The company behind a new brown coal-fuelled power plant proposed for the Latrobe Valley has won a landmark case repealing a decision to cut the size of the project in half by state environment authorities.
The ruling by the Victorian Civil and Administrative Tribunal means coal-technology company HRL will now be able to build the new power plant at Morwell at its preferred size of 600 megawatts.
The project – known as Dual Gas – will use technology that dries and ''gasifies'' brown coal, reducing its greenhouse gas emissions to those of a modern black coal power plant.
The project has attracted grants of $100 million from the federal government and $50 million from the state government, but is strongly opposed by green groups.
In February, federal Energy Minister Martin Ferguson gave HRL a six-month lifeline to meet conditions for the grant, including finding private money.
The state Environment Protection Authority had granted approval for 300 megawatts.
The tribunal found the EPA had erred in seeking to slash the size of the project under state environment laws.
''The EPA has misapplied the principles of environmental protection and best practice … in seeking to halve the capacity of the Dual Gas project,'' the tribunal found.
The tribunal also threw out an application by green groups, including Environment Victoria, to have the project rejected altogether due to its greenhouse gas emissions.
But it imposed a new condition on the project that construction not begin until another higher emitting brown-coal power plant in Victoria is closed under the federal government's paid contract for closure scheme.
The tribunal said imposing the condition would ensure the HRL project would result in lower emissions overall.
Three Victorian power plants have tendered under the contract for closure program – the larger Hazelwood and Yallourn plants and the smaller HRL-owned Energy Brix – which seeks to shut down 2000 megawatts of highly polluting coal-fired power generation by 2020. Labor is aiming to have contracts in place by the end of June.
The tribunal also imposed an emissions standard on the Dual Gas project that it emit no more than 0.8 tonnes of carbon dioxide for every megawatt hour of electricity generated. It came despite the Baillieu government breaking an election commitment to implement similar statewide conditions this week.
EPA chief executive John Merritt said the authority's original decision had been based on ''a rigorous legal and scientific process'' and the tribunal ruling was being closely reviewed.
State Energy Minister Michael O'Brien said the ruling confirmed low emissions clean coal technology was ''entirely consistent'' with Victoria's environmental objectives.
The state government last week confirmed it would open new allocations of brown coal for development in the Latrobe Valley.