AGL confirms early closure of Loy Yang A, Victoria’s largest power station

Victoria’s largest power station will close a decade ahead of schedule, prompting mixed reactions as workers reel from the decision.

Victoria’s largest power station will close 10 years ahead of schedule, with its owner to wind down operations by mid-2035.

AGL Energy, which owns the Loy Yang A coal-fired power plant in the Latrobe Valley, announced the accelerated closure schedule early Thursday morning.

AGL said it now targets an “accelerated exit from all coal-fired generation, announcing on Thursday that a targeted earlier closure date of Loy Yang A Power Station – up to 10 years earlier than previously announced”.

Its accelerated closure, as revealed by the Herald Sun on Wednesday night, was formally confirmed in a statement lodged with the Australian Stock Exchange.

But Victorian Energy Minister Lily D’Ambrosio has refused to say how the closure of the power station will affect energy prices, instead pointing that the state already had Australia’s “most affordable” power prices.

“In terms of power prices, I can point to the very fact that Victoria’s power prices are the strongest in terms of being the most affordable in the country because of our strong ambition in replacement power — cheap, affordable replacement power,” Ms D’Ambrosio said.

“What I’m saying to you is that our ambition will continue to grow. We’ve got the most ambitious renewable energy agenda now in the country. And we’ll certainly be having more announcements to be made into the future.”

Victorian energy minister Lily D’Ambrosio has promised to re-skill local workers. Picture: David Geraghty

Speaking at a joint press conference with federal Environment Minister Tanya Plibersek on Thursday, Ms D’Ambrosio confirmed the government was informed of the closure by AGL shareholders on Wednesday night.

She acknowledged that the announcement would be a blow to workers and promised the government would help to retrain, re-skill and find new work opportunities in the region.

The plant and associated brown coal mine employ about 575 people and generate 30 per cent of the state’s electricity needs.

“Right now, today, it’s about the workforce. It’s about workers who are really right now digesting a decision of AGL shareholders and what it means for them, what it means for their families and what it means for the local communities. And that is the focus of today,” she said.

Ms Plibersek agreed with her Victorian counterpart and said the closure would come as a shock to many people.

“I want to join with Minister D’Ambrosio in saying that this is a very difficult day for many people who just heard the news that they’re likely to lose their jobs sooner than they anticipated,” Ms Plibersek said.

“Minister D’Ambrosio is right in saying that the reason that this transition is happening is because the cheapest form of energy in Australia and globally now is renewable energy.

“We have a lot of work to do to make this transition to cheaper, cleaner, renewable energy easier for communities around Australia.”

AGL has announced the early closure of Victoria’s largest power station. Picture: Aaron Francis

Federal Energy Minister Chris Bowen said Australia’s ageing coal-fired power stations would continue to close.

“We need to ensure that the closures are properly managed and that we invest in the firmed dispatchable renewable energy, along with storage and transmission, to replace the lost energy generation,” Mr Bowen said.

Latrobe power plant worker Tony Wolfe said there “would be a little bit of frustration in the community” over Loy Yang’s early closure.

“Once again the dates have been changed and the goalposts have been moved but I don’t think it would be totally unexpected,” he said.

“What it does do is cement the fact, if there were any doubts, that we are getting out of coal.”

Mr Wolfe, who has worked in the power generation industry for 44 years, said the onus was on AGL to retrain workers.

“The private companies have an obligation to not just walk away from the community and the workforce, they have a moral obligation to assist with the new jobs,” he argued.

“When Germany went through this transition, nobody was out of a job.

“Everyone was trained up for new jobs.

“A lot of jobs will be transferable in these new industries.”

Mr Wolfe feared there would be a major skills shortage in LaTrobe as Australia transitions to a clean energy economy.

“We won’t have enough people to service the jobs we are going to require,” he said.

“I think there will be a major influx of workers into the region.”

‘Alarming and disappointing’

Federal Gippsland MP Darren Chester said the decision to bring forward the closure of Loy Yang A was “alarming and disappointing”.

Mr Chester said he was “unconvinced” the proposed transition to reliable and affordable alternative energy sources would be in place by 2035.

