The Australian state of Victoria, home to the city of Melbourne, is the country’s most densely populated state and also its most dependent on fossil gas. In this episode, Lily D’Ambrosio, Victoria’s Minister for Climate Action, shares about the state government’s aim to shift away from fossil gas, its aptly named Gas Substitution Roadmap, and the current status of its decarbonization push.
Text transcript:
David Roberts
When I visited Melbourne on my trip through Australia last year, just outside my hotel window was an array of what looked like miniature smokestacks. Periodically, they would belch great synchronous gusts of blue flame into the sky. The effect was visually striking, but I kept thinking … is that fossil gas?
Listener, it was. Victoria, the state that contains Melbourne down in the southeastern corner of Australia, is the country’s second smallest state geographically, but its second most populated, its most densely populated, and most importantly for our purposes here, its most dependent on fossil gas. Fully 80 percent Victoria homes are connected to the fossil gas network, and that number is rising, even in the face of the state’s ambitious decarbonization targets. On top of that, the state is also home to considerable oil and gas production.
The state’s Labor government confronted the situation last year with a Gas Substitution Roadmap, a package of policies that would combine restrictions on new gas hookups, tightened energy-efficiency standards, and subsidies for residential electrification. Most notably, it was forthright about the fact that the state would need to transition off of fossil gas entirely at some point and that these were first steps that would be followed by others.
Last month saw the release of the first major update to the roadmap, which seemed like a good excuse to reach out and talk it over with someone there. So I contacted Lily D'Ambrosio, who has been a member of the Victorian Legislative Assembly since 2002 and is currently the state’s Minister for Energy, Environment, and Climate Change.
We talked about what the roadmap says, some of the problems it has not yet addressed, the role of biomethane and hydrogen in a decarbonized state, the politics of fossil gas, and much more. It was educational and even somewhat inspirational.
All right, then, let's get to it. Lily D'Ambrosio, welcome to Volts. Thank you so much for coming.
Lily D’Ambrosio
My pleasure, David. Thank you.
David Roberts
So I guess I want to start with a big-picture question before we get into some of the details about the plan. I think, especially for someone looking from the outside, from the US, I see Victoria, here, it's the second smallest physically, but the second most populated Australian state. It is the most intensive gas user of any state in Australia. There's more people hooked up to the gas system in Victoria than in any other state, and it's one of the top fossil gas producers in Australia. So just looking from the outside, I think, how is it in the state that uses and produces so much gas, you have found the political wherewithal to declare pretty publicly and explicitly that you're transitioning off gas? What is the political answer to that riddle?
Lily D’Ambrosio
Well, look, thank you. That's a really good way to frame it. But can I also add to it, not only have we got the biggest challenge when it comes to fossil gas, it's also the fact that we have had an electricity system which has been the most carbon intensive because it's relied almost totally on lignite, that is, brown coal. Compared to any other state in the country, it's been the dirtiest form of electricity generation. And in fact, we've been a net exporter of that dirty, polluting brown coal electricity generation. And we're also a net exporter of the gas.
So it's a double challenge for us. Now, the political will comes from a number of realities. One is that you've really got to be very clear about what your ambition is. I mean, things don't happen by accident. Certainly not big transformative changes in an economy. None of that ever happens by accident. Certainly not any that are ambitious in a positive net sense. So what we've had in Victoria is effectively in the last 20 years, the majority of that time, other than about four of those years, it's been led by a Labor government. And the Labor government has been very committed to climate change, to the development of renewable electricity, and at the same time is delivering net benefits to consumers, especially those who are most vulnerable.
Because, David, as you will know, and we can certainly have the further conversation, is that you can't really manage a transition in a way that is ambitious if you leave a whole bunch of people behind, those that don't have the means to be able to come along for the journey. And that's why we've been different in Victoria. It's been a deliberate strategy. It's been about the cost of living, as it has been about reducing our emissions, as it has been about creating those tens of thousands of new jobs that come from building renewable energy. And of course, there's a lot more to it than that, but very much we've been able to sell this agenda, this program, by being able to ensure that Victorians aren't left behind as part of the transition.
David Roberts
So you think you've done enough of that in the lead up to this, to build up enough trust and unity to take this big step?
Lily D’Ambrosio
Well, unity is a different thing. If you're asking the question about unity across political parties, I will say to you that if Labor governments had not been elected, we would have seen an opposition that was building today, new coal fire generation, that would not be taking the steps that we're taking with the need to move away from fossil gas, that would have had fracking of gas in Victoria, that would have done away with our energy efficiency programs. We've got the most sophisticated one in the country and probably amongst the most sophisticated in the world. I'm happy to go through that at the right time.
But also a solar homes program that has delivered more than a quarter of a million solar PV systems and batteries to Victorian homes across the state in just a number of years — just about eight years. So none of this would have actually been there, it wouldn't have. Now, in terms of the population who keep voting for us, I'm really pleased that they do. But the point is, though, that you can never take things for granted. We know that building more renewable energy is important because it's the cheapest form of new build that you can have in the system.
We know that our coal generators are becoming less and less reliable with every year that they age. And we've already had one that closed down during our time in government back in 2016-17. Two more have been slated to close, and there is a third one that remains. So we've got to build out the system. If we don't have some ambition actually building the replacement power, well, how are the lights going to stay on? So these are all really critical things. But again, these things don't just happen by accident in terms of the way that the matters present themselves, the challenges present themselves.
They've got to be done with a very coordinated and a sophisticated program and agenda to deliver. At the end of the day, we know what we want to deliver. How we do that is vitally equally important, so that we're not leaving people behind, leaving them stranded. And that's one thing that we're very, very pleased to do and to be able to deliver.
