Energy in Victoria

A map of major urban areas, coal-fired power stations and mines in the Latrobe Valley.

The first electricity supplies to Melbourne were generated and distributed by a number of private companies and municipal generator and distribution companies. The main municipal-owned power station in Victoria was operated by the Melbourne City Council, which generated electricity from its Spencer Street power station, which opened in 1892, for the city’s residents, as well as being a wholesale supplier to other municipal distributors. The main privately owned company was the Melbourne Electric Supply Company which was established in 1899. The company operated the Richmond power station, which had been opened in 1891, and the Geelong power station.[2] It operated under franchise arrangements with a number of municipal distributors. The final major generator of electricity was the Victorian Railways which in 1918 opened the Newport power station, the largest power station in the urban area, to supply electricity as part of the electrification of Melbourne's suburban trains.[3] These early generators all relied on fuel supplies from the strike prone black coal industry of New South Wales.

Early electricity production in Victoria used relatively simple technology, but transmission over even a short distance was difficult. Initially, it was used only for public events - such as the Duke of Edinburgh's visit in 1867 and a night football match at the MCG in 1879 - and lighting in the theatre. Small scale generating plants were built in Melbourne to serve small areas and industries. However, gas remained the fuel for street lighting in Melbourne until 1894, after the construction of the Spencer Street power station by the Melbourne City Council. This power station generated enough power to light Melbourne's streets. Other councils embraced Melbourne's initiative and streets in many nearby areas - such as Richmond, Essendon, Hawthorn and South Yarra - were also lit by electricity by the late 1890s. Some Councils set up their own distribution networks, including Footscray (1911), Brunswick (1912–13), Port Melbourne (1912–13), Preston (1912), Nunawading (1912), Northcote (1912), Coburg (1914), Heidelberg (1914), Williamstown (1915–16) and Doncaster (1916).[4]

The State Electricity Commission of Victoria (SECV) was formed in 1921 to merge these small operations.^[b] In the 1920s the SECV investigated hydroelectric power generation, in parallel with work on brown coal fired power stations at Yallourn. In 1922 a report was delivered by Messrs J.M. and H.E. Coane relating to the development of potential hydro-electric power on the Goulburn River and the Cerberean Range; their findings were then in turn submitted to the Parliament of Victoria for funding, with the more cost effective project[5] approved in 1922,[6] and the Rubicon Hydroelectric Scheme commenced in that year. For the first ten years of its operation it supplied on average 16.9% of electricity generated by the SECV.

The SECV took over a number of small municipal electricity distributors during the 1920s, and in the 1930s the Melbourne Electric Supply Company was acquired along with its street tramway operations.[2] Despite these acquisitions, municipal controlled distribution companies known as Municipal Electricity Undertakings (MEUs) in the inner urban areas of Melbourne remained outside of SECV control until the privatisation of the industry in the 1990s.[7]

The first electric tram in Melbourne was built in 1889 by the Box Hill and Doncaster Tramway Company Limited, an enterprise which failed in 1896. Electric trams returned in 1906, with the opening of the Victorian Railways' "Electric Street Railway" from St Kilda to Brighton, and was followed in the same year with the opening of the North Melbourne Electric Tramway and Lighting Company (NMETL) system, which opened two lines from the cable tram terminus at Flemington Bridge to Essendon and Saltwater River (now Maribyrnong River).[8] The NMELT was an electricity and tramway company that operated from 1906 to 1922.[9] The electricity section was taken over by the SECV in 1922.[10] The Melbourne and Metropolitan Tramways Board was formed in 1919 and took over all cable and electric trams in Melbourne. The MMTB extended the electric lines, and from 1924 progressively converted the existing cable system to electric traction.[11] By 1940 all Melbourne cable tram had been converted to electric traction. The electrification of the Melbourne railway network took place in the 1920s.

The SECV built the open cut mine in the Latrobe Valley and opened the first of many brown coal fired power stations in the Latrobe Valley. Yallourn power station was built progressively from the 1920s to the 1960s. Since then the SECV opened two more open cut mines in the valley, feeding power stations at Hazelwood and Loy Yang.

