Origin Energy has called for a phasing out of brown coal generation in Australia, urging the government of Victoria to adopt US-style emission standards to force the exit of the dirtiest brown coal generators in the country.
The recommendation is included in a submission to the Victorian government’s proposed climate change act, which may include state-based emission reduction targets, a state based renewable energy policy, and transition arrangements from its reliance on brown coal to renewable energy.
Origin says progressively phasing out brown coal generation in Victoria will deliver the biggest impact on reducing emissions in Victoria and Australia. “It is also in Victoria’s interest to influence the design of such policy, to minimise the impacts of structural adjustment on jobs and the economy,” it says.
But it also notes that it will pave the way for more renewable energy. In its submission, Origin Energy says it supports higher emission reduction targets and higher renewable energy targets, as long as it does not require heavy subsidies.
The removal of brown coal generators is key to this. Australia has a massive overhang of base-load capacity, but if this is removed, then wholesale prices are likely to be higher than they would otherwise be, meaning less subsidies for renewables. If new generation is required, then it is likely that wind or solar energy could easily compete with new build coal and gas.
Origin has an interest in seeing brown coal generators removed from the market place, as it will enable more generation from its own coal plant, the Eraring facility in NSW, and also provide market support for its gas plants, many of which have been sidelined by soaring gas prices and plunging wholesale market prices.
Origin Energy says that “for a combination of reasons, including the very low marginal costs of existing local brown coal reserves and ownership structure, large brown coal fired generators in Victoria are still running at high capacity factors.
“Without policy intervention of some sort, this situation is not expected to change for a number of years. From a greenhouse gas perspective this is a perverse situation.”
“Whilst the Large-scale Renewable Energy Target (LRET) will underpin some new investment in renewable energy, the transition to lower emission generation would be accelerated if there was room in the market for this.” it notes.
“We suggest that standards be considered to progressively phase out brown coal-fired generation in Victoria. Standards are currently being implemented in North America with the US basing theirs on intensity and Canada on age. Either policy could be applied in Victoria. In comparison to a carbon tax or emission trading scheme, standards are simple to communicate to the public and their results more tangible.”
However, like its fellow big three “gentailers”, AGL Energy and EnergyAustralia, Origin Energy has reversed its previous position and is now calling for government money to help this happen, either in the form of “structural adjustment packages” and/or environmental site remediation.
AGL owns Loy Yang A, while EnergyAustralia owns Yallourn. The Hazelwood generator is owned by French group Engie, which recently announced a big push into solar and a “call to arms against coal”, although it appears to be speaking in a European and global context, rather than an Australian one.
Mark Wakeham, the head of Environment Victoria, said it was now generally agreed that “policy intervention” was needed to ensure the orderly closure of the dirtiest power stations in the country, namely Hazelwood and Yallourn.
“We welcome Origin’s view that this could be achieved by the Victorian Government introducing emissions performance standards as part of the Climate Change Act Review,” he said in a statement.
“If we leave it to the market Hazelwood and Yallourn will be the last ones to close, but when they do close they’ll so abruptly with big impacts for the Latrobe Valley.
“With emissions performance standards we get the pollution reduction benefit of them closing before less polluting power stations, and we get to time their closure and plan an orderly transition for workers and the Latrobe Valley community.”