Is Australia Finally Turning Its Back on Coal? Lily D'Ambrosio | Deep Dive Australia 04

Lily D’Ambrosio

If you want to read the Murdoch media, they will paint everyone as being crazy lefties and the rest, but that's not what this is about. I can tell you, more and more Victorians can see, they get their gas bill every two months and they can see and they struggle with the notion of actually finding the money to pay for it, okay. People understand, people are not mugs, people understand that gas prices have gone through the roof. People understand that with the new technologies that are available, with heat pump technologies, more energy efficient electric appliances, that there is a world where they can reduce their energy bills, their energy costs.

Michael Liebreich

Hello, I'm Michael Liebreich and this is Cleaning Up. We're continuing our Australia Deep Dive today, recording this episode in a rather damp and cold Melbourne. Before we start, I'd like to acknowledge that we're on the land of the Wurundjeri peoples of the Kulin Nation, and I'd like to pay my respect to their elders, past, present and emerging. 

Australia is not a unitary state, it is a federation. Melbourne is the capital city of Victoria, a small state by Australian standards, but home to over a quarter of its population. Much of the country's energy policy resides in the states. So, while the Australian Federal Minister of Energy and Climate might bestride the world stage like a colossus making climate commitments, it is in the state parliaments and civil services that the decisions will be made that either deliver or fail to deliver those commitments. My guest today is Victoria's State Minister for Climate Action, Minister for Energy and Minister for the State Electricity Commission. Please welcome Lily D'Ambrosio to Cleaning Up. 

ML

Minister, Lily, thank you so much for taking the time out of your busy day to talk to us. 

LD

I'm very happy to be here. Thank you very much, Michael.

ML

So, we always start by hearing from our guests who they are, what they do and perhaps why, but unfortunately it needs to be the short version. So, we're in this magnificent office with a view across Victoria. Fantastic, but introduce yourself.

LD

Thank you. Well, my name's Lily D'Ambrosio. I'm the Energy and Resources Minister in the state of Victoria. I'm also the Climate Action Minister and I'm also the Minister for the State Electricity Commission, which in short is a return of publicly owned renewable energy here in Victoria because we did go through a privatisation process in the early 90s and then our government has decided to bring back a government owned utility.

ML

Okay, and then, you're the longest serving Energy, Climate, Natural Resources as well is that?

LD

No, no, Energy and Climate, I think it's fair to say that.

ML

Energy and Climate and then the Electricity Commission, but the longest serving Energy and Climate Minister in Australia.

LD

Well, that's what they tell me, but absolutely, it's been an absolute delight but it's also been extremely challenging, but you know what? The value of me having been in this role for a number of years now has given me not just a really important bird's eye view, but an intrinsic knowledge of how the system works and the fact that we're on a marathon that is being run at sprint speed. And that's the way I like to put the energy transition, but it's one that is absolutely necessary and we need to get it right.

ML

Now our audience is split between the Australian audience, who'll know all about Victoria and possibly something about you, some of them will know a lot, but on average. About 88% of our viewers are overseas, in the US, Canada, all over Europe, the UK’s the biggest, and they will know relatively little, so what we're going to need to do is make sure we keep them on board. Describe if you can, the state. I want to do a little bit about the characteristics of the state and the state's energy sector, energy transport, all the things that need to change and state federal, state commonwealth relations. So we've got to cover those sort of three basics. Can you do that?

LD

Absolutely. Perhaps let's start with federations. So the states in Australia are fairly unique compared to say the UK, where the states fairly much have the levers around land use planning. And that is really critical when we're talking about renewable energy projects or any energy projects, like the states have a very significant control, if you like, around where projects go, whether they go anywhere at all. And also, of course, that includes the transmission that we need, of course, to manage this transition well. The other important thing of course is that our state has been a very heavily reliant state on coal and people will know lignite. We call it brown coal, it's lignite, and it is the most polluting coal that you can find anywhere globally.

ML

So somebody on my tour of Australia called it or described it as having the energy content of a wet telephone directory.

LD

Well, can I just say it is absolutely very wet. That's why we've never had an export industry here of brown coal, because you just can't export it. But what it has done for many, many decades is underpinned a manufacturing base here in Victoria. So Victoria has been the manufacturing base of the country on the back of really cheap brown coal to make our electricity for over 100 years. And that's also electricity that has supported the eastern seaboard of the country. So it's got its unique characteristics that don't apply.

