ELEANOR HALL: The apparent failure of a brown coal power plant has cast doubt over Victoria's plans to become a major coal exporter.
The Federal and Victorian Governments have been talking up the possibility of the state exporting billions of dollars worth of brown coal to supply the world's energy needs.
But the withdrawal of Federal Government support for a new power plant has thrown this into doubt.
In Melbourne, Simon Lauder reports.
SIMON LAUDER: Victoria's Minister for Energy and Resources, Michael O'Brien, has big plans for Victoria's brown coal reserves – they're multi billion dollar plans.
MICHAEL O'BRIEN: When we have the second largest brown coal resource on the planet outside of Russia, we have about 500 year's worth at current usage rates. Brown coal is a major asset for Victoria and it's one that the Victorian Government is determined to properly develop.
SIMON LAUDER: Mr O'Brien says there's significant interest in a brown coal export market.
MICHAEL O'BRIEN: There's considerable interest from China, from India, from Japan and the USA, just to name four.
SIMON LAUDER: The campaigns director with Environment Victoria, Mark Wakeham, says it's a foolish pipedream. He points to a brown coal project in the Latrobe Valley as proof.
In 2007, energy company HRL was offered a Commonwealth grant of $100 million for a coal drying and gasification plant. The company has failed to meet conditions and the Federal Government has now pulled the plug.
Mark Wakeham believes the project is dead.
MARK WAKEHAM: HRL promised that they would be up and running and producing power in 2009. They haven't started construction of the project, they've consistently promised jobs and investment in the Latrobe Valley and clearly they haven't materialised.
SIMON LAUDER: The Victorian Government gave HRL a grant of $50 million, which it is also reconsidering, although it may only get $30 million back.
Mark Wakeham says it shows the economics of brown coal don't stack up. He wants the Victorian Government to drop its plan to export plan.
MARK WAKEHAM: The economics of a brown coal export industry are likely to be even less viable than building new coal fired power stations in the Latrobe Valley. So the Victorian Government should abandon that pipe dream and get serious about supporting genuinely clean energy.
SIMON LAUDER: There are pilot projects underway to develop technology to treat brown coal so it can be dried and transported safely.
Victoria's Energy and Resources Minister, Michael O'Brien is not deterred by the technical barriers.
MICHAEL O'BRIEN: Oh there's no doubt that the technology is still at a stage that needs to be developed. But it had already moved on considerably over the last few years.
SIMON LAUDER: And how far off do you think it is until that technology is proven and economical enough to sign the contract?
MICHAEL O'BRIEN: Certainly we'll be looking to undertake a further allocation of brown coal over the next 12 months or so and essentially the rate at which the technology comes online will be up to the individual companies and individual proponents.
SIMON LAUDER: The head of the Centre for International Economics, David Pearce, says it's difficult to predict the future for brown coal, but HRL's problems provide a clue.
DAVID PEARCE: Probably it shows that you know technically maybe it's a bit harder than people originally thought.
SIMON LAUDER: David Pearce says the technical issues are not the only hurdles – emissions reduction policies will make coal less viable, but the demand for more energy may win out in the end.
DAVID PEARCE: My suspicion is that overall demand for energy in the medium term may well outweigh concerns to reduce emissions, just simply because the demand is so high, but over the longer term it's much, much harder to predict.
SIMON LAUDER: Another big factor of course is renewable energy – it's one that Mark Wakeham from Environment Victoria believes has been underestimated.
MARK WAKEHAM: Well the HRL project received its Victorian grant back in 2006 to build a 400 megawatt coal fired power station. They haven't built a single megawatt over the past six years. In that period, Australian households have installed 1700 megawatts of solar power and the wind industry has installed thousands of megawatts of new wind projects.
So renewable energy technologies are moving ahead in leaps and bounds while these so-called clean coal projects are stalling and faltering and sucking up taxpayers' money.
SIMON LAUDER: HRL has not responded to The World Today's request for comment.
ELEANOR HALL: Simon Lauder reporting from Melbourne.