Victorian Coalition's buffer zone plan risks billions in renewable projects, analysis claims

New economic analysis claims the Victorian Coalition's plan to implement a mandatory two-kilometre buffer zone between renewable energy projects and dwellings risks billions of dollars' worth of projects, costing jobs and taking millions of dollars from local councils.

The ABC has spoken to renewable energy experts who have mixed views on what the full impact of the proposed policy could be.

They say Victoria needs to prepare for the retirement of aging and unreliable coal-fired power stations.

The Victorian Coalition announced its policy in October 2024, as part of a regional energy development policy.

However, the issue has come to the fore after new modelling from the Clean Energy Council showed the policy would negatively impact confidence in renewables at a time when the state needed to be attracting investment.

Clean Energy Council (CEC) chief executive Jackie Trad said the proposed policy would limit renewable developments across most of the state.

The CEC analysis shows the two-kilometre buffer zone would significantly decrease the amount of available land for renewable energy projects, risking tens of thousands of jobs.

"We're talking about 26,000 workers' jobs that could be at stake here," Ms Trad said.

"It means billions of dollars in wages flowing to Victorian communities and … more than $19 million in payments to regional councils."

Protecting the rights of landholders

The two-kilometre buffer zone was first introduced under the Coalition in 2014 by then-premier Ted Bailieu, as the state considered the rollout of onshore wind.

At the time, the Coalition government was accused of holding back the renewables industry, with environment group Friends of the Earth estimating the decision cost about $887 million in lost investment.

Current shadow minister for energy, David Davis, said the party's re-adoption of the policy came at a time when regional Victorians were being unduly affected by the state's renewable energy rollout.

Regional Victorian communities are divided over the rollout, particularly in the state's west, where the VNI West project has led to farmers locking their gates to keep out companies assessing a route for high voltage transmission lines needed for the influx of renewable energy into the grid.

The Coalition has pledged to scrap that project if it wins the November election.

"We think we have struck a balanced approach for the property protection of country communities [and] a restoration of basic democratic rights, whilst ensuring that projects can go forward in sensible locations," Mr Davis said.

On-shore wind projects in Victoria must be set back one kilometre from the nearest dwelling, although there is scope for landholders to negotiate with developers.

The Victorian Coalition is proposing to extend that to a baseline of two kilometres for all renewables projects.

Elsewhere in Queensland, New South Wales and South Australia, the distance can be between one kilometre and 2.2 kilometres.

"That will be a buffer zone that's rebuttable by the proponents or the community and that will allow an appropriate alternate distance in specific circumstances," Mr Davis said.

Changes could scare investors

Renewable energy experts have mixed views on what the Coalition's proposal would mean for Victoria's energy transition.

Victoria Energy Policy Centre director Professor Bruce Mountain said he did not believe the policy would compromise the state's renewable energy rollout.

Instead, Professor Mountain said it could give affected landowners more leverage in negotiations with wind developers and allow them to potentially ask for more financial compensation.

He said the proposal was in line with other states' buffer zones and also noted the CEC's analysis could not distinguish whether every building was a dwelling or a non-residential structure.

"I doubt the picture is as black and white as the Clean Energy Council paint it," he said.

Professor Mountain said he was in favour of rooftop solar, allowing energy generation closer to the point of use in metropolitan areas, instead of development in regional areas, which required transmission infrastructure.

"We're lagging way behind on the expansion of [rooftop solar] in Australia," he said.

The Coalition proposed to increase rooftop solar uptake in the cities as part of its policy offering.

Grattan Institute energy and climate change senior fellow Tony Wood said changes to rules and policy frustrated renewable energy developers, and uncertainty ahead of an election could prompt them to hit pause until after the new government was announced.

"It doesn't necessarily mean that [developers] don't go ahead, but it creates an extra risk, and investors don't like risk."

Mr Wood said there was a risk there would be insufficient sources of reliable energy to meet demand if renewable projects were delayed during the phase-out of coal-fired power stations.

"It's becoming an issue for Victoria," he said.

In Victoria's La Trobe Valley, the Yallourn power station was tipped for closure in mid-2028, while Loy Yang A would shut in 2035.

Mr Wood said the Coalition needed to explain how it would secure energy supplies and reduce emissions if it put more constraints on renewable energy projects.