ML

And when you say manufacturing, manufacturing what? Because you used to make, there was a car, I think it was the Holden, was it that used to be manufactured here but that's actually fading into the rear view mirror. Manufacturing what?

LD

Well, look, certainly we had a very strong vehicle industry here too, clothing, trades, textiles. But of course with globalisation those things have come and gone. But we still have, of course, a very strong defence industry base here in Victoria. And we have a very strong professional industry, which really sustains a lot of the high tech. Pharmaceuticals, for example, is another important part of that. But what is really, really important for us to remember is that we've also got a lot of ageing coal fired generators that are now reaching their end of life and we need replacements for those.

ML

So I was very lucky because on the weekend, I got to drive part of the Great Ocean Road and I drove past a refinery. What would that have been?

LD

Well, we've got two oil refineries left in Australia. And one, of course, is the Viva oil refinery, which is in Geelong. So I think you've gone past the Geelong refinery. And of course, we know that there's been some challenges globally because of the blockade if you like of the Strait of Hormuz and the cascading significant impact on diesel and oil prices now that all of the world is getting a shock from, including Australia.

ML

It was Geelong. I also watched Geelong lose to Carlton at the Aussie Roads Football. I'm very happy, 

LD

I'm a Carlton supporter. 

ML

You're a Carlton supporter. But the refinery seemed to be working pretty hard, not that you can tell from a drive past on the road, but clearly because of the time we're recording this, very much Australia's I call it a diesel addiction, is causing an enormous amount of pain because of the diesel prices. Is Victoria addicted? Is that one of the states that's suffering most because you've got agriculture? You don't have perhaps the same extractive industries as Western Australia, but are you suffering from the diesel problem?

LD

Look, the whole of the country is. When you have a look at WA, they are heavily reliant on diesel for their very big mining industry. That's the reality of it, they're big consumers of it. Victoria's a food bowl. When we have a look at our agriculture, we are a very big food bowl and supplies of food, fresh food to the rest of the country. We're not the only ones, but we are very, very big.

ML

And exporting. 

LD

And exports. So it has hurt the whole of the country, but we've worked our way through that. The Commonwealth Government have got some very strong policies in place backed up by the states that have come in behind them to help to ease the pressure and the costs. Availability is your number one. You've got to keep having a supply of diesel and oils coming into the country. Price is always going to be a really critical, difficult topic in the light of global challenges that we're seeing.

ML

Okay. And let's double click on the energy transport questions, because it's funny, as I travel around Australia people have asked me, what is Australia doing well? Or how are we doing, actually, the phrase is, how are we doing? And very clearly, solar roofs on homes and batteries now on homes, you know, tick. And not just tick, that is Australia's Premier League is absolutely...

LD

It's world leading. 

ML

And it's world leading, not just in how many, but also in getting the cost down, which is very, very interesting and very significant. But then there's other areas where Australia is not leading. We already talked about one, which is the massive overdependence on diesel. And there's clearly a, that's partly even if you subsidise diesel you get diesel, clearly. But there's also, you've got coal, you're still using coal and you're retiring it. And then there's, I'm not sure where I should put Australia on the, I don't think there's anybody who would be in the Premier League globally on how to replace fossil assets.

LD

Well, look, let's put it in perspective, because I would contend to you, Michael, that Victoria is actually leading the country in terms of the plan and the actual outcomes in terms of the plan. So when we were first elected about 10 years ago, we had a reliance on coal generation that was around in the high 80%s.

ML

For your electricity. 

LD

For our electricity, right. We are now down to 53% reliance on coal generation. And we started from a base of having less than 11% of our electricity coming from renewable sources in Victoria. In just 10 years, we're up to 44.5%.

ML

And that's very similar, in fact, all of those statistics are actually very similar to China. When I started, and it was a bit longer ago, so 20 years ago China was 80% coal and now it's just over 50% coal and renewables. Well, renewables and nuclear, I think, I'm going to say wind and solar in China are up to 25%. So I'm sure if you add in the hydro and you add in never mind the nuclear, but you add in the hydro, they're probably at 30%. So it's very similar.

LD

No, no, we're actually better than... on those stats, Michael, we're doing a hell of a lot better. So 44.5% of our renewable electricity in 2025 came from renewable sources. But we also need to understand the role that gas has played in this transition.

ML

Just on that renewable, is it mainly wind and solar or do you have some hydro as well?

LD

A very small amount of hydro, but it is mainly wind and solar, the large wind and solar projects. And wind has been a really critical part of getting the mix right.

