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Victoria’s climate agenda: How to build new renewables? Part 2

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789341-daniel-andrewsYesterday we explored the Victorian government’s upcoming Renewable Energy Action Plan, examining the measures that the State government could take to promote new renewable energy projects.

But as we explained in that article, the transformation and decarbonisation of our energy supply also requires a plan to retire the state’s outdated and polluting coal-fired power stations.

The graph below highlights the source of Victoria’s greenhouse pollution. The annual emissions from just four coal fired power stations comprise nearly half the state emissions.

On an emissions intensity basis, Hazelwood and Yallourn are amongst the least efficient coal plants in the world – around 1.5 tonnes of CO2 per MWh – and they’re right here on our doorstep.

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As well as causing greenhouse and air pollution, big, dirty and old coal generators are crowding out investment in renewable energy with Victoria estimated by the Australian Energy Market Operator to have 2 GW excess generation capacity.

With the Federal Coalition’s removal of a carbon price and their unwillingness to implement any credible climate policy which would place a burden on coal generators, state leadership to facilitate coal retirement and community transition is essential. Fortunately, state governments have all the policy levers they need at their disposal.

So far we’ve seen the closure of a number of small higher-cost coal-fired power stations, including the closure of Energy Brix and Anglesea in Victoria. Both closures were announced suddenly, in response to low wholesale electricity prices. Both closures inflicted significant pain on workers and affected communities in the absence of any transition plan.

Now Victoria is left with four large power stations (Hazelwood, Yallourn, Loy Yang A and Loy Yang B) with high emissions and low running costs, all hoping that one of the other three will blink and close first to make their own business more profitable.

Without a circuit breaker these power stations could limp on for years, delaying investment in new renewable energy projects and then perhaps closing suddenly in response to changing market conditions, a looming major maintenance event, or a major failure of equipment (with serious safety risks to workers, as occurred at Northern power station in South Australia last year). Such an unplanned closure would have dramatic implications for workers and the Latrobe Valley.

It is a far more responsible course of action for the State government to outline an agenda for a smooth transition towards clean energy by gradually withdrawing coal generation and creating room for new renewable energy investment. This might involve encouraging the staged closure of the oldest and dirtiest units at our oldest and dirtiest power stations.

Yallourn has four 400 MW units and Hazelwood has eight 200 MW units, so there is the ability to commence retirement of a number of units now and stage closure over three or four years while embedding transition and economic diversification plans in the Latrobe Valley.

The Andrews government could use a number of measures to encourage the withdrawal of capacity. The simplest and cheapest would be introducing emissions performance standards linked to a decarbonisation target for the state. Standards could be embedded in Victoria’s Climate Change Act or the Environment Protection Act (both also under review at the moment), and ratchet up over time to progressively retire each of the State’s four coal-fired power stations, and eventually gas-fired power stations too.

This approach would complement (and likely reduce the cost of) efforts to accelerate new renewable energy build, with a clear schedule for power station retirement and new capacity requirements.

A retirement schedule would also kick-start transition planning for coal workers and Latrobe Valley community. Over the past six years there has been an awful lot of talk about the need for transition planning and some short lived processes to develop a plan for the region. Part of the reason these attempts have been fledgeling has been that in the absence of clear timelines for closure it has been difficult to attract the necessary resources for, and commitment to, the development of a transition plan.

Closure planning and transition planning need to work hand-in-hand. This will require local forums and consultation processes, perhaps a Latrobe Valley transition committee, and serious money on the table from both government and industry to implement economic diversification strategies.

Having been involved deeply in many of these transition conversations over the past decade there appear to be two elements to a transition plan that enjoy strong support from nearly all stakeholders.

Firstly a comprehensive rehabilitation plan for each of the mines and power stations will create hundreds of jobs over many years and good social and environmental outcomes for the local community. It is encouraging that the second Hazelwood Mine Fire Inquiry has highlighted the inadequacy of all mine rehabilitation plans in the Valley and is likely to lead to much higher rehabilitation standards and bonds.

Secondly, some workforce portability amongst the generators would provide the opportunity for younger workers who lose their job at the power stations which close first (eg Hazelwood and Yallourn) to be offered jobs at other power stations like Loy Yang A and B, while an older worker at Loy Yang should be able to participate in redundancy offers made by the closing generators.