The responsibilities of the SECV were privatised between 1995 and 1999. In 1936, Geelong was connected to the state electrical grid, and by the 1960s Geelong A had closed. Geelong B remained for a few more years being used for peak loads only, but closed in 1970 due to the much higher efficiency of the new power stations in the Latrobe Valley. Richmond power station closed in 1976 and Spencer Street power station closed in 1982. Newport power station closed in the 1980s.[3] Hazelwood power station closed in 2017.

Yallourn W Power Station viewed from the south

At present, most electricity in Victoria is generated by burning brown coal in thermal power stations in the Latrobe Valley. One of the major electricity consumers in Victoria is the aluminium smelter at Portland.

Unlike many other states, the major coalfields of Victoria contain brown coal. The high water content of this coal makes it less suited for combustion without specialised technology. As a result, in the early years of Victoria the state was dependent on black coal imports from New South Wales for its fuel needs. In general, brown coal sourced from the Latrobe valley has a low ash content.[12] The ash constituents varies significantly across the region but various silicates and oxides (Mg, Fe, Al, Ca and Na) are typical.[13]

In the 1920s the Latrobe Valley coalfields began to be exploited for power generation.

Additional brown coal reserves were at Altona, and Anglesea, and black coal in the Strzelecki Ranges in South Gippsland. Both the Altona and Strzelecki Ranges coalfields were small in size, and required underground mining. Production in these mines increased into the early 20th century. The Anglesea coalfield has been mined for Alcoa's Anglesea Power Station since the 1960s, before both the power station and coalfield were shut in 2015.

In 2013-14, the Latrobe Valley produced 98.5% of Australia’s total brown coal production at 57.8 Mt, down from 66.7 Mt in 2001-2

Brown coal has 3 times the climate change and global warming causing GHG emissions per KWh of electricity produced as natural gas. Hazelwood Power Station was commonly regarded as the most greenhouse gas polluting power station in Australia, until it closed in 2017. If as is expected after the release of the report of the Garnaut Climate Change Review a cap and trade emissions trading scheme is adopted to reduce the effects of global warming on Australia, electricity produced by burning brown coal will be expected to increase significantly in price. The open cut mine for Hazelwood power plant caught fire in 2014, shrouding residents in Morwell with coal dust for about a month.[14]

Coal mines in Victoria operating in 2019 are:

Dartmouth Dam wall and power station

Victoria has a limited hydroelectric power generation system due to the limited water resources.

The Rubicon Hydroelectric Scheme was completed by the State Electricity Commission of Victoria in 1924, and was an important component of the state electrical grid at the time. It was later followed by the Kiewa Hydroelectric Scheme that was constructed between 1938 and 1961, the Eildon Power Station in 1956, Victoria's involvement in the Snowy Mountains Scheme that was built from the 1950s to 1970s, and the Dartmouth Power Station in 1981.

The 1.5MW solar concentration power station demonstration facility in Mildura

Small-scale personal, commercial and community roof-mounted systems are becoming more prevalent. A large-scale solar energy project located in Mildura is under construction.

Windfarm outside Port Fairy

Trials of wind power in Victoria commenced in 1987, when the State Electricity Commission of Victoria erected a 60 kW capacity Westwind wind generator at Breamlea as a demonstration project. The generator was sold to a private group in 1994 with the privatisation of the SECV.[15] It was not until the early 2000s that the commercial use of wind power for electricity commenced. Wind farms at Codrington, Challicum Hills and Portland were all built by private companies with State Government funding assistance.[16]

By October 2011 there were eight operating wind farms with 428MW of capacity. The development of new wind farms in Victoria became much harder following the election of the Baillieu government who amended the planning scheme in August 2011 to give any landholder within two kilometres a power of veto over a project. This was an unprecedented planning doctrine and according to wind power companies, this change threatened the viability of investment in the state.[17]

As of November 2016, wind farm capacity had increased to 1,249 MW.[18]

In June 2017, the Victorian Government announced a three-year feasibility study for Australia's first offshore windfarm.[19] The project, which could have 250 wind turbines within a 574-square kilometre area, is projected to deliver around 8,000GWh of electricity representing some 18 per cent of Victoria’s power usage and replacing a large part of the output of the Hazelwood Power Station which was closed early 2017.

