Blog | 27th Jul, 2010

The clunker we need to scrap is Hazelwood

Prime Minister Julia Gillard's $394 million ''cash for clunkers'' policy — designed to get polluting cars off the road — is aimed at the wrong clunkers.

Two days after Gillard's announcement, Victorian Premier John Brumby released his version of "cash for clunkers" — a plan to replace one-quarter of Hazelwood, Australia's dirtiest power station, by 2014.

Hazelwood is a dinosaur of a power station, built in the 1960s and originally scheduled for closure in 2000. Its fuel-guzzling ways would put even a 1960s Ford Falcon to shame.

Turning the spotlight on Hazelwood is good politics. Voters sick of a national conversation on climate change, in which everything and nothing has been said, understand that replacing power stations such as Hazelwood will clean up our energy supply and deliver quick and lasting emissions reductions.

Recently, Environment Victoria commissioned focus groups to test public attitudes on a range of climate policy options. Replacing Hazelwood had greater impact than any other proposal, and was even supported by climate sceptics. The punters were further convinced when they were told that replacing all of Hazelwood could reduce national emissions by nearly 3 per cent, would free up billions of litres of water and eliminate the largest source of dioxin pollution in the country.

But is replacing Hazelwood good policy? Since Monday's announcement from Brumby, much of the criticism has focused on the cost. Everyone knows that a price on carbon guarantees the cheapest method of reducing emissions (except, perhaps, Opposition Leader Tony Abbott). So should we be picking winners, or in this case, losers?

The unfortunate fact is that unless (as John Howard used to say), Abbott or Gillard get hit by a bus, we're unlikely to have a price on pollution until at least 2013. Therefore, we need to take other actions that reduce pollution at an affordable price. Energy efficiency is a no-brainer. But cash for clunkers like Hazelwood is also good value.

Hazelwood's owner, International Power, has said that a carbon price of $20 to $30 a tonne would be enough to see brown coal forced out by gas-fired generation. Given that Hazelwood is the most polluting of the brown-coal generators, it is a safe assumption that a $20 price on carbon would put Hazelwood out of business, to be replaced by cleaner energy sources.

Compare that with Gillard's "cash for clunkers" program. Despite its $394 million price tag, it will reduce emissions by just 100,000 tonnes a year. That's a carbon price of $3940 a tonne, compared with $20 a tonne to replace Hazelwood. In fact, under "cash for clunkers", the federal government will buy twice as many cars as it does tonnes of annual pollution reduction.

Analysis prepared for Environment Victoria (published here) shows that Hazelwood could be enitrely replaced with a combination of renewable energy, energy efficiency and gas-fired power for $320 million a year until we have a price on carbon. Building the clean-energy power plants required would create 2000 construction jobs and 2300 ongoing jobs, many of which could be in the Latrobe Valley. All of this could happen as soon as the end of 2012, if we get moving now.

Brumby's bid to share the costs of retiring one-quarter of Hazelwood with the federal government is a good first offer. But allowing three-quarters of the ageing power station to continue polluting indefinitely is unacceptable. International Power says it wants a plan for the whole power station before it'll accept any deal. Fair enough — who'd want to be left with an old clunker running on three out of four cylinders?

Gillard has said that she's happy to sit down and talk with the Victorian government about Hazelwood, but has made no commitments. The Coalition's Greg Hunt has been kicking the tyres by talking up its Direct Action Fund, but without a firm commitment on Hazelwood, it's hard to tell if he's a serious buyer.

Given their delays and denials on carbon prices, Gillard and Abbott should stump up to help replace the whole station. After all you wouldn't buy a quarter of a used car to get it off the road, so why buy just a quarter of a clapped out power station?

This article was published on The Age online on Wednesday, 28 July 2010