Staying the course on the energy transition is now an energy security and consumer cost imperative. Yallourn Power Station is currently scheduled to close in mid-2028, removing a plant that has supplied around one-fifth of the state’s electricity. The state has a narrow delivery window to bring forward the renewable generation, storage, transmission, demand response, and limited firming capacity required to replace it.
Extending Yallourn is not a credible back-up plan. Its 1,450 MW nameplate capacity overstates what the system can depend on: since 2020 its four units have averaged more than 8,000 hours of total downtime each year, and the annual unplanned outage rate reached 32 per cent in 2024. The plant is approaching the end of its technical life, has declining output, and is poorly suited to the flexible operation required by Victoria’s changing system.
Victoria must therefore plan on the basis that Yallourn closes in 2028. Any delay – or cancellation without equivalent replacement – of the transmission, onshore wind, solar, and battery projects needed to replace it would increase the risk of insufficient supply during periods of peak demand, low renewable output, generator outages or network constraints.
The replacement pipeline exists. Nexa’s earlier analysis identified more than 7 GW of solar, 1 GW of wind and 4 GW of large-scale batteries with state planning, development and/or environmental approvals, alongside a broader proposed pipeline of around 16 GW of solar and wind and 5 GW of large-scale batteries. These projects are at different stages and not all will proceed, but they show that Victoria has investable options if access, approvals, connections and transmission are unlocked.
Renewable Energy Zones (REZs) remain important for coordinated development at scale. However, the REZ access rights framework and delayed transmission cannot be allowed to strand advanced projects or make the transition dependent on a handful of future corridors. Projects inside and outside zones that can use existing capacity, connect near demand, co-locate with storage or proceed with modest augmentation should have a clear, timely and transparent pathway.
Major transmission is not being delivered fast enough. The Western Renewables Link (WRL) is now expected in 2029 and VNI West around 2031. Nexa’s modelling shows these delays defer up to 2 GW of wind and 0.6 GW of solar between 2027 and 2035. Cancelling or further delaying these projects without credible replacement solutions would deepen the capacity gap following Yallourn’s closure.
Gas-fired generation has an important but limited role in firming the system. It can support reliability during peaks, renewable droughts, and unexpected outages, but it is not a low-cost or readily available substitute for Yallourn’s routine energy production. Southern gas supply is tightening and the Australian Energy Market Operator (AEMO) forecasts peak-day shortfall risks from winter 2029, leaving less readily available gas when it is most needed. Addressing these shortfalls would require infrastructure that is not committed and whose commercial viability is not assured. Additionally, global demand for gas turbines has created multi-year equipment lead times, which would constrain any new gas-fired generation being built this decade. It cannot be assumed that new gas-fired generation can arrive quickly or operate cheaply.
Replacing delayed renewable generation with gas would expose Victorian consumers to scarce fuel, international gas prices, and the capital cost of new turbines and supporting infrastructure. Nexa’s modelling shows that a disorderly transition – where new transmission and renewable generation projects are delayed – could require up to 1.1 GW of additional gas -fired capacity, increase gas consumption for electricity generation by 118 PJ between 2027 and 2035.
Over the period between 2027-2031, the average Victorian wholesale price could increase from $62.29/MWh to $85.20/MWh under a disorderly transition – a difference of $22.91/MWh (37 per cent) on average across this period.
Those wholesale impacts would flow through to Victorian customer bills. Between 2027 and 2031, delays would cost up to $472 for a representative household, up to $4,719 for a representative small business, and $11,797 for a representative large business over the five year period.
Between 2027 – 2050, the disorderly pathway increases total wholesale electricity costs by $33.0 billion and emissions by a further 8.6 Mt CO2-e.
While permanent cancellation was not modelled, cancelling core transmission infrastructure without an equivalent replacement would constrain the renewable generation capacity dependent on these projects, potentially prolonging or compounding the modelled impacts on reliability, gas dependence, wholesale prices and emissions. The lowest-risk course is not to pause the transition but to double down on delivery: confirm Yallourn’s closure, accelerate transmission, unlock onshore wind, solar, and batteries, enable credible projects outside REZs, expand demand response and Consumer Energy Resources (CER), and contract a diversified firming portfolio in which gas generation plays a targeted back-up role.
Summary of key recommendations
Victoria should stay the course on the energy transition, and act more decisively to address the delivery risks that are already emerging. This requires providing investors with greater certainty, accelerating transmission and replacement capacity, making better use of storage and demand-side solutions, and ensuring gas generation remains a limited back-up rather than a substitute for delayed investment in renewables generation.
- Confirm Yallourn’s 2028 closure and procure dependable replacement capacity
The Victorian Government should confirm that Yallourn will close in 2028 and publish a delivery plan for the reliable capacity, energy and essential system services required before and immediately after closure. The plan should not count Yallourn’s nameplate capacity as a fallback and should provide investable contracting signals for replacement projects now.
- Accelerate transmission and hold delivery bodies accountable
The Victorian Government and VicGrid should accelerate WRL, VNI West and other critical works with transparent milestones, cost control, and accountability. Where faster market-led, contestable or non-network solutions can unlock capacity, they should be assessed alongside the major regulated projects rather than deferred behind them.
- Unlock the onshore wind, solar and battery pipeline inside and outside REZs
The Victorian Government and VicGrid should actively progress advanced onshore wind, solar and battery projects, including credible projects outside REZs. The access framework should coordinate efficient development without becoming a barrier to projects that can use existing capacity, add storage, reduce constraints or connect closer to demand.
- Contract a diversified firming portfolio and keep gas in a limited back-up role
The Victorian Government should secure enough flexible capacity for peak and low-renewable conditions through batteries, longer-duration storage, demand response, interconnection and some gas. A diversified firming portfolio is critical to reliability, reducing the risk that fuel constraints, generator outages or delays to any one technology leave insufficient supply when the system is under greatest pressure. Gas-fired generation should be procured for residual firming, not treated as a substitute for delayed renewable energy, given fuel constraints, turbine lead times and the wholesale cost exposure transferred to consumers, which would mean higher bills and greater exposure to reliability risks.
Read the report here: Nexa Advisory – Delay is putting Victoria’s energy security at risk