David Roberts
It's funny. I said unity, and the minute I said it, I knew that would catch your ear. But it's funny. I'm so accustomed at this point to thinking of our conservative party as useless non-participants. When I say unity, I really just mean unity in the Labor party. Enough unity in the Labor Party to do this.
Lily D’Ambrosio
Yeah, absolutely.
David Roberts
So it's called the Gas Substitution Roadmap, and the first edition of it came out last year. Tell us a little bit about what led up to it. I know there have been programs to boost renewable energy. There's been energy efficiency programs. There's been bits and pieces of this, how much of it was new versus just kind of like wanting to put a stake in the ground and really sort of just say what you're doing.
Lily D’Ambrosio
We've made a lot of progress on energy efficiency. Happy to talk about that program separately. But in terms of why a Gas Substitution Roadmap? Now, can I say to you that there was a bit of a discussion internally about what we should call this document. Sometimes I think you need to say what it actually means about substituting out gas or fossil gas, and that's really important because —
David Roberts
It's quite clear.
Lily D’Ambrosio
But the thing is this, right, is when you think about where our emissions come from in Victoria, we know what the solution is to decarbonizing the electricity system. We're on our way. We've got a 95% renewable electricity target by 2035. We're soon to legislate that. We've got energy storage targets about to legislate those. So we know what the recipe is and the programs that are needed to decarbonize electricity. You will be shocked if I say to you that 17% of our emissions in Victoria, statewide, economy-wide, come from the use of fossil gas. That is a massive contributor to our emissions challenge.
A massive contributor. And the reality is right now, David, gas usage in Victoria has not even peaked. It's still going up. And that's why if we're going to be serious in being able to deliver on our emissions reduction targets, we've got a target of 45% to 50% reduction of emissions by 2030. That's on 2005 levels, and we're going to have a big jump to 75% to 80% reduction by 2035.
David Roberts
That's just Victoria, not Australia. How does that compare to the national target?
Lily D’Ambrosio
Well, look, the national target is 43% by 2030. As yet, the Commonwealth government has not set a 2035 target. There are conversations around that. But can I say to you, it's because Victoria has tended to set the pace for change that other states have picked up on. We were the first to legislate renewable energy targets as a state, the first to use reverse auction contracts for difference in a state in the country to actually help to accelerate the development of renewable energy, the first to legislate the targets for those, growing the targets, the first to have a Climate Change Act, the first to have a 50% emissions reduction target by 2030, and the first amongst really very few global jurisdictions, including subnational, to have a 75% to 80% target by 2035.
Now, we've seen a number of other states now joining us, and I'm really pleased that New South Wales is starting to join us for a 2035 target. Queensland, which is the third populous state, is also joining us just in recent days. So a lot of it comes out of Victoria in terms of not just the toe in the water, but actually leading the charge on this stuff. And I'm very pleased that other states are coming along for it. But just on the gas, 17% of our emissions come from gas. 80% of our homes in Victoria, 80% are dual-fuel homes.
That is, they're connected to the gas network. If you compare our emissions from gas in Victoria, it's 17% of our emissions. In New South Wales, emissions from gas consumption — and remembering New South Wales is a bigger state by population — it is around 9%. So it's a massive difference. So we can't achieve our emissions reduction goals unless we tackle and have solutions for fossil gas.
David Roberts
And this was because you were producing relatively cheap gas nearby, right? I mean, is that historically why Victoria is so —?
Lily D’Ambrosio
Yeah, absolutely. Absolutely spot on. Back in the 60s David, just off the coast of Victoria, there was a Bass Strait field of petroleum and gas that was discovered and produced, and therefore that brought onshore — and we don't export any of it. All of the gas that is manufactured and brought onshore into/through Victoria is only for domestic consumption. So Victoria had an abundance of fossil gas that was very, very cheap for a number of decades. And in fact, governments encouraged dual-fuel connections. Not only did they encourage it, up until two years ago, there was a law in Victoria that required all new housing developments, required them to be connected to gas.
David Roberts
No kidding.
Lily D’Ambrosio
No kidding. No kidding, David. Now, we've changed that in Victoria, and we've changed that in Victoria: It's now a choice. But we're actually now needing to go even further to that. But we'll get there. And I'm happy to go through some of the details of what the Gas Roadmap tells us, but the focus is on three things. One is energy efficiency and the importance of that to actually accelerate that. The other one, of course, is electrification, and that is the big program that we're absolutely embracing here in Victoria. And the third one is about alternative gases other than fossil gases.
Now, what role they will play in our economy. There will be a role for alternative gases. Whether there is a role for any of those for consumption or household use, I would say to you that is very, very unlikely. And therefore, we need to think about electrification in a very, very big way.
David Roberts
I want to come back to those other gases later. Those are of great interest to me, but let's talk about the electrification piece. So one piece of this is now new housing has to be all electric in Victoria or new housing that requires — I didn't quite get the technical distinction here. Not quite all new housing yet.
Lily D’Ambrosio
That's right. Let me just unpack it a little bit. There are some new housing estates. So new estates typically require planning permits because you're developing a new estate. There are some homes where, for example, if you pull down an existing home, you rebuild a home. You don't need a planning permit. So all new homes that don't require a planning permit from right now, if you can't come forward and apply for a planning permit for a new house, it has to be all electric. Okay, so now obviously there are a whole bunch of other new homes that are built that don't require planning applications that we need to consider, and that's what we've got under consideration this year.
