News | 2nd May, 2011

Yallourn power plant interested in buyout

Thursday, 2 May 2011
Tom Arup, The Age

The owners of the high-emitting Yallourn brown coal power station in the Latrobe Valley say they would consider a buyout under the federal government's carbon tax, if the right incentives are on the table.

TRUenergy managing director Richard McIndoe told The Age yesterday the government was contemplating buyouts of high-emitting power plants as part of compensation for the coal-fired electricity sector under a carbon price.

Mr McIndoe said TRUenergy ''would certainly be happy to discuss a buyout or closure program with the government,'' but would need direct compensation until the agreed date of closure.

''In order to maintain the right incentives to continue to invest there – and probably reduce the ultimate buyout cost of the power station – that's where the transitional assistance comes in,'' he said.

International Power, the owner of Australia's highest polluting power plant Hazelwood – also in the Latrobe Valley – has long expressed interest in a buyout from state or federal governments.

Hazelwood – which has been a focus of green groups – is regarded as the most likely generator to be closed under any carbon tax buyout scheme, meaning Yallourn would be a target only if the government decides to buy out more than one plant.

Mr McIndoe said the brown coal electricity industry would need 10 to 15 years of assistance under a carbon price to help it invest in new lower-emitting gas power generation, or consumers would face energy supply problems.

''You've got the four highest-emitting generators, all in 10 square miles of each other in the Latrobe Valley,'' he said. ''If you close down two of those you take out 50 per cent of Victoria's power supply, it is lights out overnight.

''You've got to have a measured transitional program for that. Yes, we will see closure of those older brown coal power stations; we have got to make sure we have the generation to replace it.''

The federal government is working through options to compensate the coal-fired electricity generators sector under a carbon price.

It is understood buyouts, loan guarantee and direct compensation are being considered, with industry expecting a final package containing two or three of the options.

Energy Minister Martin Ferguson is understood to be looking at directing his department to work up a range of options for how a generator buyout program might work.

The Greens oppose compensation for coal-fired power plants. The treatment of coal electricity is one of the key discussion points of multi-party negotiations between the government, Greens and independent MPs on carbon pricing.

Meanwhile, Opposition Leader Tony Abbott has urged the mining industry to fight the carbon tax, declaring it will have the support of ''every Australian who thinks that governments should honour their commitments to the Australian people''.

Addressing the Minerals Council conference, Mr Abbott said the tax could not be fixed. ''You must fight it. It's no good trying to make a tax as harmful as this, less harmful.''