ML

You'll be importing some of Snowy 2.0's output if you can afford it, right?

LD

Well, look I mean, well, it's a market. So whichever is the cheapest electricity that gets bid into the system every five minutes, because we have a five minute settlement market, comes in on top. But what has been really interesting is the place that big batteries have played in that settlement of pricing for electricity coming into our system. So the Australian Energy Market Operator, as we call it AEMO in Australia, their last report on price trends has shown that because big batteries has outbid gas peaking generation to set the price, it's meant that our overall cost of electricity in the last quarter has been significantly lower than what it otherwise would have been. 

And Victoria has been a standout on that because we actually started on the journey of big batteries going back to 2017. We were the first state to establish a battery storage initiative. We backed that with $20 million and that was quite a lot of money at the time. And that got a few of those big batteries. The first big batteries in Australia started in Victoria and we remain the home of big batteries because we keep incentivising those to keep the price down and firm up renewable electricity.

ML

I'm trying to remember which state had the first big battery, the famous Mike Cannon-Brookes challenged Elon Musk battery.

LD

That was South Australia. That hit the headlines because it was Elon Musk, but I can tell you in Victoria, we were the first ones as a state to develop a policy and get big batteries built in our state from 2017.

ML

And this is an internationally important thing because what you've got in so many systems around the world and definitely in the UK and across Europe, I wouldn't say it's universal, but it's very common, is that if you have a marginal priced power market where the highest cost resource that has to be run to meet demand sets the price for everything, then gas has had a massively disproportionate impact on, that is the settling resource. Gas price, since Russia invaded Ukraine, it came down, now it's gone back up because of the US action in the Gulf. You've got a renewable transition being blamed for what's effectively a gas problem.

And then the blunt response is, let's double down on renewables. But actually what you've demonstrated in Australia is that you can actually do a jujitsu move and go to big batteries and get the gas off the margin using a big battery and therefore making the electricity price much cheaper for everybody, even before you get to these kind of very high penetrations, 70-80-90% of renewables, which are down the line. Is that?

LD

Well, that's exactly right. And we saw that early on when we, because we've got to remember that when we were elected as a state government, a subnational government going back to the end of 2014, we were fairly much alone in the country where we had a conservative federal government that was not interested in renewables and in fact did the opposite.  We'd just come out of a government in Victoria that had put in place the strictest and most backward looking planning laws in the country, land use planning, which meant that we had to undo all of that to be able to unleash the renewable energy.

ML

This was things like the setbacks, how close you can build wind to communities and those sorts of things?

LD

Absolutely. And we were also faced with the coal generators reaching an end of life and needing to plan for replacement electricity coming into our system. And that was really critical. So that meant that we were the first state to set our renewable energy targets. Well, why did we set those in legislation? To give the industry confidence that we were serious. And then we set about introducing the first reverse auctions for renewable electricity run of any state in Australia.  And then, of course, that's springboarded now and being taken up by other states and also the Commonwealth Government. And we also set about getting those big batteries built in our state. That's really critical, and that's why we're in a really strong position right now.

ML

So reverse auctions, I'm not sure if I can say I was a big fan. I'm supposed to be just a neutral analyst. But that was a critical battle back in the period 2012 to 2015 when the feed-in tariff was the thing and the German foreign ministry was sending out trade missions to explain their marvellous technology of feed-in tariffs, which were going to keep renewable prices high forever. And the reverse auction, there was a bunch of us that weighed in and said, you've got to get price signals. 

But your point about the targets and the certainty, it's a fantastic segue. I did warn you that our ethos, our approach is to ask difficult questions on Cleaning Up. And so just in the interest of time, I kind of need to switch slightly to the tougher stuff. So you've got, you're at 44.6% I think it is, of electricity generation from renewables. You've got a target of, if I'm right 65% by 2030 and 95% by 2035, and that means shutting your coal. You've still got those three big coal plants, Yallourn and then the other two, I can never pronounce them.

LD

Yes, one is Loy Yang A and the other is Loy Yang B.

ML

Of which Loy Yang A is by far the biggest one, isn't it?

LD

That's right. So this is the other part of what is a very complex mathematical equation. We also need to understand that the markets react knowing that there will be a demand for renewable electricity that's still to be built. So EnergyAustralia that owns the Yallourn power station is due to retire in 2028. EnergyAustralia have a structured transition agreement with the state of Victoria to have that plant closed in 2028. Now we did that, we struck that about three years ago. Now why? To make it really clear to the market, you're going to have a gap there, get on and get the replacement electricity built, get the batteries built. And that is absolutely happening.

