How to close down brown coal generators: Hit them with bigger levies

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We all know we need to shut down our brown coal power stations, especially the really old ones, as soon as possible…But how?

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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.

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.

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8 Comments
  1. suthnsun 2 years ago

    Hear hear!

  2. Chris Fraser 2 years ago

    Agreed, although it does smack of ‘picking winners’. The very much market-oriented Coalition would love a free kick and a weapon to use against increases in the levy. Amazingly, I still prefer a market price for carbon.

  3. Dave 2 years ago

    Or just pass tougher emissions legislation.

    ” You will emit no more than XX Kg/CO2 per Mwh” reviewed annually.
    Penalty for breach is $XYZ
    Cost of breach is not allowed to be passed onto consumer.

    Easy fix !!

    • david_fta 2 years ago

      Only trouble is, the climate needs XX to be 00 (ZERO).

      A better way is to institute a tax on burning Fossil Carbon (Consumption Tax; FCCT), making it more or less revenue-neutral by cutting other taxes, then increasing the rate of this FCCT each year until coal-fired power is priced out of the market, and has been replaced by renewables.

      Then we continue raising the rate of this FCCT to do the same thing to petroleum-based transport fuels.

  4. DogzOwn 2 years ago

    How about the idea for real time levy, big $ incremented /MWh produced and then decremented if they actually perform any site rehab. Pic attached is not brown coal but indicative of huge scale. Isn’t this an emergency, before they “sell” toxic assets/liability to somebody like Clive Palmer?

  5. Barri Mundee 2 years ago

    I like this idea. As a resident of the LV the economic and social impact must be a key consideration. The generators will fight it tooth and nail though

  6. Brunel 2 years ago

    What the?

    You missed the easier method of all – crack down on mercury emissions like Obama did.

    I bet this old coal power station has heaps of mercury emissions.

    Also, build an UHVDC line from WA to Vic to NSW, so the worst coal power stations can be shut down.

  7. david_fta 2 years ago

    Thanks Alan.

    If it helsp any, there’s a handy guide to pricing Hazelwood (and every other burner of fossil carbon at http://www.dpmc.gov.au/taskforces/unfccc/public-submissions/arthur-david; go to the bottomm of the page and click on the link that downloads File attachment: “Att to 294 David Arthur.doc”

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