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Hazelwood owner issues ‘call to arms’ against coal

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The French company that owns the Hazelwood brown coal generator in Victoria – the dirtiest power station in Australia – has issued a “call to arms against coal.”

hazelwood_emissions

Gerard Mestrallet, the chairman CEO of GDF Suez, which now calls itself Engie as part of a major corporate make-over, signalled a big push against coal-fired generation in a series of meetings earlier this month at a major gas conference and a pre-Paris business seminar.

The comments were made as Europe’s major gas companies – of which Engie is one – called for a switch from coal to gas, and for a significant carbon price to be imposed to hasten that transition.

Engie – which owns plants ranging from coal, gas and nuclear, to increasing investments in wind, solar and hydro – is also forecasting the decline of centralised fossil fuel generation.

It argues that 50 per cent of all generation will be sourced locally, rather than from centralised coal or nuclear generators. It is forecasting a massive energy transition as generation becomes decentralised and digitised.

“Technical progress is powering an energy transition that is not just European, but global,” chief operating officer Isabelle Kocher told the World Gas Conference in Paris earlier this month.

“As energy solutions become smaller and smaller, so energy itself is becoming increasingly local: looking to the future, more than 50 per cent of energy generation will rely on local sources. The sun is local, and so is the wind.”

That view conforms with the outlook of other major European and US utilities. Australian utilities are also seeing the transition taking place, although they differ on just how profound it will be.

Engie has also pulled out of bidding to build a new 1,000MW coal-fired power plant in South Africa. A report in finance journal IJGlobal said no official reason had been given for the withdrawal, but quoted a source that said Engie was “purely exiting due to new concerns over supporting new coal generation.”

Engie recently opened a new wind farm in South Africa and is leading a consortium that is building the Kathu solar park, also in South Africa – a 100MW concentrated solar plant along with a storage system.

The company has declined to comment on the South Africa coal decision, but recently Mestrallet said this about quitting the coal industry in Europe: “The choice we have made is very clear. We have stopped investing …. in thermal power generation in Europe and we are investing in renewables.”

At the WGC, Mestrallet and Total CEO Patrick Pouyanne issued what the official program described as a “call to arms against coal”, pushing for gas to be adopted and helped by an international carbon price.

But what does this mean for Australia, where Engie owns the 1.5GW Hazelwood power station and the 1GW Loy Yang B coal generator, along with other assets such as the Pelican Point gas generator in South Australia? Can Engie say one thing on the international stage, and do another in its portfolio?

The Hazelwood coalmine in February

The Hazelwood coal mine fire in February, 2014.

The 44-year-old Hazelwood power station is the dirtiest coal generator in Australia and the third-dirtiest in the world, with a carbon intensity of 1.4 tonnes/MWh. The new Victorian Labor state government is coming under pressure to push for the closure of the generator, given its health impacts, the fire last year and the damming follow-up report, as well as the huge amount of excess capacity in the network.

Currently is has a licence to keep operating until 2026, although an analysis by two Harvard fellows estimated the cost of the plant’s emissions at $900 million a year.

Given Engie’s new rhetoric about climate change in the lead-up to Paris; its ownership by a government desperate to seal a climate deal, its own push to dump coal, its push to to impose a carbon price, the falling profits of the generator, the controversy and costs of the mine fire and its impact on local communities, and the company’s recognition that the world is changing rapidly to decentralised generation, it is hard to imagine how they could justify any moves that call for the long-awaited closure.

As Mestrallet himself noted when speaking to analysts earlier this year, there is no doubt about the pace of the “energy transition” across the world.

“It is really a global trend. It is an irreversible movement pushed by the technology, at the same time through the digital revolution and also the renewable revolutions in technologies for wind, for solar, for heat and miniaturisation of the equipments.”

Mark Wakeham, from Environment Victoria, said pressure will increase on Engie in the upcoming inquiry into the Hazelwood fire, which has already cost them hundred of millions of dollars in lost income and repairs, and the potential liability that the company faces in future.

