A leading power industry figure has taken aim at the findings of a new carbon tax report claiming it will not drive change in the sector and has signalled his company's willingness to accept compensation to close.
TRUenergy managing director Richard McIndoe said his company was willing to accept a package from the Federal Government to close Yallourn Power Station and to transition to gas-fired generation.
Last week the final report of the Garnaut Climate Change Review was released, which proposed a carbon price between $20 to $30 per tonne and minimal amounts of compensation for electricity generators.
Prof Garnaut is the Gillard Government's top climate advisor, although it is uncertain how much of the report will be adopted with Climate Change Minister Greg Combet reporting the final details of the climate legislation will be revealed by July.
Mr McIndoe described the report's findings as "particularly alarming" and said it would have an impact on electricity generators and the local community.
"I think it shows a fundamental misunderstanding of how the energy market works," Mr McIndoe said.
"(Report author Professor) Ross Garnaut is an economist and a diplomat but I don't think he understands how the economy of the energy market works."
He said a $26 per tonne carbon price, which was the figure used in the Garnaut report's modelling, would fail to drive a shift towards gas-fired and renewable electricity generation.
"What a $26 (per tonne) carbon price does is add significant costs to the operation of the existing power stations and therefore the owners will need to write off their equity in the powers stations," Mr McIndoe said.
He said a carbon price similar to the one proposed by Prof Garnaut would prevent new investment in the sector and threaten energy security.
Environmental groups have taken issue TRUenergy's claims, with Environment Victoria campaigns manager Mark Wakeham accusing the company of "scaremongering".
"They've been the most aggressive of the electricity generators in claiming the price on carbon will lead to blackouts and there's no foundation for those claims," Mr Wakeham said.
"Every dollar we give to coal generators as compensation is a dollar more that the scheme will cost Australian households and a dollar less we have to invest in clean energy."
He said if the company was in danger of defaulting on electricity contracts they would need to contact shareholders and he was not aware of that happening.
"It is interesting and welcome that they are open to a negotiation around closure, although it sounds as though their timeframe is fairly distant," Mr Wakeham said.
"We're optimistic that any compensation under a price on carbon for coal generators will be tied to closure or retirement of plants."