Victoria’s Labor government will hold a 650MW renewables auction and has awarded contracts for 138MW of large-scale solar plants to power Melbourne’s tram network.

The auction aims to procure power for the equivalent of 389,000 households, bringing AU$1.3 billion (US$1 billion) in investment and creating around 1,250 construction jobs over two years with 90 permanent jobs.

Meanwhile, the 100MW Bannerton Solar Park near Robinvale in the Sunraysia district and the 38MW Numurkah Solar Farm near Shepparton have both been awarded contracts requiring AU$198 million investment and generating around 325 jobs during construction.

The news came as part of legislation for the Victorian Renewable Energy Targets (VRET) that will be introduced in parliament next week. Victoria’s target is to hit 25% renewables by 2020 and 40% by 2025. It is estimated that the targets should result in Victorians saving around AU$30 a year, AU$2,500 for SMEs and AU$140,000 for large companies.

Premier Daniel Andrews said: “More renewable energy means more jobs for Victorians – that’s why we’re setting these ambitious targets and promoting investment in this growing sector.”

Minister for energy, environment and climate change Lily D’Ambrosio added: “Government investment will be capped to ensure the best value for money for Victorian taxpayers.”

Clean Energy Council chief executive Kane Thornton said the strategy would be useful in filling the gap after the closure of the Hazelwood coal-fired power plant, while also being likely to boost private investment in renewables.

Already 300,000 Victorians have rooftop solar according to campaign group Solar Citizens, which also welcomed the announcements.

Back in February, the Victoria government more than doubled the feed-in-tariff (FiT) rates for small-scale renewables in a move that was widely praised by PV advocates.