Federal energy and emissions reduction minister Angus Taylor has again sought to delay the exit of Australia’s ageing fleet of coal-fired power stations, demanding new rules that would require generators to provide a minimum five years notice of their intended closure.
In a rule change request lodged with the Australian Energy Market Comission (AEMC), Taylor has asked for the existing notice of closure requirements – currently requiring 3.5 years notice to be provided – to be extended out to five years.
Taylor’s attempt to further delay the closure of coal fired power stations could be one of his last acts as the federal energy minister, with a federal election expected to be called imminently.
It is another significant intervention in the energy market by the federal energy market to delay the exit of fossil fuels, that could disrupt the efforts of State governments, which are already implementing plans to replace retiring coal plants with renewables.
It also comes after the surprise Origin Energy announcement in March that the Eraring coal fired power station in NSW, Australia’s biggest at 2.8GW, would be closed by 2025, rather than 2032.
Taylor was galled by the fact that Origin kept the closure idea secret, and dealt only with the NSW state government and the Australian Energy Market Operator, who also kept the federal energy minister out of the loop.
Tristan Edis, from Green Energy Markets, said that was understandable given the treatment handed out by the Coalition government to AGL, which provided more than seven years notice of the closure of Liddell.
“AGL gave a massive notice period, but the response from governments made companies scared,” Edis told RenewEconomy. “Why did Origin not tell the minister about the Eraring closure? It’s because AGL did right thing and got punished for it. I was a disgrace.”
Edis notes that no one in the market had been pushing for the longer closure notices. He also questions whether they are ultimately enforceable, given that an ageing power station could suffer damage that was too costly to repair.
“And why do you need five years? AEMO says the most likely replacement for dispatchable energy is battery storage, and you can build that within a year.”
The rule change proposed by Taylor would need to be considered and approved by the AEMC, requiring amendment to the National Electricity Rules, which will be a lengthy process in itself.
The proposal has received a lukewarm response from the Australian Energy Council, the peak body that represents some of Australia’s largest generation businesses.
“Whilst they may look initially attractive, long firm notice requirements have complex and potentially counterproductive impacts,” Australian Energy Council CEO Sarah McNamara said.
“For example, they may force a generator to publish a firm date long before the operational circumstances of the plant are clear. As conditions change, inevitable adjustments will occur, that in turn can lead to a loss of confidence in the information.”
“It should be recognised that generators, like any business operation, are subject to many unknowns and risks that such a rule cannot address.”
“Company directors also have obligations under the Corporations Act 2001 in relation to operations that have become unexpectedly uneconomic.”
The existing requirement for power stations to provide at least 3.5 years notices before their closure was introduced after the closure of the Hazelwood power station, which occured with just six months warning – widely considered to be too sudden.
The proposed change would also apply to power stations expected to go into a prolonged period of ‘mothballing’, imposing the same five year notice requirement if a power station will be unable to generate for more than nine months in any 12-month period.
Taylor said the new rule change would provide sufficient warning to the energy market, providing enough time for replacement generation capacity to be built and commissioned as a replacement for the closing plant.
But it is unclear why the additional notice is required, with state governments already working to implement plans to replace their respective coal generation capacity with new renewable energy and storage projects.
For example, the NSW government is already well-advanced in its implementation of its Electricity Infrastructure Roadmap, which will support more than 12GW of new generation capacity to be commissioned prior to the closure of the state’s coal generators.
Ultimately, the change is likely to delay the closure of coal fired generators, most of which are approaching the end of their operational lives and are seeing their commercial viability eroded by the emergence of lower cost supplies of wind and solar.
“Without this rule change, there is a risk that retiring capacity is not replaced in time or is only able to be replaced with inadequate or inefficient options that are available in short timeframes, risking the reliability, affordability and security of the system,” Taylor said in a statement.
Taylor claimed that some generators had been “gaming” the existing 3.5 year notice of closure requirements – with power stations lodging speculative notices without any intention of closing on that date.
“The new rule would also prohibit speculative notices of closure when the generator has no actual intention to close the plant on the specified date,” Taylor said in a statement.
“This rule is intended to prevent generators from engaging in behaviour that could create uncertainty in the market and act as a deterrent to new investment.”
It’s an extraordinary claim that can only be targeted at a handful of generators that have submitted such a notice, with AGL Energy already in the process of decommissioning the Liddell power station, after seven years notice. Origin’s notice was 3.5 years.
The director of the Australia Institute’s climate and energy program, Richie Merzian, said Taylor’s response appeared to be a “knee-jerk” reaction to the snub.
”Minister Taylor must be suffering from a bit of FOMO with plant closure deals being stitched up behind his back,” Merzian said.
“It raises eyebrows that a government so resistant to planning a roadmap for Australia’s coal closures is now apparently so keen for longer plant closure notice periods.”
“It is abundantly clear that coal plants are going to accelerate their closures, closing faster than their official retirement dates. If this Government was genuine about providing certainty to coal communities, it would develop a national coal closure roadmap rather than attempting to strong-arm coal plants one by one.”