So, we've made that decision. If you've got a house that you need a planning permit to develop or to build, it has to be all electric from the 1st of January. Now, what we've also announced just before Christmas is the next stage of consideration about what do we do for all of the other properties, all the other homes that currently can be built without a planning application. And then, other than that, what do we do about existing homes, remembering 80% of them are connected up to gas.
David Roberts
We're going to get to that later too. Do you feel like you have, though, a legal way of reaching those other homes? Like you have the power to require them to go all electric should you decide to use it?
Lily D’Ambrosio
That's right. There's absolutely, in Victoria, there are planning laws that are the purview of the state government and then there are also building regulations that are part of the state government's purview also. So we really don't need any commonwealth government levers, if you like, to deal with these questions. I would like some of their money, can I say, David, to share in some of this? But anyway, that's another matter.
David Roberts
What about new commercial and industrial buildings? Are they on the docket somewhere?
Lily D’Ambrosio
Certainly, we want to have conversations around commercial properties. There's another level of consideration there and that is industrial; some commercial where perhaps electrification may not be feasible. That's something that we need to consider very carefully with them and that's something that we will help work to unpack. But can I just be clear that we know that the easiest way to decarbonize a home is by electrification and the technology is there and the dollar savings are absolutely there. So if you build a new home, a detached new home, for example, and you build all electric today, right now, a new home that you build, you'd be saving $1,000 off your energy bills every year.
If you combine that with solar on your roof, you'd actually be saving $2,200 off your energy bills each and every year going all electric.
David Roberts
I meant to say this earlier. I really think the ubiquity and cheapness of rooftop solar is a big piece of the politics here. It's just so tangible to people. Right. In a way, a lot of this other big stuff isn't. People can see that and it really is cheap and it really does save people money. You can see it happening.
Lily D’Ambrosio
Absolutely. And that's why our solar homes program has been very, very successful. I mean, we commenced that program about eight years ago, and right now that's delivered a quarter of a million rooftop solar systems and batteries. And effectively, right now in Victoria, about 8% of our electricity generation is coming from rooftop solar. When you think about California, I think it's around about 7%. So we're really up there. We really are up there. For a cold state that doesn't have as much sun as New South Wales, which is the biggest state by population, then Queensland, the third largest state, solar homes has been so necessary to actually get those panels on people's roofs.
And the thing is, the tangibility of it. You're absolutely spot on, David. People need to feel it, they need to touch it. And what has been really a fantastic testament to the success of targeting of the program with the rebates is that about 56% of the rebates, like 250,000 rebates so far, 56% have gone to households that are earning less than $100,000 a year. So it's very much at the lower income end that are taking it up. And that's why I say to you in my introductory comments, the real critical part of making sure that people give you the confidence and the vote and the support to keep doing this stuff is to make sure that you're not leaving people behind.
And that's why we've been very successful in getting those solar homes rebates out to those people that can otherwise least afford to be able to do it.
David Roberts
Speaking of that, so the roadmap came out last year, and then this year, just last month, I think, was an update. And one of the things in the update was some really tight efficiency standards for rental housing in particular. Which I thought was interesting and very much along the lines of making sure the people in rental housing, which tend to be on the lower end of the income scale, don't get screwed on all this.
Lily D’Ambrosio
And you're really spot on, David, because we know that renters are now becoming a much bigger cohort of the housing market than ever before. And if the US is anything like Australia, the affordability, the lack of affordability for people being able to get into their first home is absolutely gone through the roof. There is a generation of young people now who actually genuinely believe they'll never be able to afford to get into their own home.
David Roberts
Yes.
Lily D’Ambrosio
And that's pretty sad. But then how do we make sure that the benefits of transition are also enjoyed by people living in rental properties? And that's why this is going to be a very serious piece of work that we're going to be undertaking. We're going to do a cost benefit analysis, making sure there's plenty of consultations to see whether we should look at improvements to the minimum energy efficiency standards for rental properties. And some of those properties, apartment living, for example: Even if you had a sympathetic landlord, you might not necessarily be able to get rooftop solar installed. It really depends on the nature of your roof and the rules around the shared space that you have.
David Roberts
So let's talk then about the trickier part here, because this is when I was introduced all this — very first thing that came to mind. It is comparatively easy to sell "let's electrify all new built homes." Because just the economic case for electrification in new build homes is just unbeatable. It's a pretty obvious move to make. But if you're in an existing big drafty home that's built around a fossil gas furnace, then getting the new furnace and doing the retrofits and fiddling with your ducts — you see what I mean? Electrifying existing homes can be much more financially challenging and also challenging in the way of — if people move into an electrified house, it never occurs to them it could be otherwise.
But if people are living in fossil gas homes and you're asking them to change, asking people to change their existing arrangements is always politically fraught and difficult. How are you thinking about approaching this, which is the biggest part of it, I would think, is how do you persuade existing homeowners to switch out?
Lily D’Ambrosio
And look, this is something that we're confronting right now, and there's a lot of myths out there. And in particular, they are myths about what gas can do in a home versus what electricity can do for you in a home. And coincidentally, maybe not surprisingly, the gas industry is the one that's funding all of these myths out there. Surprise, surprise —
David Roberts
With ratepayer money!
Lily D’Ambrosio
With rate — and can I say, it's all about making sure that people stay hooked on gas. Because that means once you've got these sunk costs that stay with you for many, many years, that means that their profits keep going for many, many years at your expense.
So, busting the myths is really critical. Also, leading by example. Like, we know that electric cooktops these days are much different from the electric cooktops of 20 years ago that were heat resistant. Induction cooktops: We know that they're faster, they're cleaner, they reach higher temperatures. You can cook your papadams, whatever it is, on there. And these are all really important to consumers, we know.