ML

Do you know how fast time passes? That was 2021. 

LD

21? There you go. 

ML

But the question is, is that date 2028 set in stone? 

LD

Absolutely.

ML

Absolutely. So it will shut in 2028?

LD

It will shut and EnergyAustralia are already starting to wind back some of their activities at that station and the mine.

ML

I know there was some public, there was some to and fro about, was there a negotiation going on about keeping it open?

LD

No, well can I just say that there are conservative elements of the mainstream media whose objective is to punch out the confidence in investors for the replacement electricity that's got to be built. There have never been any negotiations since 2021. EnergyAustralia and our government are at one and remain at one. And in fact, EnergyAustralia is already planning alternatives to their power station exiting the market. And that's really critical for investor confidence. And that's why we keep getting those new technologies built so that we don't have a gap in the market and we keep those power prices as low as we can.

ML

If you want to kill all discussion of that, why not redact the bits that need to be redacted and release the deal?

LD

Well, these are commercial in confidence arrangements.

ML

Redact the commercial bit, redact the payment numbers or whatever, but the framework of it, how are you going to ensure that it actually happens? And let's put it this way, how you're remunerating them for sticking to it, those sorts of things. Not necessarily the numbers, I get that those are commercially confidential, but why not just release the thing?

LD

We're absolutely committed to this. We've not wavered from it and neither has EnergyAustralia. And can I say to you that investors continue to invest in Victoria and also point to the fact that we have a structured transition agreement with AGL, who are the owners of the Loy Yang mine and Loy Yang A power station for a closure in 2035, and that will happen also.

ML

So that is, and so these contracts that we can't see, they say they allow no possibility of either Yallourn or Loy Yang A and B going beyond those dates?

LD

Well, they will close. And those companies have said they will close and they are already building their alternative supply of electricity and backup support for those replacements.

ML

But you say they're building the replacement, but they are independent competitive companies. So they're not responsible for producing the replacement. That could be, it could come from onshore wind, solar, it could come from offshore wind, some of it could come from Snowy, wherever it could be traded. So the onus can't possibly be on them to produce replacement supply.

LD

It's not on them, no, it's on all of us. The reality is EnergyAustralia are a massive company in Australia, they are also gentailers. AGL, the owners of the Loy Yang A power station and the mine are gentailers. They have a significant book of customers, they are in the top three energy companies in the country. However, we're going to need a lot more renewable electricity built between now and 2035, between now and 2040. And we've absolutely got a strong pipeline of projects that have come in seeking planning approval in Victoria and are being built..

Because people know that with the certainty that we're giving them through those contracts that have been settled with those two businesses, AGL and EnergyAustralia, plus of course all of the transmission planning that our state has now taken on responsibility for away from the national market that we're not accountable to any elected governments, taking control of that. Just last week, we gazetted, we declared, I declared the new renewable energy zones in Victoria, six zones, including for offshore wind and of course, making sure that we have transmission built in anticipation of those renewable electricity projects that need to be in place to ensure that not only can we keep the lights on, but we have the cheapest and continue to have the cheapest wholesale electricity prices in the country. And guess what? That's what we've got in Victoria.

ML

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ML

So the coal is going to shut and you've touched on what we need to do, which is you need transmission and you need generation. And 95%, let's focus on probably 2035, because 2035 is kind of tomorrow anyway, in terms of building infrastructure. Not only does it have to meet current demand, you made a very good point, I hope our audience understood that gentailer, what you were saying there if I could gloss it, is that because they also sell electricity, they're shutting some of essentially their supply. So they are going to have to, as I said they don’t have to provide, they don't have to fill the gap, you're saying that they do because of the ‘tailor’ bit of the gentailer.

LD

It's a very lucrative part of their business, supplying electricity to their customers.

ML

But when you say we all have to do this, you're the Minister. So I'm going to push back on that.

LD

Absolutely. I always take responsibility.

ML

You, Lily, need to make sure that there is enough supply and also that there is transmission. And the transmission is unpopular, let's be clear, that all has to arrive on time. And then supply, including offshore wind. So there's a few things there that I think the Australian part of our audience will go, hmm, this could get spicy.

