If ever there is a case where the headline doesn’t tell the full story it is the news that Victoria’s Yallourn power generator – one of Australia’s oldest and dirtiest coal plants – will shut earlier than planned.
The basic facts are clear: the owner, EnergyAustralia, had previously said the Latrobe Valley generator would close in 2032, and now it will be gone by 2028.
Despite the seven-year-notice period, much of the initial reaction to the announcement focused on fears of electricity price hikes and blackouts at a distant future date.
To some extent, it masked what had really happened. In reality, EnergyAustralia had made a deal with the Victorian government to keep the plant open longer than it almost certainly otherwise would have been.
Analysts have long expected Yallourn to shut early partly because it keeps breaking down, and partly because it is too inflexible to compete with the extraordinary influx of cheap renewable energy into the grid.
With so much solar energy being generated in the middle of the day, wholesale electricity prices in Victoria have dropped 70% over the past year. This has been good for consumers and the climate, but bad for coal plant owners, who are struggling to stay viable. Yallourn has been hit harder than most.
Modelling for the Australian Energy Market Operator (Aemo) that assumed a slower grid transformation that that now underway had previously suggested the plant could close by about 2026. Some workers at Yallourn expected it to shut even earlier, and were relieved on Wednesday to learn they might get seven years work before it goes.
EnergyAustralia linked its closure announcement to the global push to address the climate crisis, noting investors were moving away from thermal coal, and stressed shutting Yallourn would immediately cut the company’s emissions by 60%.
But the company was open to sweating the plant a little longer when it approached the Victorian government to make a deal on the closure. The government says it will not release details of the agreement, citing commercial confidentiality, but it doesn’t deny there may be public support to ensure it remains available until that date.
Victorian taxpayers could reasonably ask what they are spending to keep a 50-year-old plant online, and why the Andrews government thinks it will be needed that long.
The Morrison government’s response included raising concerns about what a closure in seven years would mean for grid reliability and energy affordability, urging the industry to build some form of replacement and leaving open the possibility it would step in if the private sector didn’t.
It was a less aggressive echo of the Coalition’s response when AGL announced it would shut the Liddell coal plant in NSW by 2023. Then, the government pressured the owner to extend its life before warning the taxpayer-funded Snowy Hydro may build a gas-fired generator if energy companies were too slow to commit.
The near repeat performance prompted some in the electricity industry to wonder: is this what substitutes for energy policy now?
Based on estimates put forward by plant owners, eight coal plants are due to shut over the next 20 years. Most experts believe that will prove a conservative timeline given the pace at which solar energy is pushing coal out.
A recent analysis found up to five plants including Yallourn could be unviable within the next four years. Dylan McConnell, from the University of Melbourne’s Climate and Energy College, has suggested we just bring the expected closure date of every coal plant forward by half a decade.
Energy policy in Australia is rife with contradictions. State governments are increasingly backing renewable energy and, in NSW, long-duration energy storage through underwriting and price guarantees. It is starting to drive the sort of transformation in electricity, if not the rest of the economy, that climate scientists warn must happen more quickly across the globe. But few in power publicly acknowledge coal closures could come in a rush.
Rather than introducing policy to accelerate the inevitable shift, the Morrison government criticises the state plans and rejects calls for a national policy framework that would guide private investment in the flexible energy needed to fill the gaps around a system that the energy security board says could be 60% solar and wind by the end of the decade.
The Coalition, of course, abolished a national carbon price in 2014 and spent the years following fighting itself over a series of failed potential replacements, losing a prime minister along the way. Scott Morrison has gone to great lengths to avoid re-opening an internal battle over energy, including promising to pay for a feasibility study into a new coal plant in central Queensland to placate local MPs and Senators.
It is the same split that has stopped the government from at least giving lip service to a target of reaching net zero emissions, a goal backed by more than 100 countries.
The energy solution devised by the energy minister, Angus Taylor, is an ad hoc mix of policies that include promising, but so far failing, to change the Clean Energy Finance Corporation so he can direct it to underwrite “grid reliability” projects, such as new gas and pumped hydro plants.
Federal and state governments are funding new grid connections between the states. And there has been an initial wave of announcements of privately backed grid-scale battery announcements.
But there is no overarching plan to to ensure a smooth transition if there is a run of coal closures. Business leaders and the energy security board have warned the private sector is less likely to build the new back-up capacity needed when governments are interfering in the market.
Amid all this, there is a model for what a transformed electricity system will need. Aemo last year released a blueprint for an optimal grid that found renewable energy could at times reach 90% within 15 years, and between six and 19 gigawatts of new flexible energy capacity should be in place by 2040 to support it.
This could come from batteries, pumped hydro, demand management programs and gas, but Aemo suggests new gas power – favoured by the Morrison government, and the only fossil fuel on the list – is likely to be more expensive than other options.
The market operator describes the blueprint as an “actionable roadmap” that prioritises the public. It might be worth dusting off and re-considering before anyone expresses concern about the next announcement of an early coal exit.