Alan Pears is Adjunct Professor, School of Global Studies, Urban and Social Studies (GUSS) at RMIT University. This article was first published at The Conversation. Reproduced with permission.
We all know we need to shut down our brown coal power stations, especially the really old ones, as soon as possible: preferably 10 years ago, the date when the old State Electricity Commission of Victoria planned to shut down Hazelwood (actually 2005).
But how? There seem to be two broad approaches: an ‘orderly phase-out’ or ‘just let the market sort it out’. Neither is very satisfactory. One may involve payment of ‘compensation’, while the other could take decades.
There is another approach. Use the market, but actively intervene to make inefficient, old brown coal plants less competitive. And crank up the pressure until they close. The Victorian government has already taken a small step in this direction by tripling the levy on brown coal mining, although it is still a trivial cost to the generators.
Progressively increasing this levy or introducing extra ones makes sense. The revenue can be used to cover the cost of decommissioning and mine rehabilitation which is not covered by present agreements. It could even be used to help the Latrobe Valley economy transform, including by paying workers to rehabilitate the mines and decommission the power stations: there’s years of work there. They could also be retrained and assisted to work on energy efficiency and renewable energy projects.
The key is to make sure that the marginal cost of brown coal generation trends towards that of black coal. Then, if there is a plant failure in one generation unit, it won’t be worth fixing it. If we need to move faster, we simply crank up the levy until brown coal can’t profitably bid into the electricity market and the most expensive units shut down first.
We should also make sure there is no talk of ‘compensation’. These power stations have already been generously ‘compensated’ under the Labor carbon pricing deal – and they are no longer paying the carbon price. They have done very well. Further, their owners took a calculated gamble when they bought them, in full knowledge of climate science.
It’s time for the Victorian government to take serious action.
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