David Roberts
But at least here in the US, people feel very emotionally about their gas stoves. This is a big political problem here.
Lily D’Ambrosio
That's right. As if we never had anything before then, like wood cooking. But look, I think what's going to be really critical here, and this is why the cost factor and the bill saving is really critical. At the end of the day, an induction cooktop tends to be the go-to symbol for the gas lobby, if you like. I've seen social media posts with Americans chaining themselves to their gas cookers. I've seen that, David, and I think, oh, my goodness, like, "not over my dead hand" or whatever it was that Charlton Heston once said. But anyway, putting that aside, look, the reality is this: we've had the health and medical associations coming out saying gas combustion in the home is not good for your health.
Now, I'm not saying that Lily D'Ambrosio, who doesn't have a medical degree, I'm not saying it, but the medical profession is. We do have a higher incidence of asthma in Victoria compared to other states. Now, maybe there's a contributing factor there in terms of gas combustion in the home, but we know that they are pollutants. Gases are polluted when it's combustion in the home. But we also know that when you think about it in terms of where your big bill savings are going to be and where your emission savings are going to be, heating your hot water, heating your space, that is your space heating, that's where the bigger cost savings are going to be.
Look, at the end of the day, if most people are comfortable to swap out their gas hot water system at the end of life, perhaps for a heat pump, they're going to be saving a lot of money if their room heater or space heating fails and is beyond repair, swapping that out for, again, a heating and cooling system that is from a heat pump technology is actually going to save you a lot of money anyway on your annual bills. And if the last thing in your house happens to be your cooktop, which is about, I think, 4% of your gas consumption, then that's a journey. I mean, all of this is a journey, but the facts are really clear.
Swapping out those appliances today can give you massive cost savings every single year. But the other question is, how do we help people make those choices? And that's why our energy efficiency program, what we call the Victoria Energy Upgrade program, which is a white certificate scheme, which is based on emissions reductions, obligations that we place on energy retailers, is going to be doing a lot of the big lifting for us because there are a lot of discounted products, whether it's heat pumps for hot water systems, replacement hot water systems, heat pumps for heating and cooling systems, and we're this year adding induction cooktops, discounted products for replacing your old systems.
David Roberts
I saw that. Very exciting. Well, yeah, you can subsidize these things and encourage people to do that, and I know that will have some effect. Could you ever envision at any point in this, though, having to draw a line and say, we're just not going to sell any more gas appliances in Victoria? Is that in the toolbox at any point?
Lily D’Ambrosio
That will be a consideration that will be subject to what we call the regulatory impact statement in Victoria. In Australia, we call it, which is basically doing a cost benefit analysis, a very detailed one. And then, of course, having significant public consultations around that with a whole range of stakeholders out there. And that's what we're going to be kicking off this year. We're going to explore a number of options and the option that you've suggested is one of those. But at the same time, we're not going to be sitting and waiting for that outcome. We're going to be expanding our Victorian Energy Upgrades programs to have those induction cooktops there.
And also, of course, we've had a lot of heat pump technologies and systems that have joined the scheme just in the last six months that give people an option now to replace their gas hot water systems with heat pump systems also. And of course, space heating is joining the list, too.
David Roberts
Am I right in guessing that people who get rooftop solar are going to be more inclined, or are more inclined, to electrify the rest of their stuff, too? It just seems like those go together really well.
Lily D’Ambrosio
I think that's right. They do go together very well. I mean, I'll confess to you that my husband and I, we renovated our home and we've gone all electric, and I'm now far more attuned to the time of day that I turn on my washing machine using my heat pump, hot water system or turn on the dishwasher, because I know that if I turn it on later in the morning, early to mid afternoon, when the panels are doing fine, then I'll be using free power, free electricity for it. So it's a neat combination of having all electric when you've got solar, that's for sure.
But there's still significant savings even if you don't have solar in going all electric.
David Roberts
So this brings up a question, which you alluded to a little bit before, which is one of the risks if you're transitioning off gas that people talk a lot about and worry a lot about is if you have people kind of going off the gas network kind of randomly here and there, the network itself stays the same size and involves the same fixed costs, and those fixed costs end up being distributed among a smaller and smaller group of people. So you get what they call the death spiral, where the fewer people who are hooked up to gas, and it's usually the poorer people, right, the people who can't afford to get off it, who are going to get stuck with that. So that brings up the question of how do you, in an orderly way, kind of electrify an entire branch of the gas system so that you can shut down the whole branch? Have you thought about how to sequence things that way?
Lily D’Ambrosio
We're absolutely alive, and certainly I'm very alive to that as a consequence of very deep and broad electrification. I'll say to you that it's not a problem for us to solve tomorrow or the day after. However, at some point we will need to turn our mind to it, and part of that will be working through what is the value of the existing gas assets? How much revenue have the owners of these pipelines actually extracted from these embedded assets? Because I think that's something that should also be made very clear to the population is that how many times over have these already been paid for?
I'm pulling up some questions here, David, other than giving you my preferred way of dealing with this, but I think it's not simply a matter of thinking that there's a whole bunch of assets there that haven't yet been paid for, because I think a lot of them have already been paid for. The key is to actually, at the moment right now, not make it worse, to stop the spread of the gas pipeline system right now. And that's why we made that decision last year.
David Roberts
So, the decision. No more new gas pipelines.
Lily D’Ambrosio
Sorry. The decision was about new homes that require planning permits. So any new development that has not yet had planning applications or processed planning approval, they will be subject to all electric. So this is about stopping the continuing expansion of the network.
