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The case for shutting down Hazelwood power station

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Under its Clean Energy Future, the Federal government will negotiate to close 2000 MW of the dirtiest fossil fuel power generating capacity in Australia by 2020.

With the price on carbon now in operation, there will be pressure on some highly carbon intensive station to remain viable – this policy pre-empts the failure of the most vulnerable businesses and provides some certainty as to which stations will close, as well as compensating the companies affected, including the workers who will lose their jobs.

The plants under consideration are Hazelwood, Yallourn and Energy Brix in Victoria, Playford B in South Australia and Collinsville in Queensland.

The most likely combination of these stations is Hazelwood and the much smaller Energy Brix which both rely on the same open cut coal mine in the La Trobe Valley. So assuming these are the stations that close, what will be the impact on Victoria and Australia’s carbon emissions and electrical energy system?

Hazelwood power station is a 1600 MW brown coal generator made up of eight 200 MW units which were constructed between 1964 and 1971. It is the oldest coal-fired generator currently operating in Victoria, and not surprisingly has the highest carbon intensity of any power station in Australia at 1.52 tonnes of CO2 for each mega-watt hour* (MWh) of electricity produced (as reported by the Australian Energy Market Operator.

It is just ahead of Playford B in South Australia, but Playford only has a capacity of 240 MW. Loy Yang B produces more carbon (20 mega tonnes versus 18 for Hazelwood), but also produces almost 40% more electricity. Hazelwood is a clearly a prime candidate for the Clean Energy Future program to purchase and shut down 2 GW of the most carbon intensive generating capacity.

In 2011, homes, business and industry connected to the National Energy Market (the NEM, made up of Tas, SA, Vic, NSW and Qld) consumed 200 TWh of electricity. The power stations combined produced 186 Mt CO2. Hazelwood supplied 6% of the NEM’s power and 10% of the emissions.

 

Station Capacity (MW) Power (TWh /year) Carbon Intensity (tCO2 /MWh) Carbon (Mt CO2)
Loy Yang A 2210 16.7 1.21 20.2
Hazelwood 1600 12.1 1.53 18.4
Bayswater 2640 17.2 0.99 17.6
Yallourn 1480 11.7 1.42 16.6
Eraring 2680 13.6 0.99 13.7
Loy Yang B 1000 8.6 1.24 10.6
Mt Piper 1400 10.3 0.94 9.5
Liddell 2000 8.3 1.08 9.0
Wallerawang 1000 6.4 1.05 6.7
Gladstone 1680 6.8 0.96 6.6

Australia’s 10 biggest carbon emitters.AEMO (http://www.aemo.com.au/)

 

So what happens if 6% of the generation is removed? Will we have rolling blackouts? Who will take up the slack?

A few years ago when demand was continuing to increase, this might have been a serious question. But, since 2008 total demand in Australia has been decreasing at between 1% and 2% per year, a decrease of almost a gigawatt.

The effect has been that generators are operating at lower capacity factors – with wholesale electricity prices not seen in a decade – and claims that no new fossil generating capacity will be required in Australia for a decade. That means no new state-of-the-art generators that would have much lower emissions than Hazelwood.

Hazelwood runs at an average of around 85% capacity, or 1.4 GW. So the 1 GW decrease in demand is close to the total contribution of Hazelwood. Turning it off would more or less take us back to the supply and demand balance of 2008.

This would have the effect of increasing wholesale electricity prices by around 2 c/kWh – returning prices to the levels seen before 2008, and restoring some investor confidence to build new and cleaner capacity.

Even without new capacity, the effect of shutting down Hazelwood and the slack being taken up by existing generators that have on average 30% lower emissions, would reduce CO2 emissions by 5 Mt per year, or 3% of Australia’s electricity sector emissions.

In the national energy market, there is around 50 GW of capacity listed. On average we use 22 GW – so there is plenty of capacity sitting idle much of the time, waiting for the extreme demand days when the temperature reaches into the 40s.

With 2 GW removed from the system, there is a concern that the system may struggle to meet peak demand. But those hot days tend to be sunny, when rooftop photovoltaic (PV) will be producing at its maximum. In the last two years almost 2 GW of solar PV capacity has been installed nationally. Just as long as we use our air-conditioners when the sun is shining.

Roger Dargaville is a research fellow at the Energy Research Institute, at the University of Melbourne. This article was first published in The Conversation, reproduced with permission.

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  • Beat Odermatt

    The whole idea to pay the heaviest polluters compensation instead of investing in clean energy seems to be about the most stupid idea. Power companies have known for years that one day some kind of disincentives would be created to make life harder for highly polluting industries These companies had an opportunity to use some of the windfall profits during the 1985-2000 period to invest in diversification of their energy portfolio. In the end great greed overcome any rational environmental considerations and even old power stations like Playford were “refurnished” to take advantage of massive peak power prices. It is scandalous that these companies are now rewarded for their actions. I have always argued that we should have legislations and not taxes. If the Government would legislate to reduce CO2 emission by about 2.5% per annum, we would see a gradual removal of “dirty” electricity producers without any cost to the tax payer. Companies would be able to find the most economical way to achieve such targets, if by reducing power use by increasing the use of renewable energy. We don’t need a carbon tax and we don’t need to reward the dirtiest polluters, we need a challenging achievable path towards a low carbon economy. The current carbon tax is nothing more than a tax and will actually lead to an increase global warming. It is not possible to find a more complicated and expensive way to achieve nothing then the current carbon tax. At least in the field of stupidity our Government has achieved a level of excellence.

  • http://www.change.org/replacehazelwood Mark Wakeham

    Nice article Roger. Hopefully the current contracts for closure negotiations deliver the full closure of Hazelwood as well as closure of other power stations. We’ve got a simple web petition to key decision-makers here encouraging them to replace Hazelwood. Great if people could sign it and share: http://www.change.org/replacehazelwood

  • Julian Turecek

    As we saw from the closure of Mumorah announced this week, the retirement of capacity is a normal functioning of the energy market. While it’s possible to make the case for shutting down Hazelwood, given that it is not ours to shut down (it is privately owned) the real question is whether you can make the case to use billions of dollars of taxpayer funds to shut it down, or whether you can leave it to the market (ie the combination of energy demand and supply) to do the same job.

    • Beat Odermatt

      I agree! If the Government would spend the Billions from the carbon tax windfall to help renewable energy, then renewable energy would become cost competitive. Instead of wasting the money to cover-up bad investment decisions by power companies, low interest or no-interest loans for new clean power would produce something good for all Australians.

  • Michael Wilbur-Ham

    At the moment both Labor and Liberal are committed to cutting Australia’s emissions by 5% from 2000 levels. Labor intends to move the carbon tax to an ETS to achieve this.

    If Labor (though an ETS) or Liberal (via magic) meet their commitment, and this is probably the best we can hope for at the moment, then in 2020 our emissions will be 5% less than they were in 2020.

    So what difference does it make to shut down Hazelwood? And if the point of the tax then ETS is for business to make the most economically rational decisions on how to reduce emissions, why do we need to pay for Hazelwood to be shut down?

    Now if a government says we will pay to shutdown Hazelwood, and that will reduce our emissions by 1%, and so now our 2020 target will be 6%, then three cheers, shutting down Hazelwood makes a difference. But I’ve never heard even the environmental groups make such a suggestion.

    Have I missed something? Or am I right that this really makes no sense?