The majority owner of the Hazelwood and Loy Yang B brown coal power stations in Victoria has announced that it will cease to build any new coal-fired generators, including in energy-hungry emerging economies.
GDF-Suez, now known as Engie, and majority owned by the French government, which is hosting the Paris climate change talks in just over a month, announced overnight that it would scrap all new coal-fired power station projects, and cancel one that was almost in train in Turkey.
Hazelwood
Engie has been going through a major makeover in recent months, particularly since the appointment of a new deputy CEO, Isabelle Kocher, who has been tasked with transforming the company. She has said that solar is the future, and says that most energy requirements will be generated on site or within the local community.
This shift to distributed generation, and a focus on solar and storage, is being replicated among the other major energy players in the world, with E.ON and RWE in Europe, and NRG in the US, shifting their focus away from centralised generation towards solar, storage, smart software and electric vehicles.
Engie CEO Gérard Mestrallet said the decision was driven by expectations of a good outcome in Paris, and the inevitability of a significant carbon price. “We will build no new coal fired power stations,” he told Le Figaro magazine. (here, in French).
Instead, he said Engie will focus on renewables – solar, wind, geothermal and hydro – as well as gas. He said developing economies such as India and Brazil would add coal, but their focus would be on clean energy.
Engie’s Isabelle Kocher and Gérard Mestrallet
Environmental NGOs want Engie to go further than a promise of new new builds, and accelerate the closure of plants such as Hazelwood and Loy Yang B, particularly in the light of the Paris meeting.
“Serious action on climate pollution cannot ignore the dirtiest coal power station in the developed world – Hazelwood power station in Victoria,” said Environment Victoria Campaigns director Nick Roberts.
“Victoria should now be rapidly developing a transition plan for the Latrobe Valley community to ensure new investment in jobs and industries other than coal. Closure is now inevitable and we need to have a plan to support the community through the transition.
“Hazelwood power station is no longer a community asset, it has now become a liability. In February 2014 the coal mine that supplies the power station caught fire and burned out of control for 45 days, covering the homes of over 15,000 people in toxic coal ash for weeks and damaging the health of the local community.”
He noted that in 2015, analysis by researchers at Harvard University, released by Environment Victoria, revealed Hazelwood costs at least $900 million in health and environmental damage per year.
Analysts expect Engie to sell their generation assets in developed countries such as Australia. A recent report by Morgan Stanley, however, questioned whether the big brown coal generators had much value.
It said that Engie’s entire generation portfolio in Australia, which comprises two big brown coal plants, three gas generators and one small wind plant, might be worth as little as $A760 million.
“We can easily see that a chunk of historical assets now sit outside of the group’s new strategy focus,” the analysts said. This included conventional power generation assets in Australia, north America, and parts of Europe.
But they noted that the Australian asset sales may be complicated by the ownership structure and the lack of clarity over carbon policy in Australia (the Coalition government insists there will be no carbon price, everyone else says they are dreaming).
“There is still uncertainty around the environmental rules that will affect thermal generation, and in particular carbon emissions,” the analysts said. “The fact that there is already a minority partner in the business may also deter a category of potential buyers seeking full control of the assets.”
Giles Parkinson is founder and editor-in-chief of Renew Economy, and founder and editor of its EV-focused sister site The Driven. He is the co-host of the weekly Energy Insiders Podcast. Giles has been a journalist for more than 40 years and is a former deputy editor of the Australian Financial Review. You can find him on LinkedIn and on Twitter.
