EnergyAustralia calls for “unity” to enable “inevitable” transition to renewables

EnergyAustralia’s managing director Catherine Tanna has called on Australia’s political parties to end the political games over energy policy and to recognise the areas of common agreement in an effort to facilitate the “inevitable” transition to renewables.

The EnergyAustralia chief told the AFR energy summit that the decarbonisation of the Australian energy sector was inevitable, and that the fighting between policy makers needed to end if Australia was to manage the technological and regulatory challenges the energy transition will throw up.

“I wonder what the debate looks like to people outside the energy industry – to a family trying to get by, to keep the kids happy and pay the bills,” Tanna told the summit.

“Most often they’re presented with two extremes: on one hand a drive for the endless build of new renewable energy versus stoic support for old coal on the other. A thoughtful transition, playing on the strengths of both those fuels, is hardly ever put as an option.

“The frustrating thing about energy is we agree on more than we realise,” Tanna added. “If we’re to get anywhere, this tribalism and pursuit of people to blame must stop.”

Tanna said the economics of the energy sector means that Australia’s legacy coal generators will be retired over the next few decades and replaced by the cheapest forms of renewable energy.

“Decarbonisation of our energy system and the economy is inevitable,” Tanna told the Summit. “It isn’t whether we’ll get to net zero-emissions, it’s when and it’s how.”

Tanna said it is crucial to ensuring that adequate solutions are identified and implemented to enable the clean energy transition and to provide grid support services such as frequency and voltage controls that have historically been provided by coal generators.

“With regards to frequency control and inertia,  I am agnostic about where those services come from, but in the coal days, we didn’t have to think about it that much because we had an excess of supply. We didn’t have to think about where these services come from, we didn’t value them, we didn’t pay for them,” Tanna said.

“But in the future, this one of the key things we have to solve for. As more renewables come into the market, something has to provide these services.”

When queried about the future of the Yallourn power station, Tanna said that EnergyAustralia hoped that the power station would continue to operate through to the planned commissioning date in 2032, but conceded that changes in government policies and closures of large energy users could accelerate its closure.

“We must get better at managing the retirements of big power stations. There might be a dozen in the next 30 years. If replacement capacity isn’t ready to go, and we haven’t planned to manage impacts on communities, we will repeat Hazelwood,” Tanna told the summit.

“Customers have paid for us to learn those lessons.”

“It often won’t be the in the hands of the owner of a power station as to when it might close. As owners of coal-fired power stations, we are not in charge of all the different variables,” Tanna added.

The Portland aluminium smelter has faced growing business challenges, and the closure of such a large electricity user in Victoria could increase the pressure on Yallourn, one of Victoria’s oldest and emissions intensive brown-coal generators.

EnergyAustralia suffered a $1 billion loss for the first half of 2019, citing growing challenges with its legacy coal generators, and squashed margins within its retail electricity business as retail market reforms force the big retailers to offer cheaper tariffs to their customers.

Ongoing speculation over the future of the Yallourn power station has emerged, following the retirement of the Hazelwood power station that was also located in Victoria’s Latrobe Valley, and the ongoing operational challenges faced by the ageing power station that has seen it rank as one of the least reliable coal-generators in the National Electricity Market.

EnergyAustralia closed the coal-fired Wallerawang power station in 2014, and Tanna said that the company had learnt lessons from that experience that it would apply in the management of its remaining coal assets.

“One of the first announcements I made at EnergyAustralia was a painful one: the retirement of the Wallerawang power station near Lithgow, after 40-years’ service,” Tanna said.

“The plant was too costly to maintain in a depressed market. Closing Wallerawang did reduce emissions; it was the rough equivalent of taking 2 million cars a year off the road, but it also cost local jobs. Even afterwards, EnergyAustralia was struggling financially.”

Contrasting the approach to the decommissioning of ageing coal infrastructure, the CEO of Engie Australia and New Zealand, Augustin Honorat, told the AFR Energy Summit that Engie had decided not to wait for external factors to make the decision for the company to get out of coal.

“Engie has stepped away from coal in Australia, and around the world. Not because of any technical risk inherent to coal, but because we think this technology is not suitable, not sustainable, in the medium or long term” Honorat said.

“The cost of coal is simply too high. To the environment, to communities to our customers and to our shareholders.”

“At Engie, we have chosen not to wait for external forces to determine our future business model.”

Engie acquired the Hazelwood power station in 1996 when the power station was sold by the Victorian Government. The brown coal generator consistently ranked as one of Australia’s most polluting power stations with a high emissions intensity for a power station of its scale.

Engie closed the Hazelwood power station in 2017 and was criticised at the time for providing just five months notice of closure, limiting the ability for the Victorian energy system to adjust to the loss of 1,600MW of generation capacity, and for the workforce of almost 500 workers.