David Roberts
Right, right.
Lily D’Ambrosio
Okay. That's what we announced last year. Now it's about how do we deal with all of the other, however many millions of properties that are still connected to the system.
David Roberts
Well, this might also be a not tomorrow problem, but another risk or issue that people raise is, at least in the know, we're talking about expanding electricity demand pretty radically and it's just very difficult to build new transmission and distribution. It's difficult to build new wires. Is the Australian grid or is the Victoria grid ready for a big influx of new electricity demand?
Lily D’Ambrosio
Well, I think the experience that you're having in the US is no different to the UK, to other parts of the world, and of course Australia. That is we've had a transmission network that was built according to almost like a "set and forget" system of electricity production and distribution. That's the reality of it. And the reality also though is that we had our transmission system in Victoria, but other states also managed through a very national approach, which I'm not trying to be hypercritical here, but I don't think people understood, the bureaucracies that were established around this, really didn't quite understand the need to plan ahead for a transition that was going to be inevitable.
Understanding that planning and building transmission takes a lot longer to do than actually building replacement power generators. And so everyone is playing catch up now: Victoria, New South Wales, Queensland, other states and other countries are doing the same. So there's a number of projects that are underway in Victoria that are in the planning phase for transmission. There's a new interconnector that is going to be built between Victoria and New South Wales. And also, of course, there will be one between Tasmania and Victoria because in Tasmania we've got the very big hydro plant, and that makes a lot of sense to move variable power from one place to another to store it.
But also we're going to be having our own storage targets for Victoria. And we're also in the middle of planning our transmission network for offshore wind energy production in Victoria. And Victoria will be the first state in the country to develop an offshore wind energy industry.
David Roberts
Oh no kidding. What stage is that in?
Lily D’Ambrosio
Well, we've established targets. So we're looking at a minimum of two gigawatt of new offshore wind energy production by 2032 and we're doubling that by 2035 and then we're looking at nine gigawatt by 2040. We have issued a number of implementation statements to the market. The third one we released just before Christmas, we're looking at opening up our expression of interest process in 2025 and having the first projects awarded in late 2026 and then construction to start sometime after that and be ready to go by 2032. That is the actual generation to be going. So we're the first state to do this.
And, as I said, we're about to legislate those targets. But we've got the program underway. We've got, as I said, the planning around the transmission connection points coming in on shore, looking at corridors for transmission improvements. And the really beautiful thing, David, is that having been and continuing to be the net exporter of power to other states here in Victoria, because we've had that coal generation for decades, we've actually got a fantastic transmission infrastructure in the area of Victoria in the Gippsland region, the Latrobe valley, which will then be put to other uses and it'll be put to use for offshore wind energy production and transmission.
So we're really well placed to be able to, and also the skills locally, to be able to shift workers and provide them with opportunities for alternative types of electricity work.
David Roberts
I'm going to return to that in just one second. But you think in terms of building the grid out to accommodate this new electricity, you're on pace. You're confident the grid is going to be able to handle this?
Lily D’Ambrosio
The grid will definitely be able to handle it. And we've established a new public entity which will deal with our transmission infrastructure needs. We've decided that we can't rely on the national one any longer for planning new transmission and we set about an alternative pathway about three years ago. So we've got our VicGrid, as we call it, and that is a public entity that is doing the planning for new renewable energy zones across our state. There are six of those and there's a couple that are offshore. There are six in total renewable energy zones. And the mapping is happening right now in terms of what the transmission connection points need to be to have those renewable energy zones able to take on more renewable energy projects with confidence that they can actually not just get built, but actually be able to connect unencumbered to the grid and have a road to actually send their power into, because there's a number of constraints that we've got across the current grid — not just in Victoria, New South Wales, we've got the same problem, Queensland and other states — and it's about unlocking some of the projects that have already been built but are not able to be fully free to export power.
But then, of course, make sure that we've got that capacity and the network to take more power on. And all of that's been mapped out and planned. It's about actually getting it done now.
David Roberts
So, back to the skills thing. Another question about this is, if you're a big economic shift from one form of heating, one form of building, one form of construction to another raises the question of jobs. Do you have the skilled workforce in Victoria to handle this? And is building that part of this program?
Lily D’Ambrosio
Absolutely. So this year, we'll be releasing our Victorian Energy Jobs Plan, which will identify and articulate clearly the types of jobs that will be needed for us to achieve our 95% renewable electricity generation by 2035. That includes all the transmission that needs to be built by then. That includes the REZ zones that need to be developed out. That includes, of course, storage projects that also need to be built out to be able to have a fully integrated system that can be reliable, have the power there when Victorians need it. So we know that the amount of new electricity generation and storage that we need to have built between now and 2035 to get us to 95% renewables.
And by the way, David, when I say 95% renewable electricity, that means all coal generation is gone in Victoria.
David Roberts
Yeah, I was going to ask, do you have a plan, a schedule to close those down?
Lily D’Ambrosio
Well, one way or another, there will be no more coal generation in Victoria by 2035. Just on that, we have agreements in place with two of the three remaining generators in Victoria to exit the market by a certain date, unless otherwise agreed, if there's no need for them earlier. And that gives certainty to investors to be able to come knowing that, look, if they invest in this electricity generation, there will be a market for them, all right, which will be important. Then, of course, there is one generator that still has not declared itself. But one way or another, David, there will be no more coal generation in Victoria by 2035.