“Moving to a system which is 100 per cent weather dependent before transmission lines are even built to link large-scale renewable projects to the grid is a recipe for higher prices, unreliability for businesses and blackouts for family homes,” Mr Chester said.

Mr Chester said a high-level and bi-partisan taskforce should be appointed immediately, with significant long-term funding allocated to help our region manage the transition.

“Hopefully this announcement by AGL will force Premier Dan Andrews to wake up and realise the direct threat to the social and economic future of the Latrobe Valley, as business decisions are made in distant boardrooms without any consideration of local community impacts,” he said.

“I accept there is an irreversible transformation underway towards more renewables, and less coal-fired power.

“But it must be done in a way which respects our local communities and delivers a reliable and affordable system.”

The Australia Institute’s climate and energy program director, Richie Merzian, said he was not surprised Loy Yang A was closing early because it was “one of the most unreliable power stations in the grid”.

“The problem Australia is facing is the coal closures are being managed on a case-by-case basis between the power station owners and state governments, leaving regional power communities out in the cold and in the dark,” Mr Merzian said.

He said there was no national roadmap for coal closures, adding that Australia should look to Germany on how to develop one.

AGL confirms decarbonisation transition

The move comes after AGL finalised a strategic directions review of its business.

AGL’s incoming interim CEO Damien Nicks said: “AGL’s targeted accelerated closure of Loy Yang A power station by the end of FY35 represents a major step forward in Australia’s decarbonisation journey, supporting the transition to a lower carbon world aligned with the Paris Agreement goals.

“The targeted earlier closure of Loy Yang A Power Station will avoid up to 200 million tonnes of greenhouse gases being emitted compared to the previous Loy Yang A Power Station closure date.

“We believe that our ambitions to decarbonise and build a low-carbon portfolio represent an attractive opportunity to participate in Australia’s energy transition, and will ultimately provide access to a wider pool of capital sources.

“Importantly, AGL will continue its relentless focus on delivering for its customers as a leading multi-service energy retailer, and our goal of making the energy transition simple, accessible and affordable for our customers. We will sharpen our focus on digitisation and advanced analytics to further simplify and automate how we operate and serve our customers.

Incoming AGL chief, Damien Nicks. Picture: Adam Yip

“This is an ambitious strategy that we will aim to deliver through the 12-year period to the targeted closure of our coal-fired generators. We will work with our stakeholders to make sure this change is responsible, that our customers’ energy needs are met and that our workforce and communities are supported through this change.”

In December 2021, the national energy market operator planned for the Loy Yang closures to be fast-tracked by 15 years, sparking urgent calls for action to prevent blackouts and soaring prices.

The nearby Yallourn Power Station has already been fast-tracked to close by 2028, which will amplify the state’s energy crisis.

In preparation for the closures, the market operator pushed to fast-track major power pole and wire projects, which would aim to bring online more solar and wind power for Victoria.

In 2020, coal generated more than 54 per cent of Australia’s electricity.

Shock early closure a blow for workers

David Southwick, deputy leader of the Victorian Liberals, said the announcement was a blow for workers.

“After eight years, Daniel Andrews has failed to deliver any meaningful transition plan for workers and their family across the La Trobe Valley and has allowed the energy expertise and infrastructure of this region to go to waste,” he said.

“Only a Matt Guy Liberals and Nationals government will deliver real solutions to keep power prices low, the lights on and support a sensible transition to net zero.”

Mark Richards, Victorian Mining and Energy Union Secretary, questioned AGL’s commitment to supporting the LaTrobe community through the transition.

Loy Yang power station will be shut at the end of the 2035 financial year.

“While AGL likes to be considered a bit of a corporate responsible company, the reality is just yesterday we were in fair work conciliation with them, he said.

“AGL are trying to push full time workers out via replacing them with contractors.

“If they are such a great company, why are they doing that?”

The ex-Hazelwood worker said there would be long-term consequences for the community without a long-term strategy. He noted the privatisation of the Victorian electricity industry in the 1990s led to major job losses.

“We previously had Jeff Kennett cut 10,000 jobs out of this area in a population of 70,000,” he said.

