no wonder that Victorian government plans to take a step towards renationalising their electricity assets are being received with less than overwhelming enthusiasm.
