Lights switch on at Yallourn, but does it deserve a prize?

A few years ago, Richard McIndoe, the CEO of EnergyAustralia – one of the country’s big three utilities – notoriously warned that the “lights would go out” if the country introduced a carbon price and didn’t give coal-fired generators enough compensation.

Everyone assumed he was talking about the grid. But he may just have been referring to the idea factories inside many of the country’s boardrooms. Now, after several years of doggedly pursuing the dream that business will continue as usual, it seems the lights have finally come back on – at least in some companies.

The Australian Financial Review reported on Saturday that EnergyAustralia, the owner of the Yallourn brown coal generator in the Latrobe Valley, had approached the Coalition with a proposal to use taxpayer money to pay for the closure of the ageing and highly polluting plant.

If true, it is not surprising. Any dream of BAU (business as usual) being the centerpiece of any corporate strategy in the energy industry has been shredded by the extraordinary developments in the electricity market in recent years.

Rooftop solar is already pricing coal out of the market. State government are looking for ways to protect their state-owned generators by changing tariff regimes (WA is the latest to contemplate this). But as Dan Arvizu, the head of the US National Renewable Energy Laboratory, told RenewEconomy last week, you can’t put the wind and solar genie back in the bottle.

Everything that has and will be deployed to decarbonise the grid – rooftop solar panels, battery storage, energy efficiency, and increased renewables – undercuts the business case for inflexible and dirty coal-fired generators.

Electricity demand is already 20 per cent below forecasts in some areas. As a recent ClimateWorks study found, Australian businesses could save $3 billion in electricity costs by becoming more energy efficient. That’s $3 billion off the revenue of generators.

EnergyAustralia has not so much recognized the future as the present. There is no place for old, inflexible and highly polluting power stations like Yallourn in the grid of the 21^st century. EnergyAustralia has simply recognized that and decided to act – possibly with an eye on the IPO that could then be rebranded as clean and green.

So, should EnergyAustralia get a prize for recognising this seeking first mover advantage to access to taxpayers’ funds to compensate for closing down? Even those groups who argued strongly for the now disbanded payment for closure program are not having a bar of it.

Environment Victoria’s Mark Wakeham, who argued strongly for the closure program, described Yallourn’s move as desperate, and reflects the growing problems it has with its mine and falling demand.

“The best way to clean up our power supply and replace ageing and failing power stations like Yallourn and Hazelwood is to keep the price on pollution in place, remove fossil fuel subsidies, increase investment in renewable energy by maintaining the national renewable energy target and getting serious about energy efficiency.”

He said proposals for an industry-wide levy to pay for such closures was self-serving:  “We already have an industry wide levy to encourage the clean up of our power supply. Its called the carbon price.”