The other 5% will continue to be reliant until alternative solutions are found, but will continue to be reliant on about 5% of electricity generation on fossil gas, if you like. And we obviously want to try to substitute that out at some point with other technologies. But as it is now there won't be any more coal generation. So those plans are all mapped out and legislated for. And there is some legislation that we've got in Parliament right now to deal with the rest of the emissions profile. We're looking at bringing forward our emissions reduction, well, net zero goals from 2050 to 2045, and that 75% to 80% emissions target by 2035.
And 95% renewable electricity, and the storage targets, and the offshore wind energy targets.
David Roberts
95% renewable electricity. What are you at now?
Lily D’Ambrosio
Now, we have made a massive jump; we're on about just below 38% in Victoria, 37.8%. And when I say what we're measuring, what we're actually measuring is the actual generation, the share of generation in our state. So we're relying on generation in our state. So, it's about getting the jobs and the projects built in our state. Now, can I just say that we're on 37.8 at the end of 2023. We came into government at the end of 2014 having around about 10% of our electricity coming from renewable energy sources. Now, we've made a massive jump, a massive jump in the number of projects built. In the four years before 2014, that's when we were out of government for those four years, I'll tell you what, not one single renewable energy project was given approval by that government. Not one, not one. Okay, so who's in government absolutely matters. Who's in government absolutely matters.
David Roberts
You're preaching to the choir. And this is mostly rooftop solar. Are there big solar fields? Is there wind?
Lily D’Ambrosio
Yes, yes. And in fact, when the previous government, the conservative governments, as I said to you, Labor has been in government for most of these 20 odd years. In that four year period between 2010 and 2014, the conservative governments had a policy, effectively, of killing off the wind energy industry. Not one single new wind farm was given planning approval in those four years because they had the most draconian planning laws around where you could build new wind farms, which meant none of them happened, none of them were going to be built. Okay, so nothing happened and very little happened in terms of large scale solar at all.
It all started happening when we came into government in 2014, driven by targets, but also a lot of deep policy work and the right types of mechanisms to help kick-start the build. So we had reverse auction, the first state in the country to use reverse auction and contracts for difference to get projects starting to be built in our state, because a lot of projects just weren't going to get built unless they — it wasn't about having a grant, it was about the bankability of their project. To be able to reach financial close. And contracts for difference reverse auctions were able to get it happening and kick started.
And, of course, absolutely reforming the planning rules around where you could build wind farms. Now, rooftop solar has grown in its proportion of the 95% renewable electricity that we've set ourselves. So rooftop solar will contribute to that. As I said, we've gone from having one of the lowest uptakes of rooftop solar in the country — because of our weather situation, we're a very cool climate — to being a really big contributor. And we want to continue to grow that, of course. But that'll only happen because of our solar homes program. Big rebates. And a big commitment over a ten year period, to continue those rebates.
David Roberts
Okay. One of the last really big things I wanted to talk about, because there's a lot of ins and outs, a lot of aspects to it, is this question of alternative forms of gas. I know in the US, one of the dynamics that is going on in states with big gas companies, is: Gas companies are trying to sell biomethane as their way to stay alive, basically. They're like, "oh, we'll just transition over to biomethane." And a cursory look at the numbers, quickly: it's ludicrous. There's not enough biomethane to do what fossil gas is now doing. So I'm curious, both, what role do these alternative gases play in your gas transition plan? And sort of like, what role are they playing for the gas companies?
Lily D’Ambrosio
Well, look, that's a really good question. So if we start with biomethane, because you started with that. There is a role for biomethane, but as you said, it's very limited. I mean, the reality is biomethane is going to come from organic waste products. And rather than having it going off into the atmosphere. You capture it and make sure that you use it for a productive purpose and then substitute out your carbon intensive fuel for electricity. Which makes a lot of sense. But it's very limited. That's not to say that we shouldn't do it. But it's not going to be the total answer.
It'll make a contribution. And probably an important contribution in terms of the firming capacity that it could provide. But you don't want to get into a situation where you're actually starting to create, using materials that otherwise would have higher value use simply to feed a big beast that you've oversized. Yes, I think Britain is in that same situation, where I think they've got pellet biomethane or electricity generation: they're importing the pellets.
David Roberts
Yeah, yeah. Some from the US actually. That's a whole — there's a whole backstory there.
Lily D’Ambrosio
Yeah. Now, I've put some limits on how much waste-to-energy production we can have in our state. When I was the environment minister for a few years I had the ability to create some rules around how much can be allocated to waste-to-energy. Now, I know that that's not necessarily the same as biomethane. But importantly, we don't want to end up having waste energy — which are very much incinerators — that end up feeding some other thing that you've created because you don't have enough organic material to feed it. So separating all of those out was something that is very important that we've done that.
We've done that in Victoria. So that's that. It will have a role. It will be very limited. And it should be limited to the alternative uses of the materials that you'd be relying on to produce that.
David Roberts
Well, biomethane, we know pretty well how much there is. And what kind of things you can use it for.
Lily D’Ambrosio
Exactly.
David Roberts
Hydrogen is a much fuzzier question. How are you thinking about hydrogen?
Lily D’Ambrosio
Well, if we just go back to that starting point. About how some of the gas producers have sort of been saying, "well, biomethane, biomethane, because that'll sort of be our saving." That'll save us or string people out for long enough to think that it's still — you know, "don't switch off the gas to your home yet, because you never know." Well, in fact, the same playbook is being used here in Australia. And it's the same playbook that gas producers are using today that the coal industry used to use 5-10 years ago in Australia. Is that "oh, look, there's going to be clean coal." Let's not —
David Roberts
I remember clean coal.