Exploring such options will require innovation and an open mind. It is all too easy to maintain a hands off approach to both power station retirement and transition planning, but that does no favours at all to the Latrobe Valley community who already experience high disadvantage across a range of socio-economic indicators.

The Andrews Government could explore policy measures other than emissions performance standards to facilitate orderly coal plant closure. Frank Jotzo’s recent paper suggesting generators should contribute to a fund which then assists the first generator to exit has attracted much interest and makes a lot of sense.

Generators like AGL and Energy Australia have been well aware of brown coal oversupply and barriers to exit for some time and have been highlighting the need for government intervention.

Through its Renewable Energy Road map and climate change strategy, the Andrews government could use both the ‘stick’ of emissions performance standards, and the ‘carrot’ of some kind of brokered deal (as is happening with the Andrews Government’s Forest IndustryTaskforce) to get generators and other key stakeholders into the room to make meaningful decisions about power station closure and community transitions.

Victoria has the dirtiest power stations in the world in our backyard. It’s great that politicians are excited about the jobs and investment that flow from new renewable energy projects. But attracting renewable energy investment and retiring dirty coal power stations are two sides of the same coin, and we need both if we are to clean up our economy.

Mark Wakeham is CEO of Environment Victoria, one of Australia’s leading environmental charities.

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  • Tim Forcey

    VICTORIANS – TURN ON YOUR AIR CONS NEXT WINTER…

    …and heat with renewable energy instead of gas.

    Collectively Victorians could save $250 million per year on their heating bills by using the reverse cycle air cons (renewable energy collecting heat pumps) they already have in their homes.

    See: http://reneweconomy.com.au/2015/the-cheapest-way-to-heat-your-home-with-renewable-energy-just-flick-a-switch-92274

  • Ian

    Mark Wakeham makes so much sense with his series of articles so far. The gut feeling though, is that no-one will listen. We need a plan B and plan C.

    plan B is 1. encourage and promote distributed solar and storage of unlimited size and unlimited potential for export to the grid. Allow a pathetic FiT of 5c/KWH in exchange for unfettered access to import and export to the grid, and in exchange for no grid connection fees. 2. Mandate new buildings to be fitted with solar covering a substantial % of roof space. 3. Mandate all public buildings and charitable organisations to install solar and subsidise this. 4. Promote small businesses to use their $20000 tax write off to install solar. 5. Introduce community solar and wind farms where individual members can offset their electricity bills with electricity generated remotely at these ‘farms’ with some sort of smart time of use/ time of generation exchange. 6. Advertise and promote environmentally responsible business renewable power purchase agreements. In other words leave the gentailers to their own devices but fully promote distributed solar at all levels of power consumption. Stop the gentailers’ bleating by reducing the FiT to next to nothing but prevent them from discouraging solar uptake by them introducing fixed fees. By creating a massive competition to coal generation, the gentailers will beg for Plan A ‘s reforms.

    plan C is similar to plan B: approve utility scale wind with power purchase arrangements to big business, large public services like hospitals and municipalities and electrified public transportation. Beef-up state interconnectors especially with Tasmania with special arrangements to exchange renewable power generation from wind farms and large scale solar farms with hydro generation produced by that state. This would leave the current grid of fossil power generation and existing network of customers alone to sort out their dwindling customer base and new utility scale renewables generation can expand to supply their own dedicated customer base. Again renewables developers should be free to find their own customers.

    Once installed wind and solar is there to stay, Coal can beat its chest but it’s rivals will not go away. They can then bow out gracefully or shut down catastrophically just as they choose.

    • Ian

      Vested interests are not going to voluntarily close down. Money is the bottom line. The experience all over the world where renewables threaten the incumbants is that the incumbants use their considerable corporate might to sway regulator decision making to keep their way of life intact. Solar is generally tolerated up to a point when it is useful for peak shaving in the day time, but once solar penetrance increases to the level that a ‘ duck curve’ occurs then out come the utility Light-Sabres and the battle is on.

      The trick is to out manoeuvre the FF lobby by creating an independent supply-demand symbiosis between utility scale renewables and dedicated corporate customers with power purchase agreements, and by facilitating independance of individual small scale electricity users such as homes using solar plus dual purpose storage ie electric vehicles. The third leg of this renewables push is to strongly support solar plus storage for edge of grid and remote locations. This third aspect should get the utilities’ support as cutting loose their expensive rural commitments should reduce their cross-subsidisation costs.

