Blog | 29th Mar, 2017

Hazelwood's closure shows industry and government must plan ahead for climate change

More coal generators will close as Australia shifts to renewable energy, so there must be more plans in place to smooth the transition.

When Hazelwood stops generating electricity this week, it will be the first Australian power station to close, at least in part, because of climate change. Hazelwood’s owner, French energy giant Engie, has said it is “making climate a priority” and has committed to retiring its most outdated coal plants worldwide.

Hazelwood’s closure will bring the total to nine coal power stations in Australia that have retired in the last five years – including the Port Augusta power stations in South Australia, the Munmorah and Wallerawang power stations in New South Wales and the smaller Energy Brix and Anglesea power stations in Victoria. It’s a clear indication the global industrial transition from coal to renewable energy across the world has reached our shores.

Like all such transitions, this one will involve a big upheaval for the affected workers, but never before has an industrial transition had so much else at stake. Never before has the end of one industry been so essential to the wellbeing of the rest of society.

Burning coal for electricity accounts for a third of Australia’s greenhouse gas pollution. It is the country’s largest single source of carbon dioxide, and it’s likely to be the easiest to reduce – cutting climate pollution from more diffuse sectors such as transport and agriculture will be more challenging.

Globally, the International Energy Agency identified phasing out inefficient coal power stations as a key plank in any effective global agreement on climate change. Domestically, the Australian Energy Market Operator has estimated we would need to close the equivalent of another five large coal power stations (a total of about 8700MW of capacity) by 2030 in order to meet even the Turnbull government’s manifestly weak climate targets. Targets more in line with keeping global warming under 2C involve closing one Hazelwood-sized power station each year from now on.

While coal generators have been closing, they have not necessarily been closing in a way that serves local communities: the closures at those nine power stations in the past five years have given workers an average of just four months’ notice from announcement to turning off the boilers. For communities where coal is a large part of the regional economy, this is too little notice.

But neither have they been closing in the best way for our climate. Economics has driven decisions. Unprofitable generators – the lame animal in the moving pack that is the National Electricity Market – have stumbled and fallen quite suddenly, but these power stations aren’t necessarily the worst or biggest polluters.

A Senate inquiry into the retirement of coal-fired power stations, due to report this week, provides an opportunity to move the public debate beyond political blame games and into the realm of responsible policymaking. In recent months, green groups, business groups, unions and even the energy industry itself have called for a greater government role in planning the phaseout of coal-burning power stations.

For communities, knowing when a power station will close gives much-needed impetus to diversify the regional economy. While Hazelwood’s closure came with just five months’ notice, the state and federal governments have pulled together transition plans worth over $300m. Time will tell whether this is sufficient to smoothen the local impacts, but repeating this level of funding for the remaining 20 coal generators could mean finding $6bn in government budgets in coming years.

For clean-energy investors, knowing when a power station will close gives confidence about when new renewables projects will be needed. A timeline for the retirement of Australia’s remaining fleet of coal-burning power stations would provide this certainty. There’s a compelling case that to avoid energy market chaos, we need to set closure dates from now until 2030.

Even some big power companies are on board. AGL, owner of three large coal power stations, has previously advocated for setting 50-year lifetime limits on each generator. Energy Australia recently argued that companies should be required to provide much earlier notice of when their own generators will close.

As of next week, Energy Australia’s Yallourn power station in Victoria’s Latrobe Valley will be the dirtiest coal generator in the country, and one of the oldest. The company’s public position that it will remain open until 2032 seems unlikely at best and deceptive at worst – a deception that has consequences for workers, communities and energy markets. Scepticism is warranted: Hazelwood’s owners gave the same 2032 closure date just months before announcing the power station would bow out in March 2017.

Last month the Australian Prudential Regulation Authority warned that companies need to appropriately manage their exposure to climate risks, effectively putting the owners of coal-burning power stations on notice. Telling shareholders an asset might be open for another 15 years when a much shorter life is likely, or even possible, could have serious legal consequences.

We don’t have to choose between coal power and renewables – community attitudes and energy markets have already decided. The choices now are about speed and justice. Will this industrial transition be fast enough to avoid the worst risks to our climate, and fair enough to sustain regional communities? Will it be chaotic and disruptive, or planned and orderly?

Hazelwood stops generating this week, but these questions will linger until we finally have a national, long-term plan to phase out Australia’s remaining coal-burning power stations.

This article first appeared in The Guardian.