“You would think it will concentrate some minds in Paris,” he said. “That highlights the need for a Victorian government plan for the future of the region,” he said, noting the abrupt closures of smaller power stations in Anglesea in Victoria and Port Augusta in South Australia.

  

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  • Alastair Leith

    wow — great news (i think) if rhetoric precedes action

    • Richard Koser

      Giles asks a good question. I hope he rings Engie and asks them.

      • Alastair Leith

        “Given Engie’s new rhetoric about climate change in the lead-up to Paris; its ownership by a government desperate to seal a climate deal, its own push to dump coal, its push to to impose a carbon price, the falling profits of the generator, the controversy and costs of the mine fire and its impact on local communities, and the company’s recognition that the world is changing rapidly to decentralised generation, it is hard to imagine how they could justify any moves that [obstruct the community’s] call for the long-awaited closure.”

        that question?

        • Richard Koser

          That question. If that’s all true, when will they shut the plants? Will they want compo? What about site rehab?

          • Alastair Leith

            Site rehab is looming as a big issue with mines overseas (Peabody in USA?) going bust and not having funds for rehabilitation. If they just go and sell the asset to a shell company and that turns insolvent it will fall to taxpayers.

            Which is another reason I’ve proposed since the devastating BP/Halliburton Deepwater Gulf Spill that resource companies put up collateral against potential environmental damages to be held by govt (and invested in RE) and then receive that collateral back as payments over the life of the project if they have no incidents. Demanding remediation funds in security now might hasten the demise of coal and gas.

            Of course the industry would fight any damages trust fund tooth and nail but at least it would be them fighting defence not the ENGOs for a change.

  • John Knox

    This could be the start of something HUGE – more power to them (if you’ll pardon the pun) for deciding to become a true energy company rather than simply fossil generators…

    • Ian Baird

      Actually,moving from coal to gas is NOT the answer. From one fossil fuel to another, NO WAY!

      • John Knox

        Gotta agree with that, Ian. Fugitive emissions alone make (unnatural) gas as bad or maybe even worse than coal…

  • Blair Donaldson

    “The choice we have made is very clear. We have stopped investing …. in thermal power generation in Europe and we are investing in renewables.”

    When the chief of a major electrical generation company sees the light and acts accordingly, you have to wonder why Tony Abbott is determined to back fossil fuels. He is either incredibly arrogant or unbelievably ignorant about what is happening elsewhere around the world when it comes to energy generation.

    • John Knox

      Either way, he’s not much of a ‘leader’…

      • Blair Donaldson

        Yes, and he verifies that opinion on a daily basis.

    • Richard Koser

      All of the above, plus pig-headedly obstinate and stuck in some fantasy 1950s world where we curtsy to the Queen and Australia was overwhelming European.

    • Barri Mundee

      The only sensible conclusion is that his party was funded by vested interests and he now has to deliver a delay of the transition away from burning stuff that must occur

      • Blair Donaldson

        The one consoling fact is that each day that passes is another one closer to the end of the current government and TA as PM. He is little more than a huge embarrassment. The antiscience he subscribes to is getting really ridiculous, to the point that even welded on supporters must be starting to feel uncomfortable (you’d hope)

      • Roger Brown

        Coal “donations” LNP got $3 Million and later a couple of Board jobs.

    • Elisabeth Meehan

      Tony is in the pocket of big coal because he owes them. He’s sold his arse to the coal lobby, via donations.
      No real mystery. We have a third world style dictator, not a leader.

  • Rob G

    Retreat! Retreat! Retreat!
    Makes you wonder when you see this and other similar stories how the Gallie Basin project could ever be considered viable…

    • John Knox

      Increasingly, they’re looking like white elephants and #StrandedAssets and it would be a mistake, both financially and reputationally, for banks to touch these projects…

      …and rightly so.

    • Richard Koser

      It isn’t. The banks won’t lend $16bn to blow a hole in the Great Barrier Reef.