LD

Oh, well, look, what is important is this right, so we took over responsibility for planning and getting transmission built away from what was the national market body, the Australian Energy Market Operator, which was turning back to Victoria because, no criticism of any of the national market bodies, but when we ended up with the national electricity market going back nearly 30 years ago, effectively a lot of the rules around transmission and distribution and generation went to market bodies that were not elected, certainly were not accountable to voting populations, and were not building and planning in anticipation of this big transition that we've got underway.

So transmission needed to come back to Victoria. We established VicGrid, so Victoria grid, transmission grid, an infrastructure body that is doing that really careful planning to not overbuild on transmission networks, but to make sure that what is needed to be built is there in time for those that are building the renewable electricity generation, know that once their project is built, it will actually be able to send electricity into the grid.

ML

But you already have a curtailment problem. You already have wind farms, I think particularly wind if I've understood, actually no, wind and solar that is being curtailed, because the transmission grid can't accept that much electricity.

LD

And that is why we've taken control of that. That's why we could see that that was becoming a bigger problem and we needed to do something about it and that's why we've taken control of it. Now, there are a couple of big transmission projects that are now being built. One is what we call the Western Renewable Link, which will absolutely once built unlock further opportunity for the existing generators to remove their curtailments, but also have more renewable energy projects built along the corridor of that transmission project.

ML

But it is unpopular, and people don't like transmission. Particularly the drive on the Great Ocean Road, got to make sure I get the name right, beautiful, beautiful countryside. I will say if anybody is looking to plan a holiday, honestly I was just bowled over. 

LD

Yeah, it's beautiful, absolutely. 

ML

But you've got that, and then you've got your agricultural areas, but also I mean it may not be quite as touristy, but people don't like transmission. And you've got your little model of a transmission, the audience can't see this, certainly not the podcast audience, but there's a pylon there. You like pylons, not everybody likes pylons, a lot of people hate pylons. And of all of the energy transition, the easiest thing to slow down and stop is actually pylons.

LD

Well, that's true. And look, I mean I've always been really clear about this. You know, certainly it's not an easy thing. It's not an easy thing to plan new routes for transmission projects, but ultimately they need to be built. And what we've been very clear with communities is that we cannot build renewable electricity without additional transmission. And some of it is about augmenting the existing transmission infrastructure, it's not about expanding. In some ways we won't need to expand, but in other areas, we will need to build that new transmission because ultimately this is a broad public good. It's about our economy and making sure that we can deliver that replacement electricity when it's needed.

ML

But there's a risk. If the transmission is delayed, you could be as successful as you want on building the new, and there's a risk. The Auditor General I believe, looked at the risk register, extraordinarily, a risk register for the state is not published. I was very surprised to find that, I like risk registers. And the Auditor General said that there's risks in shutting the coal and either a risk that the replacement generation, particularly offshore wind, may not be there in time, and also that the transmission may not be there in time, and asked for the modelling. You said it's been modelled in great detail, fine, but you didn't release the model.

LD

Well, look, there are risks in everything that we do, and it's about what you do to mitigate the risk. And what we've done in Victoria is take back control of the planning around transmission. We've also changed our laws in Victoria to enable us to move ahead with key elements of the transmission process, whilst it's going through planning approvals processes. And all of this is about shaving off time, because time is money, and getting these projects built, and they will be built.

ML

But you might be doing all the right things perfectly, but one of the ways you manage risk is transparency. You tell people, you let people decide whether they believe that you've managed the risk, whether you've acknowledged all the different sources of risk, and whether they need to protect themselves by maybe doing more. If it's a company, they might need to do some private wire solo, buy an even bigger battery, or whatever it is. They need information to manage risk. And there's a couple of areas that I've picked up as I've been travelling around, but also preparing and reading, where you've decided that you're doing everything right, and it's better not to share information. Is that a fair criticism? Why is it not fair?

LD

Well it's not fair because, and all due respect to the Auditor General but I look and governments look to the Australian Energy Market Operator, which is the independent market operator that reports on the health of our transition. And the Market Operator, in their last report released last year in terms of electricity supply, they do a health check report every year jurisdiction by jurisdiction, so state by state. And they have been really absolutely clear that for at least the next 10 years, Victoria does not have an energy security or reliability problem. And that is because of all of the careful planning that we have done, and the runs on the board in terms of what we've been able to deliver. So the market operator basically is the one that's given us the tick when it comes to that health report.

ML

With respect the Market Operator, unless they have seen the deals with Loy Yang and Yallourn and unless they have the information, I mean, you have an independent arbiter who’s supposed…

LD

But the deals are deals about a closure date and agreements around what the workforce will receive by way of training to be able to prepare them for alternative employment.

