With growing concern about the ability of the carbon price to withstand attacks by a Tony Abbott-led Coalition in wrecking mode, the contracts for closure process assumes greater significance as a means for locking in up to 20 million tonnes of annual abatement and creating space in the market for investment in new clean energy projects.
What we know is that five power stations have thrown their hats in the ring – Hazelwood, Yallourn and Energy Brix in Victoria, Playford in South Australia and Collinsville in Queensland. That’s very significant. Despite the coal industry’s claims to immortality, five power station owners have said they are willing to consider closing this decade given the right incentive.
The federal government is currently in negotiation phase with these five companies and has promised to enter into contracts for closure by June 30 this year. Negotiations are of course taking place very quietly behind closed doors. It is very difficult to get a read on how the process is playing out, although so far deadlines have been met and the government has given every indication that it is committed to making contracts for closure work.
However the next public announcement on contracts for closure is likely to be the outcome of the negotiations. So how to maximize the effectiveness of contracts for closure and what criteria should we use to assess the upcoming announcement? Here’s five key elements Environment Victoria will be looking out for:
Will the contracts be watertight in the event of a change in Government? While contracts for closure should be entirely consistent with the Coalition’s so-called Direct Action Policy, so far the Coalition has been all over the place on this program. Greg Hunt claimed the ALP stole the idea from the Coalition, while Tony Abbott said the Coalition wouldn’t support the closure of any power station if it led to the loss of a single job, so make of that what you will. In coming months the Coalition needs a clear explanation of how it will deal with any signed contracts for closure. Investors wanting to build replacement power stations will need this or else the Coalition will be preventing and delaying billions of dollars of investment in clean energy in regional areas.
While the ALP committed to close ‘up to’ 2000 MW of polluting plant, MPCCC members who brokered the deal, including the Greens, Rob Oakeshott and Tony Windsor, would be expecting that every effort is made to secure the closure of the full 2000 MW. This could see the retirement of one large (Hazelwood or Yallourn) and two small power stations. Playford and Energy Brix are the obvious candidates for the smaller power stations. Playford because there is genuine interest in pursuing solar thermal projects in the region and because the coal fields will run out shortly anyway and Energy Brix because it is so polluting and relies on the Hazelwood mine.
The federal government’s preferred timeline is for closures to commence in 2016, which leaves a short window to achieve the full 2000 MW closure. Australian climate policy history is littered with examples of programs that started slowly and aimed to ramp up to ambitious targets in the final years (Renewable Energy Target anyone?). We seem to approach climate policy like a limited overs cricket team facing a massive run chase, but choosing to block the first 20 or 30 overs. A linear trajectory for the contract for closure program will guarantee early emissions reductions and maximise emissions reductions over the next decade. It will also have a less sudden and jolting impact for coal communities as generation is wound down gradually rather than stopping with a rush. Generators that propose an earlier start than 2016 to retiring capacity should be favoured in the negotiation process.
This is an area that needs some serious work and discussion with local communities. At the moment the rehabilitation plan for the Hazelwood mine for instance is to flood the pit and turn it into a lake. Is that acceptable environmentally or from the local community’s perspective? I suspect the answer is that no-one’s bothered to ask yet. As far as the power stations go, sites like Hazelwood and Yallourn are riddled with asbestos and demolishing the buildings could be very expensive. Again there needs to be some serious discussion about future options for these sites. Overseas an iconic power station was turned into an industrial museum at Battersea. A nuclear reactor built in Germany but never commissioned was turned into an amusement park called Kernwasser Wunderland. And an abandoned clay mine in Cornwall became an ecotopia called Project Eden. While an appropriate and sensible use for the retiring power stations would need to be developed a seemingly off the wall idea may make more sense than spending hundreds of millions on demolition. But again a serious community conversation is required.
The price on the carbon package committed $200 million over seven years for transition and regional development programs and investment in affected regions. While there are concerns that this amount falls short of what’s required, it will be important that this spending commences early to bring on-line new jobs and industries prior to and during early turbine closures. The federal and state governments should be holding regional development roundtables in places like the Latrobe Valley now to understand what assistance industry would need to locate new investment and projects in the Latrobe Valley. Successful generators will also need to demonstrate that they have a plan to retrain or redeploy workers where possible and minimise the impact of unit closures on workers.
These five tests are critical to maximise the public interest from the contracts for closure process – after all, power station retirements will be secured with taxpayers’ money. But we have a historic opportunity to get the replacement of the first coal-fired power stations in Australia for climate change reasons right, looking after the environment and communities in the process. Because anyone who understands the climate science knows, these will be the first of many more power station retirements in the decades ahead.
Mark Wakeham is the Campaigns Director for Environment Victoria. Environment Victoria has campaigned for the replacement of Hazelwood power station and the establishment of the contracts for closure program.
This piece was published in the Climate Spectator on Thursday, 19 April 2012