“We have been through this before and we are not willing to go through it again.”

He added, “If we are going to be putting wind farms off the coast, we need to have them built here in the Latrobe Valley.”

Opposition says closure a hit for Aussie households

Coalition energy spokesman Ted O’Brien said the early closure of Loy Yang A was a “disappointing outcome” for Aussie households and businesses, which were grappling with soaring energy prices and high cost-of-living pressures.

“While this is a commercial decision for AGL, it is devastating for the more than 1000 workers in the Latrobe Valley and Muswellbrook regions and will impact the livelihoods of thousands more workers and businesses across the local economies,” Mr O’Brien said.

“AGL must continue to support its workers and the local community during this challenging period.”

Mr O’Brien claimed Labor’s policy settings were “accelerating the closure of power stations like Loy Yang A” by undercutting their economics.

Coalition energy spokesman Ted O’Brien says the early closure of Loy Yang A is a ‘disappointing outcome’. Picture: Lyndon Mechielsen

He welcomed AGL’s 12GW replacement commitment but said the company owed it to their customers to step up and deliver.

“With no assurances of new on-demand generation capacity coming online in time, the early withdrawal of Loy Yang A will leave a gaping hole in Australia’s electricity market exposing the grid to blackouts and runaway power prices,” Mr O’Brien said.

“Labor is gambling on the premature closure of power stations to drive the uptake of renewables without any guarantees of replacement generation.

“Anthony Albanese must take immediate action to ensure Australians aren’t crippled with higher energy prices for decades to come.”

Resources Minister Madeleine King said coal-fired power station closures needed to be properly managed, with supply from other power sources required in the system.

“Minister Bowen is working with state ministers on their energy plan, on ensuring we transform the energy system, and ensure we invest in renewables so that we can backfill,” Ms King said.

She acknowledged that gas would continue to play a part in the energy mix for some time but would play a different role in each state.

Ms King said Labor supported new gas fields, if they stacked up environmentally and commercially.

She reiterated that the government was very committed to taking action on climate change.

Greens applaud early closure

The federal Greens have welcomed the early closure of Loy Yang A as “great news” for the climate and Australia’s chance of keeping global warming below 1.5C.

The announcement has amped up calls for the federal government to establish a national energy transition authority, after the Greens introduced a Bill for the authority in the parliament this week.

Greens transition spokesman, Senator Penny Allman-Payne, will on Wednesday head to the Latrobe Valley to meet with the community and stakeholders.

“Decisions to rapidly bring forward the closure of coal fired power plants, however welcome, should not be announced via a company’s media release to the ASX,” Senator Allman-Payne said.

“It should be a planned and co-ordinated process that allows local workers control.

“Without a national body to plan and co-ordinate our shift to renewable energy the workers and communities, who have for generations relied on the jobs and investment the coal industry has provided, will be left behind.”

Senator Allman-Payne urged Labor to support the bill saying similar transition bodies in Europe have enabled workers to move into new well-paid jobs, be redeployed or benefit from an early retirement.

The Greens Bill was sent to a Senate inquiry, which is due to report back in March next year.

Victorian Greens deputy leader Ellen Sandell also welcomed the move.

“The writing is on the wall for Victoria’s brown coal plants, which burn Australia’s most polluting coal. They’re old, unreliable and polluting, harming the health of local communities,” she said.

“With the recent announcement by AGL that Loy Yang A will be closed by 2035, it’s clear our coal plants have had their day and will be shut sooner than expected.

“The Victorian government cannot keep their head in the sand any longer and deny that coal is on the way out. They need to release a plan to replace these plants with 100 per cent renewable energy which also protects workers and communities.

“The Greens want to see a job-for-job guarantee for coal workers with funding to 2035 for an Independent Latrobe Valley Authority and a commitment to more renewable energy in Victoria to replace the energy from coal.”

As part of their election platform the Greens have proposed a job-for-job guarantee for coal workers and funding to 2035 for an Independent Latrobe Valley Authority.

Ms Sandell said an independent Parliamentary Budget Office costing found that the job-for-job guarantee would cost $150.9m dollars over the forward estimates.