ML

But Lily, the modelling of how, forget the deals for a second that's fine forget the deals, but the modelling on how you're going to replace that lost coal-fired power, if you don't share it, how can people sign off? There is an independent arbiter that is designed within the political system of Victoria, because okay if you say all of this is commercially sensitive, so we can't just share all of the modelling because it's market moving, okay fine. But there's a process whereby somebody can look at it who is trusted by, supposedly trusted and supposedly confidential, independent arbiter, why have you not provided that modelling to the independent arbiter? Because the upper house has asked you to and you haven't.

LD

Well, what I would say is that it's the Australian Energy Market Operator that is absolutely the industry expert when it comes to checking all of the elements of the transition that each state has in place to be able to manage the transition well for the replacement, for the closure of the coal generators. And the Market Operator for Victoria has said for at least the next 10 years, Victoria will not have a reliability electricity problem, nor a security of electricity problem because of what we've committed to doing and then actually delivering. And ultimately, I think Victorians want to hear, Australians want to hear that the independent industry expert has given us the tick of approval. Now, that doesn't mean that we don't keep doing what we're doing. We absolutely have to and we've got to continue on this path.

ML

How central is offshore wind? The auction that is, I don't know how many if it's been published, how many gigawatts of offshore wind are you looking for? You've got some fantastic developers there. People talk about Star of the South as one of them, but there's I think 12 others. How much offshore wind, how central, how much will that cost?

LD

Well, look, that is an absolutely important part of our transition. When we look at offshore wind, when we do offshore wind, we'd have to do less onshore. And onshore means less transmission. That doesn't mean though that we do offshore wind and we don't need to keep building onshore. We still will continue to need to build onshore. 

ML

Those six zones.

LD

Well, that's exactly right. So it's less pressure on the actual physical areas of our state, the landmass and land use challenges, absolutely. So our commitments are around the first auction obtaining two gigawatt of capacity for the first auction, which kicks off in August and it will kick off and we will have the first offshore wind energy projects built in Victoria. We do have a nine gigawatt target of offshore wind capacity by 2040. At the same time during that whole period, we will also need to continue to build onshore, whether it's large solar and batteries and of course wind projects in Victoria.

ML

Can I ask what price are you expecting? Because the history and I'm based in the UK, at one point, we had an auction that came up with this price of £37, of course it was 2012 money. But now in real money, the last auction was £90, which is about AU$180 per megawatt hour. If it's AU$180 per megawatt hour, is that a good deal, is that something that would you, are you going to put a price cap that stops that from happening, and if so doesn't that leave you a hole?

LD

Yeah, well look, and what's important, of course, is that once the auction itself, which kicks off in August, we'll have all of that relevant information built into the tender documents and that's really important. Ultimately, we want to get the best priced projects coming through the auction, but we also want to make sure that they get built. Now, we've learned a lot from countries that have come before us.

ML

Is there a scenario though, where you just don't get to an acceptable price? Do you know what price you would say, sorry that's a bad deal, and we'll do more?

LD

Yeah, but we're not going to disclose what we hope to get from a competitive tender process, which will be a very competitive one. We have, as you mentioned, fantastic global players that are really keen to build in Victoria. But what we do know is the counterfactual. The combination of offshore wind and the continuation of building onshore, our replacement electricity through renewable sources, and the transmission that we need, when you take a whole system approach and understanding of all this, is cheaper than the counterfactual.  The counterfactual is you build out a lot more gas generation than what you otherwise would need, that you keep our coal generators, which are less reliable, sticking around for a lot longer. And that's by the way what our opposition is wanting to do, and prices will go up.

ML

But Lily, cheaper than the counterfactual based on a model that you won't release. Do you understand the issue and the way I'm driving? I'm a big transparency fan.

LD

No, I get that. But, you know, it's not just Lily D'Ambrosio, the Minister in Victoria, saying this. We've had all of the experts, we've had the CSIRO, which is our Commonwealth Science and Industrial Research Organisation.

ML

Innovation Research, I warned you about the acronym claxon.

LD

Very good. And the Market Operator and many other independent authorities are really clear about this, because this was a hard fought out debate during the last federal election, when proponents were pushing nuclear or more coal or new coal. And the evidence was absolutely palpable. The cheapest way to transition our ageing fleet of generators is more renewables, not less, is more renewables and not nuclear. And right now, that is the counterfactual and the evidence has been borne out by the facts.

