Anglesea brown coal generator to close after losing social licence

It could be the classic tale of a stranded asset. And one that should resonate throughout the energy and investment sector. Even when Alcoa announced 15 months ago it would close its Point Henry aluminium refinery near Geelong, it refused to shut the highly polluting brown coal coal fired generator that had supplied the refinery for 46 years.

Alcoa reasoned that someone must want to buy its output, or even the generator. “Alcoa believes the Anglesea power station is a viable asset and that is why it will be offered for sale,” a spokesman said in early 2014.

But no one bought it. Finally, more than one year after the announced closure of the smelter and following an intense push by the local community, Alcoa has seen economic and environmental reason, and decided to close the 150MW facility.

The Anglesea generator had supplied about 40 per cent of the smelter’s power needs but could not continue when operating in a free market. Despite being one of the lowest cost generators, it had high sulphuric content, making it a controversial polluter, and it lost its social licence to operate.

In any case, the coal market is being readily reshaped by the incursion of renewables, with several coal fired generators closing, including Wallerawang, Collinsville, Munmorah, Energy Brix, and Playford B.

However, other coal fired generators are being spared a similar fate because the Federal government is intent on ensuring that there is no policy signal for renewable energy.

After finally agreeing to a reduced target of 33,000GWH (down from 41,000Gwh), the Coalition has pulled the certainty that the renewable energy industry has craved by back-flipping on its commitment to put off the next review until 2018, or even 2020.

The market remains overburdened by excess base load capacity. AGL has suggested 9,000MW of coal fired generation is surplus to requirements. Gas-fired generators are suffering the most because the rise in gas prices has pushed them out of the market. This is despite the fact that many are newly built – in fact, more gas and coal fired generation capacity has been built in Australia since 2009 than large scale renewables.

AGL Energy is now arguing that the Coalition government should impose emission limits on remaining coal fired generators as a way of forcing excess capacity out of the market. Forcing closures based on age would also be effective. AGL can argue this because its fleet is younger, cleaner and more efficient than most of its competitors.

Environment Victoria CEO Mark Wakeham said the closure had wide community support.

“What this episode shows is that leaving the closure of old power stations to corporate decision making means there might not be time to diversify local economies before job losses occur,” Wakeham said.

“With significant oversupply of electricity generation in Victoria, Anglesea will not be the last power station to close suddenly. State and Federal Governments need a plan to continue the phase-out of dirty power stations that supports communities and minimises disruption