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Victoria must stay the course on transition or Victorians will be slugged with $33bn bill

Nexa Advisory

Nexa Advisory’s new report finds Victorian consumers will pay more than they should for electricity, and energy security and reliability will be at risk, unless the state government stay the course on the transition.

Stephanie Bashir, CEO at Nexa Advisory, said: “The clear message from our analysis is that the only way forward for Victoria is to stay the course and get the energy transition done. 

“Any more delays or cancellations of generation or transmission projects put the state’s energy reliability and security at risk, and will cost consumers needlessly.

“Renewables powered 44% per cent of the state in 2025, staying the course means we lock in the lowest electricity prices for the benefit of Victorian families, businesses, and the economy as a whole.

“Talk of delaying the closure of ageing coal like Yallourn is just more hot air, and is critically damaging investor certainty – it is past its use by date and cannot be relied on as a fall back option. It’s not a policy option for anyone who understands the way the system works. Not now, and not going forward.”

Importantly, it is also clear that new gas-fired generation is not a silver bullet. Global demand for gas turbines has created multi-year equipment lead times. Plus, relying on additional gas-fired generation would expose Victorian consumers to scarce fuel, international gas prices, and the capital cost of new turbines and supporting infrastructure. 

 

Between 2027-2050, this disorderly pathway increases total wholesale electricity costs by $33.0 billion.

 

Over the period between 2027-2031, the average Victorian wholesale price could increase from $62.29/MWh to $85.20/MWh under a disorderly transition – a difference of $22.91/MWh (37 per cent) on average across this period.

 

Those wholesale impacts would flow through to Victorian customer bills. Between 2027 and 2031, delays would cost up to $472 for a representative household, up to $4,719 for a representative small business, and $11,797 for a representative large business over the five year period.

 

Yallourn Power Station generates one fifth of Victoria’s power and is scheduled to close in mid-2028. The plant is approaching the end of its technical life, and Nexa Advisory’s analysis shows that its units have experienced as much as 32 per cent annual unplanned outage rate, and that it is poorly suited to the flexible operation the power system now requires. 

 

As such, the state has a narrow window to bring forward delivery of the renewable generation, storage, transmission, demand response, and firming capacity needed to replace it. 

 

Nexa Advisory has identified a significant pipeline of the required projects, much of which have state planning, development and/or environmental approvals. However, it is clear that not enough will proceed unless investors have certainty about Yallourn’s closure, and approvals, connections and transmission are unlocked. 

 

Nexa Advisory’s work suggests that the lowest-risk course is not to pause the transition but to double down on delivery: confirm Yallourn's closure, accelerate transmission, unlock onshore wind, solar, and batteries, enable credible projects outside REZs, expand demand response and Consumer Energy Resources, and contract a diversified firming portfolio in which gas generation plays a targeted back-up role. 

 

Summary of key recommendations

 

1. Confirm Yallourn's 2028 closure and procure dependable replacement capacity

The Victorian Government should confirm that Yallourn will close in 2028 and publish a delivery plan for the dependable capacity, energy and essential system services required before and immediately after closure. 

 

2. Accelerate transmission and hold delivery bodies accountable

The Victorian Government and VicGrid should accelerate WRL, VNI West and other critical works with transparent milestones, cost control, and accountability. Where faster market-led, contestable or non-network solutions can unlock capacity, they should be assessed alongside the major regulated projects rather than deferred behind them.

 

3. Unlock the onshore wind, solar and battery pipeline inside and outside REZs

The Victorian Government and VicGrid should actively progress advanced onshore wind, solar and battery projects, including credible projects outside REZs. The access framework should coordinate efficient development without becoming a barrier to projects that can use existing capacity, add storage, reduce constraints or connect closer to demand.

 

4. Contract a diversified firming portfolio and keep gas in a limited back-up role

The Victorian Government should secure enough flexible capacity for peak and low-renewable conditions through batteries, longer-duration storage, demand response, interconnection and some gas for residual firming. 

About Nexa Advisory

Nexa is an advisory firm with an unwavering focus on accelerating the clean energy transition, in a way that provides secure, reliable, and affordable power for consumers of all types.

Nexa Advisory is a team of experienced specialists in the energy market, policy and regulation design, stakeholder engagement, and advocacy. We work with public and private clients including renewable energy developers, investors and climate impact philanthropists to help them get Australia’s clean energy transition done.

Nexa Advisory stands at the nexus of the energy sector’s complex web of stakeholders. We support and direct their dialogue so as to remove the roadblocks to the transition. 

We have a track record in policy creation, advocacy, political risk assessment, and project delivery. We are holistic in our approach and deliver solutions with people in mind, and commercial intent.

Contact details:

Enquiries or interviews with Stephanie Bashir:

Stephanie Bashir, Principal, Nexa Advisory 

Email: [email protected]

Phone: +61 402 060 120

Web: www.nexaadvisory.com.au