    • Alastair Leith

      There was an interesting article in AFR about why Adani is so bullish about their demand projections, India only has high-ash coal and increasing they are building newer plants to produce less environmental emissions (though still burning coal) so they’ll need the imports if they continue to use coal the way they are (which is mostly domestically sourced atm).

      http://www.afr.com/business/mining/coal/india-to-fuel-adanis-coal-expansion-20150616-ghpg3x

      Also these power plants aren’t so much about power for the great many people without power in their homes as building industrial complexes (tax-free zones like China did probably) and so there’s less transmission and network cost involved than rollout to the rural villages and cities. Distributed solarPV and storage can already undercut in terms of LCOE and time to market where networks don’t exist but will have a harder time meeting industrial demands I suspect for a few more years.

      • john

        low quality high ash content coal from the mines range between price of $35 to $54 and Carmichael may be able to deliver thermal coal at a way higher quality however being able to supply it is one thing but being able to make any money from supply is a whole new question.
        I do not think they can deliver the very good low ash content thermal coal below $70 a tonne.
        Yes it is good quality but how on earth does it equate on purely economic terms.

        • Alastair Leith

          hope you’re right. it’s insanity to think that much coal will be burned without major impacts.

    • lin

      It isn’t, which is why Abbott wants to use your tax dollars to prop it up.

      • Chris Fraser

        … and then spend more tax dollars to clean up the combusted mess he makes.

      • Rob G

        Yes and that’s why he is on borrowed time. His tactic are becoming so desperate that he has resorted to a smear campaign on Shorten. Tick -tock Mr Abbott.

        • lin

          The end of this lying, morally bankrupt, corrupt and thuggish government cannot come soon enough. Every passing day they find new ways to plumb the depths of bad governance.

  • lin

    Best news I have heard in ages! I’d be happy to buy my electricity from a company that was actively pursuing these changes.

  • Ron Horgan

    This looks like a major policy change and Hazelwood is an embarrassment to be quietly closed down and remediated ASAP.
    The Victorian Government should not have to make too many concessions at our expense.

  • john

    So Engie owns Hazelwood a 1.5GW power station now this rather a huge power station just taking it out of production on any day would cause some chaise.
    So lets assume they decide to wind it back and close the station then what is needed is rather a lot of replacement to fill the gap.
    A rather lot of RE has to be built to fill the void that would be caused so get off your bottoms and do it: is obvious to everyone.

    • By the market’s own estimates, there is 9GW of excess capacity. Departure of Hazelwood would hardly be noticed. But good idea to build RE for when they all gone – the brown coal generators at least.

      • Smurf1976

        Actually, the lights would have gone out in Victoria the Summer before last if Hazelwood (or any other large power station) hadn’t been operating. For that matter, even just the closure of Port Augusta (SA) and Anglesea (Vic) would almost have done it. There might be spare capacity in Qld and NSW, but that’s not available to meet peak demand in Vic and SA when the wind fails to blow when it’s needed most.

        • Smurf, that is not true. This is from AEMO’s statement of opportunities report. “However, even with 10 years of
          consumption growth, by 2023-24 between 1,100 MW and 3,100 MW of capacity could still be withdrawn from each
          of New South Wales, Queensland, and Victoria without breaching the reliability standard.”

          • Smurf1976

            I’ll politely point out that in 2014 during the heatwave, supply was so stretched in practice that there was well under 1000 MW of unused capacity between Vic and SA combined. Had a breakdown occurred at (say) Loy Yang taking 2 units offline then blackouts would have occurred with 100% certainty as the capacity simply wasn’t there.

            Something to note about AEMO’s “reliability standard” is that it doesn’t require that all load be met in order to meet the standard. In other words, AEMO does accept the occasional generation shortfall leading to blackouts.

            Whether or not the wider community and government would accept that in practice is another matter but from a *political* perspective, if Hazelwood were closed tomorrow and the power goes out next Summer due to a generation shortfall then I’m pretty sure that we’ll either be re-commissioning Hazelwood or building some other non-intermittent source of generation. No politician will be claiming credit for the power going out no matter how much CO2 they avoided being emitted.