Lily D’Ambrosio
Remember clean coal stuff. And a number of governments, including previous Labor governments. Drank from that Kool Aid, too, I'll confess. Not me. But anyway. But anyway, there is no such thing as clean coal. And as we speak right now, gas producers have made zero progress towards any meaningful swapping out of natural fossil gas with renewable gases in the gas network. They say they've got targets, but they're making no progress whatsoever — other than running a little tin pot trial here and there. However, there will be a role for renewable hydrogen in heavy industry, transportation, aviation fuels, some manufacturing — some manufacturing that need it as a feedstock that is at high heat — unless some other technologies happen.
So, look, with every six months that go past, David, I become more of the view that renewable hydrogen, and that's going to be very important — biomethane to a degree, limited degree — but renewable hydrogen will have to play an important role or its various carrier forms for those heavy industries, shipping, heavy industry, most likely transportation.
David Roberts
Is that something you can see the gas industry getting into, or who's going to do that? And do you envision a lot of that being done in Victoria?
Lily D’Ambrosio
I can't see any gas producers having made any serious effort to move the dial here. They are in the same modus of thinking of fighting a culture war that they want to fight, which is their culture war, not my culture war. I want to fight the cost of living war, which is about getting people electrified, because that's the cheapest way and the quickest way for them to decarbonize and get dollar savings and get money in their pocket rather than embedding for decades expensive fuel. That makes no sense. It's good for the gas producers. It's not good for ordinary Victorians. And that's what it is. That's the reality of it.
David Roberts
The hope here, the vision here is for those uses of gas in industry, say, that can't be electrified. You want to completely replace those with hydrogen or biomethane.
Lily D’Ambrosio
There's been no pronouncements or declarations. But it's a journey, right? And the journey will be, how do we help? Or how do we guide industry to be able to opt for alternative fuels that are emissions free? Now there's work happening at a national level. We've done some work here in Victoria on a renewable hydrogen industry plan. We've put some money into it.
David Roberts
I heard a lot about that when I was down there. A hydrogen superpower.
Lily D’Ambrosio
Everyone wants to be a hydrogen superpower.
David Roberts
Everybody does.
Lily D’Ambrosio
Everybody wants it to be the hydrogen superpower for the world.
David Roberts
I personally am skeptical if the world is going to need a dozen hydrogen superpowers. I'm skeptical that the world's going to need that much hydrogen. But I guess we'll see. They can't all be superpowers.
Lily D’Ambrosio
No, I think that's right. I mean there will be a role for it. Now, what shape it takes, and the cost curve, and when is it going to actually cross over with the existing carbon fuels is a critical question. Now, I know that with the US's Inflation Reduction Act, that is likely to bring forward the cost curve changeover, the cost curve meeting point, if you like, crossover, to I think about 2026 is the last I read, which is really amazing. Can I just say, I'm not asking you to be partisan at all and whatever people think of other policies.
But Biden is doing what previous Democratic presidents should have done 20-25 years ago in terms of trying to rebuild the manufacturing base for that country.
David Roberts
That's what I keep saying. I wish you could come talk to American voters about that because they don't seem to be hearing that message for some reason.
Lily D’Ambrosio
I don't understand it. Maybe not enough of it has actually presented itself in a tangible form in some of those states that remember the days that they lost a lot of industry. I don't know, but certainly there's a lot of money there, a lot of money, and it's actually sucking out a lot of global dollars to the US. But anyway, sorry, so, in terms of that renewable energy, I mean, the cost curve between making hydrogen from renewable or green sources versus making it from other carbon sources and replacing fossil gas altogether is going to happen sooner rather than later.
Europe now has got its own equivalent of an Inflation Reduction Act anyway, in terms of money that's been put into trying to compete with the US. So I think the next three, four, five years, I think we will know what role no-emissions hydrogen will play. We will know what role it will play, I think, for the next 20-30 years. That's my view of it. And the other thing is that we have yet to see bottomed out electrification as an option for a lot of businesses that even today we can't necessarily see a solution for in electrification that hasn't bottomed out yet.
David Roberts
Yes, that's my personal bet is that electrification is going to get a lot farther than people think and shrink that hydrogen space more than people think.
Lily D’Ambrosio
I think that's right.
David Roberts
I've kept you a long time. Let me wrap up with two slightly political questions, or, well, not slightly, completely political questions. One is, I can only assume that a Labor government announcing a transition away from gas in a gas heavy state is kicking up a lot of opposition, a lot of political opposition. I assume the gas companies now are coming after you. So I know US politics pretty well, but know a long way away from Australia. How secure is this pathway that you're on? And is there still the live possibility that it could all get scrapped again?
Lily D’Ambrosio
This is the interesting thing. The Bass Strait gas fields that have been so abundant for however many decades are starting to deplete, and there are very, very few alternative sources of fossil gas that have been found sufficient to replace those depleting fields, which means that probably in the next two to three years, Victoria may cease to be a net exporter of gas. Domestic gas to other states, and for that reason — so, we've got to be ready for this. And frankly, I had this conversation with my government that started quite a while ago about, well, look, this is what's happening.
We're not going to frack because we've outlawed fracking in Victoria and the evidence around what might be available anyway if you were to frack, putting aside the environmental and the agricultural costs of it, we don't believe that there are sufficient amounts there anyway to be a total replacement. So the fact is we've got to go along this route of electrification. We've got to substitute out our reliance on fossil gas for a whole range of reasons. One, of course, it's becoming less available, and it will continue to be that, and it will continue to be expensive. Now, it's still going to be with us for some time to come, that is fossil gas.