      Another olive branch to the utilities is finding them new customers, transportation is such a customer, electric vehicles, trams, electric busses, and city metro services. Electric vehicles mean battery storage, and renewables cannot progress beyond a certain point without storage. Whilst feeding the FF utilities electric vehicle customers with one hand, renewables are being bolstered with the same EV storage with the other hand.

      Tim Forcey has an excellent point, electrifying home heating using reverse cycle air conditioners. Gas is removed from the pool of domestic energy use and the utilities can delight in new loads for their product. Subsidies for electrification of heating, be it reverse cycle space heating or induction cooking or heat pump hot water heaters should be used as a sweetener for bargaining with utilities regarding tariffs. IE, removing fixed fees, removing limitations to exported distributed power generation and storage and other impediments to distributed solar and storage in exchange for promoting electrification in the home and in the transport sector.

      Sticks and Lollies, aggression and nurturing , will change society’s FF addiction.

      • Ian

        Einstein probably said ” in an electrical circuit, for every KW of power generation there needs to be a KW of load”. Government, to promote renewables, must subsidise, not utility scale solar but large scale loads. Forget pouring public money into large scale solar projects, use that money to electrify public transport, metro systems, electric busses and trams. The new electricity load can be shared between the existing FF generators and new large scale renewables, again linking this government largess to renewables-promoting tariffs at the domestic level.

        • Alastair Leith

          only works if the excess coal capacity is closed down directly through government edict. then demand may grow. demand has fallen since FY 2009/10. Unless you tie new solar farm projects to particular uses like Transport with PPAs.

  • Ray Miller

    As both Hugh Saddler and Alan Pears have pointed out Energy Efficiency is the key strategy needed to be employed by the energy users which will have the largest stick to break the back of the inefficient generators. Efficiency strategies are a long term and economic efficient to make the biggest and recurring savings. The bonus is then any or all of the local renewable and battery storage technologies become smaller to cover 100% of the local load and then have more to export should the owner decide to.

    Coal mine rehabilitation of all the Vic power stations should be the top priority while the companies are still operating. By the Vic government requiring NOW all pits which have not been accessed over the last year to be under rehabilitation as a condition of being able to stay connected to the grid would force their hand at no cost. The state is exposed to the mining liabilities and should take immediate steps to reduce any unfunded liabilities by the companies operating the generating plants.

    • Mark Wakeham

      I agree Ray, my next article will be on what the State Govt’s energy efficiency and productivity statement should include

      • Barri Mundee

        Great article Mark. Looking forward to the next one!

  • Alastair Leith

    Jotzo, Mazouz paper does indeed make a lot of sense, @disqus_iKb0gNqoEv:disqus

  • DogzOwn

    But Greg Hunt says nothing to worry about and no need to do anything. Of their own accord, brown coal power stations will close soon, at no expense to tax payers. Asking about “soon”, any time in next 10 to 20 years! See, no worries at all.

  • Gary Rowbottom

    Well said Mark. I have worked at Alinta Energy’s Northern Power Station in South Australia for 16 years in a technical capacity and am seeing (and feeling) the pain of lost jobs as our closure looms. I have been and still am involved with the Repower Port Augusta local community group that along with its network of wider alliance partners, have been advocating for 4 years now to build concentrating solar thermal electricity generating plants with molten salt storage in our region. We saw that as a way to keep electricity generating jobs in our region, and be part of the needed transition from fossil fuels. Our hope was to start building new CST before closure so it would be a proper transition. It hasn’t turned out that way for us, but Victoria and other states need not make the same mistakes. It’s pretty easy to prioritise closures by emission intensity and efficiency. Proper planning of closures and transitions should happen as Mark describes. But I concede that may be difficult to achieve and perhaps Ian’s Plan B & C will be needed.

  • DogzOwn

    Isn’t reduced consumption a lower hanging fruit than more efficient appliances? Even new build houses perform nowhere near as well as they should. Anything more than 10 years old is likely no better than 2 star. So how about campaign to revive ceiling insulation, draft proofing, window upgrades etc?