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Taxpayers to shell out up to $350 million for Andrews’ energy plan

Victorian taxpayers will cough up hundreds of millions of dollars to help pay for the Andrews Government’s upcoming solar and wind farm auction.

A public subsidy was added to the scheme at the last minute to avoid passing on extra costs to already skyrocketing household bills.

The move will punch a $250-350 million hole in the state Budget, and experts warn the full cost could be much higher. But the exact sum is being hidden from taxpayers: the government argues its contribution, which is capped, could distort the competitive process.

Fears of a worsening energy crisis in Victoria are growing because of the potential for coal-fired power stations to follow on from Hazelwood’s closure earlier this year. Industry sources have told the Herald Sun that Victorian policy, prolonged federal inaction, and a lack of investor certainty meant there were now major doubts whether Yallourn W, supplying about a fifth of the state’s power, would remain open beyond 2022.

According to an Australian Energy Council document, the 43-year-old Latrobe Valley power station could close as early as 2020. Energy Australia has repeatedly said it has enough coal to last until 2032 and it plans to run it until then.

But it has conceded policy settings and market influence may change before then.

The renewable energy auction, aimed at increasing supply, has been welcomed by green groups who say it will bring jobs in emerging industries and lead to a phasing-out of coal-fired generators.

But critics question Victoria going it alone with a state target – against the recommendations of Chief Scientist Alan Finkel’s energy review – and warn a quick closure of more baseload coal stations could cause supply chaos during periods of peak demand.

The Herald Sun has learnt the government considered allowing the first stage of its auction’s costs – which will see solar and wind farm developers bid to build 650 MW of energy – be paid by passing costs on to the energy market.

At that stage, Energy Minister Lily D’Ambrosio told the Herald Sun the VRET, which will help create 1200 construction jobs over two years, would add a “modest” cost to households of about $25 a year.

Ms D’Ambrosio has now confirmed the government would absorb the auction costs.

It claims the VRET will lead to lower wholesale prices and a $30-a-year saving for households, though the modelling of this hasn’t been released.

Federal Energy Minister Josh Frydenberg said the plan, coupled with tripling coal royalties, was a ‘recipe for a higher priced and less stable system’.

The Construction Forestry Mining and Energy Union’s mining division state secretary, Geoff Dyke, said there was no policy to find more reliable baseload power as coal-fired stations closed: “I will be absolutely amazed if we don’t have blackouts this summer.”