ML

I would love to move on to talk about well, we're sadly running out of time.

LD

And can I just say, gas is still going to be really important for us in terms of that 5% peak in capacity that we need by 2035.

ML

Okay so now you've mentioned gas. I was going to try and give you a free pass on because the other thing that you are doing, which is unpopular is, gas in homes. Well over half of your homes are heated with gas, 90% of your homes have got some gas heating.

LD

Dual fuel, as we call it.

ML

Dual fuel. And to get to your target, all of that has to come out. I mean, you have to essentially decommission the reticulated gas network and have all your homes on electric. And what you've said is that even an existing appliance, if it breaks you will not be allowed to replace it with gas supplies. That is a very, very tough thing politically to get through, right?

LD

But let's, let's boil it down to what we've decided. Okay now it is true that Victoria compared to other states is heavily reliant on gas for our homes.

ML

For historic reasons.

LD

For historic reasons, gas was absolutely really cheap when it was discovered in the Bass Strait, which is for international viewers between Tasmania and Victoria. And that's supplied not just Victoria with cheap gas, but other states. Those resources are depleting. The physical, the geology is, we know that less and less gas is now available and we've got to pivot. Now the thing is too, of course, since the 2010s

ML

You don't have to pivot, there are other sources of gas.  

LD

But let's also consider the whole of the story of gas. Gas is very, very expensive. Australia started the gas export market, we entered the global market in 2017, I think it was. And from that point on, our gas prices were tied to the global price, which meant that there was a big jump in gas prices, even for domestic gas.

ML

But Chris Bowen could reserve gas and do something about that, Chris Bowen, the Federal Minister of Energy and Climate.

LD

And can I just say, Victoria was the lone voice going back to, cause I've been around a while, going back to 2016, 2017. 

ML

Do you know, I remember that conversation about reservation.

LD

That's right. and myself and the Premier at the time, Dan Andrews called on Scott Morrison, who was the Prime Minister at the time, I think it could have been him or Malcolm Turnbull, to have a gas domestic reserve for the country. Because it was absolutely ludicrous that a country that had so much gas produced north of Victoria was, too much of it was being sent overseas. And that meant that we were struggling to have enough gas to meet our own domestic needs. That is crazy, it should never have been allowed.

ML

But if you fix that, the reality is that the problem with gas is that you won't hit the climate, you won't hit net zero by 2050. If you do, you could fix the gas price problem by working with the Federal Energy and Climate Department. But the reality is you would then miss net zero, you could give up on net zero effectively if you do that.

LD

Look, I mean, the Commonwealth Government have made a commitment around gas reservation policies and they're working through exactly what that needs to look like. And that's a commitment that they've made. We welcome that because we called for that for a long time. But the reality is right now, and for a number of years and into the future, the prices of gas compared to electricity in the home are higher. We want to make sure that the cost of living, the transition is going to be really critical in the context of a cost of living debate, because if you lose social licence in this, you lose the authority to be able to take action on climate. And it's about helping people save money on their bills.

ML

Isn't that exactly the issue, though, the social licence? Because if what you're saying is that electrification, replacing those appliances with electric will be so much cheaper because we're worried about the cost of living, then why do you need to ban the gas replacement? People should be flocking to the electric. So you can't, you know, there's a bit of benevolent dictatorship going on.

LD

No, no, look, I reject that. I reject that. I mean, if you want to read the Murdoch media, they will point to everyone as being crazy lefties and the rest but that's not what this is about. I can tell you more and more Victorians can see they get their gas bill every two months and they can see and they struggle with the notion of actually finding the money to pay for it. OK, people understand people are not mugs. People understand that gas prices have gone through the roof. People understand that with the new technologies that are available, with heat pump technologies, more energy efficient electric appliances, that there is a world where they can reduce their energy bills, their energy costs. Now, what we decided as a government is that we were very much a standout going back in the day. And I grew up in the 70s where, you know, every new housing development were required by law to have dual fuel. OK, they had to have gas reticulation. 

We decided that we can't continue to grow a gas network to new housing developments because it is a very expensive fuel. And importantly, you actually have a sunk cost that needs to be recovered from consumers for years to come. We don't want to bind and lock Victorians into heavy prices for gas for years to come. Now, what we've decided is that new homes that are built need to be all electric, new housing developments, the ones that have got needing new planning approvals, all electric. In existing homes, what we've said is that we understand that we can help Victorians with the transition by identifying the gas hot water systems. What we've said there is that as gas hot water appliances reach the end of life, one of the ways to help Victorians reduce their energy bills is that those replacement hot water systems need to be heat pump technology, electric efficient technology. And those rules start from March next year.