Town gas was initially supplied to Melbourne by private companies such as the Metropolitan Gas Company from the 1850s, and the Brighton Gas Company which was floated in 1877,[21] and others, all of which operated their own small gasworks which converted black coal into gas, with gasworks being scattered throughout the suburbs. Town gas was used for lighting, heating, and cooking, and replaced kerosene for lighting.[21] It was also used for street lighting before electricity became available starting in the 1890s.

The Gas and Fuel Corporation of Victoria was formed in 1951[22] to manage gas supplies for the state. It took over Metropolitan Gas Company and Brighton Gas Company and over time also acquired the other local municipal and company gas works.[23]

Its first project was the building of a centralised brown coal gasification plant at Morwell. The plant opened in 1956 and used the German Lurgi process to produce gas that was transferred to Melbourne via a high pressure gas pipeline.[24] The production of town gas was changed in the late 1950s when Syngas production was developed, a process that converted waste gases from oil refineries to a useful energy product.[24]

The search for natural gas in Bass Strait off Gippsland commenced in the mid-1960s by Esso Australia and BHP. The floating rig Glomar III was used for exploration drilling, which begun on 27 December 1964. After two months gas was struck, and by June 1965 it was confirmed that a major gas field had been found. Known as the Barracouta field, discovery of the Marlin field followed in March 1966.[25] Both of these fields use offshore drilling rigs as a production base. The Longford gas plant acted as the onshore receiving point for oil and natural gas output from production platforms in Bass Strait. By 1969 the production plant and distribution network were complete, allowing natural gas to be sold to consumers.[26] A majority of Victoria consumers converting gas appliances to natural gas by the 1970s.[27]

VENCorp was established in 1997. In 1994, the Kennett Government privatised[28][29] the distribution, retail and transmission companies, along with the State Electricity Commission of Victoria, Victoria's main electricity utility. The G&FC was wound up in June 1995. Gascor acted as a gas wholesaler, purchasing gas from Esso/BHP-Billiton and on-selling it to private sector gas retailers Origin Energy, AGL and TXU. In March 1999, Envestra (now Australian Gas Networks) acquired part of the former Corporation's distribution network.[30]

Until 1 October 2002, each retailer supplied gas in a defined geographical area, and from that date the gas market in Victoria was opened to new gas retailers and full retail contestability for gas customers was introduced, enabling gas retailers to seek customers state-wide. At that time, there were three retailers, which continued to be the major retailers. Full retail price deregulation occurred in 2009. Victoria Electricity (later Lumo Energy) applied for and obtained a gas retailing licence in December 2004 and commenced gas retailing in early 2005.

In 2005, TXU sold its Australian assets to Singapore Power, which retained the distribution businesses (electricity and natural gas distribution networks) in Victoria, and onsold the remainder. Singapore Power then floated 49% of the business as SP Ausnet, retaining 51%. In May 2013, Singapore Power sold 19.9% of its 51% stake in the business to State Grid Corporation of China.[31] SP AusNet changed its name to AusNet Services in August 2014. In September 2014, Hong Kong-based Cheung Kong Group bought all the shares in Envestra, including APA's 33.4% stake, while APA retained the operation and management of Envestra's assets until 2027. In October 2014 Envestra's name was changed to Australian Gas Networks Limited.[32]

In September 1998, the Esso Longford gas explosion took place in which two workers died and eight were injured, and resulted in gas supplies in the State being severely affected for two weeks.

Additional gas reserves were discovered in the Otway Basin offshore from the Otway Ranges in recent years. BHP Billiton discovered the Minerva gas field 1993, with production commencing in 2004.[33] The Santos Limited operated Casino field was discovered in 2002, and started production in 2006.[34] In 2002 Woodside Petroleum prepared to develop their Geographe and Thylacine gas fields.[35] These newer gas fields use undersea wellheads connected to the shore and production facilities with pipelines, minimising the visual impact on the coastline.