No one can turn off the tap overnight or even in five years' time. Well, we'll continue to need it for some years to come. However, its role will need to be diminished. And the only way you can do that is to have a managed transition, because a managed transition is the only way that you can make sure that you don't leave people behind and you don't leave people stranded. Ultimately —
David Roberts
I wish you could come over here and say that to all our state governments and our national government. We're trying to find out if you can do it without planning; we're trying to find out if you can back into it.
Lily D’Ambrosio
I mean, you're in Washington state, I believe, David. So, does your state not have planning laws in terms of — ?
David Roberts
Actually, Washington is — I should brag a little. Washington has excellent policy in place, actually has a really good and extensive amount of policy in place. In fact, a lot of what ended up in the Investment (sic.) Reduction Act was drawn from state policy, and a lot of that was drawn from Washington state policies.
Lily D’Ambrosio
Yeah, David, we had your governor out here just before Christmas, I heard. Yeah, he went down really well.
David Roberts
Yeah, Inslee's great.
Lily D’Ambrosio
Very good. He's doing some good stuff.
David Roberts
So you're facing opposition, but you think in some larger sense this is inevitable. And can't ...
Lily D’Ambrosio
I don't want to say that things are inevitable. You know, we're going through this, and I'll keep saying to people, I keep saying this to the media and anyone who asks me here in Victoria, Australia, this is a journey, but it's a journey that we have to have. And guess what? It'll actually save people a hell of a lot of money, and people are hurting, and it's not getting any better. And why wouldn't you want to do this? Why wouldn't you want to do it? It's all in one direction in terms of the advantages of it.
And people are prepared to come along for the journey and listen and have their views expressed, and that's where we're up to. But I'm very clear that not only do we have the right policy settings, policy is on our side, but so is the politics. And those two things have to always go together. Always have to go together, David.
David Roberts
Well, let me test how much you believe that. Could you imagine with the current politics — because this is a big question that faces a lot of fossil fuel producing countries and states — which is: It is one thing to cut your own demand for fossil fuels and it is one thing to cut your own emissions. Can you envision taking the next step of deliberately restricting production?
Lily D’Ambrosio
For export purposes, you mean?
David Roberts
Or just production generally. Just keep it in the ground.
Lily D’Ambrosio
Keep it in the ground, yes. We've got a lot of coal, and I'm forever mystified by all of the people who think there's still a place for it or some alternative use for it. I mean, sometimes something's going to just stay in the ground. Coal's got to stay in the ground. But look, if I talk simply in terms of Victoria's perspective, our gas is naturally being diminished in terms of supply.
David Roberts
Yeah, it sounds like the decision is being made for you.
Lily D’Ambrosio
Yes, although we made the decision to make fracking illegal, and that's not going to be reversed. We are not going to frack. The others would have fracked and that's not going to happen here in Victoria. So we made a decision to keep gas that could otherwise, unconventional gas, that could otherwise have been extracted. We're leaving that in the ground, definitely. But now it's all about making sure that we don't run out of gas too fast before we're ready. And, well, it's the same with electricity. No one can afford every coal generator in the country to shut down tomorrow because there won't be enough electricity to replace it tomorrow.
So any party that's in government has always got to be a responsible party, but also very ambitious and also being really clear and certain about what the trajectory looks like, but making sure that it's a trajectory that has ambition and complementary policies that actually support the people to come along for that ride, for that journey. It's why we actually set interim emissions reduction targets, David, because we wanted to say to industry, this is not just where we want to be by 2045. In a way, that's easy. Or 2050 or 2040. It's easy to do that, to say that, but where do we want to be by 2025?
Where do we want to be by 2030? Where do we want to be by 2035 and 2040? They're harder policies to land, but they're necessary because the economy then starts making the adjustments, businesses start making the adjustments, and then you start turning your mind to what are the other policies that we need to deploy in the state to get us there? That's why we've got the gas substitution roadmap. That's why we've got that 2035 target of 75% to 80% emissions reduction. That's why we've got solar homes, because we set renewable energy targets of 50% by 2030, and we're upping that to 65% because we're actually doing better than what we thought we would do.
These are all things that complement each other and support an ecosystem to get us there, not just one or two levers. You're never going to get there with just one or two levers.
David Roberts
Well, this has been super fascinating and just heartening and a little slightly jealous-making on my part, but thank you so much for talking us through this journey that you have set out on.
Lily D’Ambrosio
Well, David, thank you so much. I think that your podcast is one that my office is very enthralled by the work that you do, and I've been very keen to take part in this, and I really do want to thank you for the opportunity. And these things are never easy. If I can just leave you with one final comment. If you were to pick a state in the country to embark on a decarbonization pathway, Victoria would not be the first one that you would typically have chosen.
David Roberts
That's what I was trying to get at with my very first question. It's not the one I would have guessed if you just asked me to guess one.
Lily D’Ambrosio
No, but governments have to govern, and they have to lead, and there's no simple way to do that other than through a lot of hard work and talking to a lot of people. You have to talk to people and you have to listen, and you have to test a lot of things, a lot of ideas, some of which didn't work out, but then other ones were meaningful. Then it's all about how that sits with people and whether you're actually talking to them and whether it makes sense to them in the end.
David Roberts
Well, I appreciate you. Thank you so much.
Lily D’Ambrosio
Thank you so much, David. Best wishes to you.
David Roberts
Thank you for listening to the Volts podcast. It is ad-free, powered entirely by listeners like you. If you value conversations like this, please consider becoming a paid Volts subscriber at volts.wtf. Yes, that's volts.wtf. So that I can continue doing this work. Thank you so much and I'll see you next time.
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