So if people want to continue to heat their rooms with gas systems, they can do that. If they want to continue cooking on a gas stove, they can continue to do that. But you know what we've done though, is we've also made available an opportunity for people when they when they have the whether it's their hot water system or whether their room heater or their gas stop, when it breaks down, we've got the biggest energy efficiency programme in the country, which means that they can swap out any of those appliances and that need not cost them any more to put in an energy efficient electric heat pump appliance or indeed a cooktop. So that's really important. So people have got that choice.

Hot water is really important. I don't think people really care about how their hot water systems are heated, how their water is heated. And that is why we've got those policies in place. And we're determined to keep that going because we know it will save Victorians hundreds of dollars off their energy bills each and every year. And we make no apologies for that because we need to reduce our reliance on gas. We need to move to greater energy efficiency. And you know what, with the gas, the Victorian gas that we conserve through these measures, we will be saving enough gas, conserving the existing Victorian gas, even though it's expensive, it's cheaper than gas from the north of the country. We will have conserved enough gas in the homes that by 2035, it will equal about 85% of the industrial gas needs in Victoria. That's like finding another gas project off the coast that we don't have to find.

ML

Lily, I knew if we started with gas that it would be a fascinating conversation. It is a fascinating one.

LD

It is fascinating but it's a complex one too, and that's why you just can't have a one line that explains everything about it because it is complex.

ML

And I'll be honest, I also meet others as I go around and I talk to other political leaders, and then I find them not doing those things. And I can assure you, I give them exactly as hard a time for not doing that, possibly a harder time for not doing those things…

LD

And you should, and you should.

ML

As I've given you for doing those. But this is a fascinating conversation because these are exactly, this is what they call the sausage making of the transition. This is what it looks like. And I've been absolutely fascinated. I just am aware that I've gone past the time that you very kindly allocated to speak to us here today. So I'm going to draw it to a close so that you can get on with actually doing the things that we've just been talking about.

LD

Well, thank you very much, Michael. The reality is leadership in energy is really critical. And that means sometimes having to spend the time and having those conversations and often having repeat conversations with the community about why we are doing what we're doing. And like I said, people aren't mugs. And whilst people think that they can communicate all policies through a social media meme or some AI generated thing on a social media post, people's situations, people's lives are far more complex.  And people want to know that the leadership has an understanding of what's needed to be done. Absolutely get that social licence in place and get on and get it done. And ultimately, I'm about driving cost of living improvements for every Victorian and managing a transition that everyone can be proud of and be confident in.

ML

Thank you very much. And hopefully Cleaning Up plays a small role in at least informing the discussion and letting people form their opinions. And so again, thank you very much for your time.

LD

Thank you very much.

ML

Thank you. So that was Lily D'Ambrosio, Minister for Climate Action and Energy, as well as Minister for the State Electricity Commission in the great state of Victoria, Australia. As always, we'll put links in the show notes for resources that we mentioned during our conversation, a number of state energy plans and so on. I'd like to thank our cameraman here in Melbourne visiting from Sydney, Rob Moorman. Also Jo Jagger and Kendall Smith, head of operations for their hard work putting this Australia tour together, producer Oscar Boyd, video editor Jamie Oliver, the team behind the scenes at Cleaning Up. Also the Leadership Circle without whom none of this would be possible. And of course, you the audience for spending time with us here today. Please make sure that you subscribe to our newsletter at cleaninguppod.substack.com so you don't miss any of the other episodes in this Australia Deep Dive or our normal Cleaning Up programming. That's cleaninguppod.substack.com. 

ML

Cleaning Up is proud to be supported by its Leadership Circle. The members are Actis, Alcazar Energy, Arup, Copenhagen Infrastructure Partners, Cygnum Capital, Davidson Kempner, EcoPragma Capital, EDP, Eurelectric, the Gilardini Foundation, KKR, Mitsubishi Heavy Industries, National Grid, Octopus Energy, Quadrature Climate Foundation, Schneider Electric, SDCL, and Wärtsilä. For more information on the Leadership Circle, please visit cleaningup.live. If you're enjoying this episode, please hit like, leave a comment, and also recommend it to friends, family, colleagues, and absolutely everyone. To browse our archive of around 250 past episodes and to subscribe to our free newsletter, visit cleaningup.live.