Tom Koutsantonis: Pulling plug on Hazelwood power station in Victoria emphasises the need for a national power strategy

THE closure of Victoria’s Hazelwood power station has huge implications for South Australia’s electricity supply, writes Tom Koutsantonis.

• Marshall: Now SA’s power supply is even more vulnerable
• SA power prices ‘to rise’ as Victorian power plant closes
• Hazelwood coal-fired plant shuts, 500 jobs gone

THE withdrawal of another coal-fired power station from the National Energy Market is a further sign of the increasingly urgent need for a national policy that promotes the orderly transition to a clean energy future.

As we saw with Port Augusta Power Station, the closure of Hazelwood will have a devastating impact on the hundreds of workers employed at the site, their families and the wider community of the Latrobe Valley.

As our Government did, I am sure the Victorian Government will do everything it could to support the workers to deal with the uncertainty they will face.

The transition of Hazelwood out of the market will need to be managed, both in terms of its impact on the workers and their families and the impact on the NEM.

It will potentially leave a supply gap in the market that is required to be met by other forms of generation. This may put upward pressure on prices across the border, however it may also lead to increased competition and drive more gas generation in South Australia.

The NEM is extremely complex and will take time to adjust to the withdrawal of Hazelwood, so the ultimate impact on the market and on other generation assets will take time to be fully understood.

However Engie, the owners of Hazelwood, have a contracted position in the market that they will need to cover when Hazelwood exits.

This may mean that the nation’s most efficient gas generator at Pelican Point, which is currently only running at 50 per cent of its 450 MW capacity, may be required to help cover the company’s existing contractual position.

This could benefit the South Australian energy market through increased competition.

There is no doubt that the nation is shifting to a cleaner, carbon restrained future.

However, at the moment, while coal-generation is withdrawing from the market in this disorderly fashion, companies are not reinvesting due to the uncertainty of policies at a Federal level.

If Australia is to reduce carbon emissions by 26 to 28 per cent below 2005 levels by 2030 as per the Paris agreements, there needs to be massive structural changes in the National Electricity Market.

To meet these national targets, carbon intensive coal generation must be replaced by low-emission generation, such as from gas, wind and solar.

I recently advocated at the COAG Energy Council for the introduction of an Emissions Intensity Scheme in order to provide the smoothest, lowest cost transition away from coal-fired generation towards renewables and other low-emitting forms of generation.

This is not a radical idea. It was originally proposed by Prime Minister Turnbull when he was in opposition and, experts believe, would put downward pressure on power prices.

At a state level our recently-announced energy package is designed to bring new generation into the South Australian energy market in order to increase competition and put downward pressure on prices.

The future of Australia’s energy mix is one without coal, a fact which Steven Marshall and his party refuse to accept.

However, we urgently need a national policy framework to make the transition to a more efficient and cleaner energy future as smooth and as undisruptive as possible.

Tom Koutsantonis is State Treasurer and Energy Minister