            Have a look at this: http://www.aemo.com.au/AEMO%20Home/Market%20Notices/0044525

            LOR3 = demand exceeds all available generation of any type. And this happened with Hazelwood running hard along with all other capacity available for service on the day. There would have been widespread power disruptions had Hazelwood, or any other large source of generation of any type, not been running indeed the situation was bad enough as it was.

            I’m all for renewable energy, strongly so, but the hard reality is that there isn’t 1600 MW of spare capacity in Victoria once normal and foreseeable maintenance outages, breakdowns, lack of wind and other such matters are considered. If everything works perfectly yes, but no engineer or anyone who has worked around power stations would expect that to happen in practice. It’s a borderline miracle if every “conventional” generating unit (coal, gas, hydro) is actually available all at once, and even less likely that we’ll also get good wind and solar output at the same time (though solar on a sunny afternoon is pretty certain of course).

          • MrCyberdude

            NUCLEAR POWER in Victoria & NSW is what’s missing from this conversation. The reality is that when base load power is eventually needed, if coal is not used the only genuine alternative is NUCLEAR energy.
            This is the adult conversation that needs to go to a referendum and be decided on by the people, while being fully informed of the increased cost of power generation. Personally I’d back Thorium but not Uranium.
            .
            Smurf, you are on the money regarding “Blackouts”. The interstate high voltage tie lines have often been at their limits but that isn’t discussed publicly.
            .
            My Twitter profile should indicate my local knowledge, government and stakeholder involvement when it comes to Hazelwood Power Station.

            MrCyberdude

          • JonathanMaddox

            From your link: “AEMO is seeking a market response.” One day ahead. That doesn’t sound like a request to build a new power station to me, only for owners of existing generation capacity or severable load to offer some more to the market. This communication is part of the proper functioning of a well-regulated market.

            You are aware that Victoria is connected to power stations in New South Wales and Queensland also, where there is a lot more “spare” capacity and indeed several coal-fired power stations have been mothballed in recent years (Munmorah, Wallerawang, Tarong)? Black coal has become an expensive commodity, so black-coal-fired power stations frequently decrease output in order to conserve fuel (and reduce emissions), in a way which, without a carbon price, the brown coal power stations of the Latrobe Valley do not.

            And yes, I did not fail to notice that Tarong was switched back on more recently — at the expense of the Swanbank gas-fired power station. Gas is now even more costly than black coal, you see.

            A market response is what AEMO requested and that’s what it gets, all the time.

          • Smurf1976

            What the market notice says, in layman’s terms, is that every available power station was already running and that no more was available. It’s not a request to build another one at a few hours’ notice, it’s a warning that the lights were about to (and very nearly did) go out.

            Putting that another way, it’s saying that Hazelwood was absolutely critical on that day, there being no other source of generation available had it suddenly disappeared. The same could be said for every other significant power station in Vic and SA – the system couldn’t have coped had any one of them not been running.

            As for supply from other states, that was already maxed out on the day. If we’re going to use surplus capacity in Qld to enable less peak generation in Vic then that needs more transmission from Qld into NSW and from NSW into Vic. Transmission from NSW into Vic was already operating at full capacity at the time as was transmission from Tas to Vic so no more was available without some very serious investment.

            AEMO didn’t get a market response on the day, since nothing was possible. What they got was, from memory, one failed generating unit repaired a bit earlier than expected. But if Hazelwood hadn’t been running, there would have been widespread blackouts that day with 100% certainty (unless, of course, some other new source of generation had already been built to replace it).

            As for gas versus coal, those in the industry saw that one coming years ago. Gas is being priced out of base load generation just as oil was back in the 1970’s. With the growth of solar cutting the need for intermediate load generation, that really leaves gas as viable only for actual peaks and that’s where it will continue to be used.

            One consequence of that is that it makes the more energy efficient gas-fired plants, that is the combined cycle ones, unviable. Hence Swanbank E has been mothballed and others are running less (or not at all). The less efficient open cycle units still have an occasional market for peak generation as they always did, but gas for base load is dying and about to be dead in a big way. Even with a modest carbon tax, coal is still cheaper.

