Alinta Energy offers stinging rebuke of coal closure powers

Governments are mulling new powers to delay closures of coal power stations, but Alinta Energy says they would be open to political manipulation in a stinging rebuke.

Negotiations between the NSW government and Origin Energy over the closure date of the Eraring Power Station has been slow. Picture: Brendon Thorne/Bloomberg

Alinta Energy has slammed proposed new government powers which would allow states to delay the closure of coal power stations, raising the alarm on the threat of Australia’s energy ministers intervening in the market for political purposes.

The Albanese government and its state counterparts are considering a scheme which would give those who opt in special powers to amend the closure dates of Australia’s big coal plants, which still provide up to 60 per cent of the nation’s electricity.

Currently, owners and operators of coal power stations simply have to give a notice period of 3½ years before closure.

But, the plan has attracted strong opposition over fears it would “corrupt” signals for investors to commit new spending to the power grid.

Alinta Energy said it was particularly concerned over the potential for “non-rational” decision-making by energy ministers.

“Ministers are not best placed to forecast reliability or system needs shortfalls, increasing the risk of intervention for political purposes,” Alinta said in a submission on the orderly exit management framework.

Alinta said the scheme would be counter-productive, potentially susceptible to politically motivated intervention while adding governments were not qualified to determine whether the exit of a coal power station would leave a reliability shortfall.

“Alinta Energy strongly opposes the introduction of additional mechanisms, such as the OEMF, that would impose additional regulatory burden, increase uncertainty for investors by destroying any last potential for investment decisions to be based on price signals, lead to increased costs for participants and ultimately impose higher costs on consumers, without a clearly identified gap in regulatory arrangements,” the retailer said.

Such is the alarm, the Australian Energy Market Operator last year said the country would need to rapidly accelerate development of new zero emission sources or face a decade of unreliable electricity supplies — which would evaluate the risk of price rises and blackouts.

But, Alinta said it was wary of the scheme, noting it had the potential to hike risk for market participants as retirement of generator announcements and schedules would be subject to even greater uncertainty.

Under the scheme, “the Minister would be able to issue a Notice of Mandatory Operation, if ‘in the Minister’s opinion’ it is needed to avoid a system needs shortfall. Such a subjective judgment would be open to non-rational decision-making resulting in intervention for political purposes and significantly increases risk for market investors,” Alinta said.

The sentiment was shared by others, including AGL Energy, Australian Energy Council, which represents electricity and gas companies, and the Clean Energy Council.

Joining the chorus, EnergyAustralia — the country’s third largest electricity and gas retailer — said the mechanism would need to be tweaked, though the company insisted it supported the objectives of the policy.

“The framework can be refined to better achieve several core objectives, namely providing more certainty on closure timings, explicitly accounting for emissions, preserving contract market liquidity, and integration with other market interventions around reliability,” EnergyAustralia said.

EnergyAustralia’s chief executive Mark Collette has been a vocal advocate for a managed exit, and Victoria has already begun to act.

Victoria has struck secret deals with AGL and EnergyAustralia to ensure the state’s two largest coal generators stay open.

AGL’s Loy Yang will now stay open until 2035, while EnergyAustralia’s Yallourn generator will close in 2028.

NSW is next, with the state Labor government negotiating with Origin Energy to keep the Eraring coal power station open beyond its scheduled closure date of August 2025.

But, negotiations have proven to be painfully slow, as the government struggles to find an agreement which would see taxpayer funds cover potential losses in a politically palatable package amid broad voter opposition to extending the lifespan of coal power stations.

The deals have been criticised by opponents to fossil fuels, which oppose taxpayers potentially underwriting the losses of coal to ensure they stay open, but supporters insist it provides broad market certainty — which is desperately needed amid a complex transition.

The federal government has set an aggressive target of having renewable energy generate more than 80 per cent of the country’s electricity by 2030, but there is widespread acceptance an insufficient amount of zero emission sources of power are being built.

Coal power stations run consistently throughout the day, and the influx of renewables means many are operating at a loss during sunny days before returning to profitability when the sun sets.

The trend is expected to exacerbate, particularly if the CIS is successful in leading to the rapid influx of new renewable projects, and heighten the demise of coal power stations. Already Australia’s energy market operator expects all coal-fired power stations to have shuttered within 15 years.

Australia is grappling with how to rapidly wean off its fossil fuels dependency without causing harm to its economy. But, there is growing concern about a lumpy and damaging transition as new renewable energy sources of power struggle to materialise while plans to shutter coal — still the dominant source of electricity — are moving at pace.

Originally published as Alinta Energy offers stinging rebuke of coal closure powers