Today approximately 1.5 million domestic customers in Victoria are supplied with gas via over 25,000 kilometres of mains. Industrial and commercial consumers account for nearly 50% of gas sales.[26] In the 2005/2006 fiscal year, the average gas production in Victoria was over 700 million cubic feet (20,000,000 m³) per day and represented 18% of the total national gas sales, with demand growing at 2% a year.[36]

Gas supplies come from offshore Bass Strait gas fields - Gippsland, Otway and Bass basins. The Longford gas plant, the onshore receiving point for oil and natural gas output from production platforms in Bass Strait off Gippsland, is currently owned by a joint partnership between American-based ExxonMobil and BHP Billiton, and is the primary provider of natural gas to Victoria, and also provides some supply to New South Wales and Tasmania. The Dandenong LNG gas storage facility provides flexibility to the east Australian gas market, by hedging against risks such as outages or emergencies and peak demand periods.[37] The Iona underground storage, near Port Campbell, Victoria. Cooper Basin Gas (and Queensland and NSW coal seam gas) via the MSP and NSW-Victoria Interconnect also provides gas for the Victorian market.[38]

Australian Gas Networks owns most of the transmission pipelines in Victoria. Gas Pipelines Victoria Pty Ltd owns the transmission pipeline from Carisbrook to Horsham.

The gas distributors in Victoria include:

• AusNet Services — 31.1% owned by Singapore Power, 19.9% by State Grid Corporation of China and the other 49% is publicly owned.[31]
• Jemena — 60% owned by State Grid Corporation of China and 40% by Singapore Power.[39] Its VicHub, which was commissioned in January 2003, is an interconnect facility situated at the Longford Compressor Station which enables gas to flow bi-directionally between the Eastern Gas Pipeline and the Victorian gas transmission system.[40] The Eastern Gas Pipeline, also owned by Jemena, is a supply pipeline between the Gippsland Basin, Victoria and New South Wales. The pipeline supplies more than half the gas consumed in New South Wales, including Sydney, Canberra and Wollongong, and regional centres Bairnsdale, Cooma, Nowra and Bomaderry.[41]
• Australian Gas Networks — owned by Hong Kong-based Cheung Kong Infrastructure (CKI).[42][43]
• Multinet Gas — owned by the DUET Group, now owned by CKI.[42]

Today, there are 18 energy retailers in Victoria, 9 of which are also gas retailer.[44] The major retailers are AGL Energy, EnergyAustralia (formerly TRU), and Origin Energy (representing almost 30% of Australian east coast domestic gas market demand[45]); with the others being Alinta, Dodo, Lumo Energy, Momentum Energy, Red Energy, and Simply Energy. The retailers issue bills to its customers based on gas usage information provided by the distributors.[43]

The Tasmanian Gas Pipeline was constructed and commissioned by Duke Energy in 2002. It is a 734 kilometres (456 mi) submarine and onshore gas pipeline which transports natural gas from the Longford gas plant, under Bass Strait, to Bell Bay, Tasmania.[46] Tasmanian Gas Pipeline (TGP) Pty Ltd is the owner and licensee of the Tasmanian Gas Pipeline.[47][48] In April 2004 Alinta acquired Duke Energy's assets in Australia and New Zealand. In Tasmania, the gas fueled the Bell Bay and the Tamar Valley Power Stations until the completion of Basslink made them redundant.

To increase the security of natural gas supply to Adelaide, natural gas from EnergyAustralia's Victorian Otway Basin is piped from the Iona Gas Plant near Port Campbell, Victoria, and Origin Energy's Otway Gas Plant, via the 687 km SEAGas pipeline to the gas-fired Pelican Point Power Station at Port Adelaide. The pipeline is owned and operated by South East Australia Gas Pty Ltd which is owned in a 50-50 partnership by APA Group (Australia) and the Retail Employees Superannuation Trust.[49]