    • John Knox

      Well, no, actually – the NEM has an over-abundance of energy supply at present which is part of the reason some generators are finding the going quite tough. Renewables and lack of demand are pushing the wholesale price down as was reported by the government’s Warburton enquiry…

  • Giles you paint a quandary for GDF Suez. I hope they respond to the article. They might respond by saying why should the French Government bear the cost of shutting down a Victorian power station when Australia just repealed the carbon price. It is awkward and embarrassing -there is only so much an enlightened company can do when the incentives are not in place.

    • Ron Horgan

      Paul , when you buy a company you usually become responsible for both the assets and liabilities. Unless a special exclusion was agreed when the sale was made this should be the case here .As GDF Suez are a large and honorable company, they may not be able to simply spin Hazelwood off into a shell company and then bankrupt the shell owner.
      If they did have an exclusion, the question is who is now left holding the baby and responsible for remediation costs.
      The fact of Australia repealing the carbon price should not change the issue?

      • I agree with you on assets and liabilities. Great care was taken to soften the blow of a carbon price when it was introduced each coal polluter was thoughtfully compensated. Less care was taken when the price was repealed….finger waving to ensure the lower tax benefit was returned to consumers. Now if an incentive to reduce coal consumption is reintroduced do – is it time to renegotiate compensation? If I were a french tax payer I’d certainly hope so.

        • Ron Horgan

          “By the prickling of my thumbs”, I fear that us taxpaying muggings will be the ones to pay for the clean up.
          I’d still like to see if the sale to GDF had a clause protecting them from the cost of remediation

  • Edward Borland

    Good to focus on supporting displaced workers now as well as closing Hazelwood. Having alternative opportunities / skills / industries there will make it easier on the community and the politics.

  • Sara Hill

    Will they (Engie) walk away from fracking too? Can China and India meet their energy needs using renewables in the next 20 years? Are we prepared to sacrifice our energy hungry lifestyles and sell them our “cleanest” fossil fuels so that the developing world can make a green leap? Are China and India learning from our fossil fuelled mistakes?
    At least it sounds positive for communities close to Hazelwood.

  • Leigh Ryan

    Both Chinese and Indian Governments have stated their objectives clearly.
    To stop importing Coal.
    To use their own Coal for existing generators and to fuel another 60 generators planned but not yet built.
    To expand rapidly and on a large scale Solar and Wind and where suitable Tidal generators, especially in remote and rural areas.
    Who are Adani, this is important to understand, well they are a major Shipping Company and the largest power generator in India, their latest 660mw Thermal Project is Clean Coal Technology, they have just signed a contract to build a 10,000mw Solar Plant in Rajasthan.
    Adani owns the National Rights to Coal Mining in India, Building Carmichael in Australia isn’t about cost for Adani it’s about Coal security for both Adani and India.
    If your going to argue against a project at least understand what and who it is your up against, their is way too much mis-information out there and it’s time both sides told the truth.

  • James Prest

    Toxic Emissions from the Hazlewood power station in 2013-2014: according to the Federal Government’s National Pollutant Inventory: Mercury: 430 kg; Total Volatile Organic Compounds: 340,000 kg; Particulate Matter 10.0 micrometers or less in diameter: 4,200,000kg, Particulate Matter 2.5 um: 600,000kg; Sulfur dioxide: 14,000,000kg, Arsenic: a mere 50kg.

    There is a live question about the implementation of the polluter pays principle here.

    The Victorian Environment Protection Act says “Section.1 it is the intention of Parliament that in the administration of this Act regard should be given to the principles of environment protection. Section 1F: F Principle of improved valuation, pricing and incentive mechanisms 1F (2) Persons who generate pollution and waste should bear the cost of containment, avoidance and abatement.

    Yet licence #46436 held by Hazlewood Power Partners accessible at the EPA website does not contain limits on Mercury or VOC pollutants mentioned above and does refer to any load based licensing fee for any pollutants.