Closure of Loy Yang A expected to see Victorian power bills soar

The controversial decision to fast-track the closure of Loy Yang A could have dire consequences on Victorians’ electricity bills.

The early closure of Loy Yang A would send electricity bills soaring by 21 per cent, adding hundreds of dollars to power bills, new analysis warns.

Research by conservative think tank the Institute of Public Affairs predicts average ­retail electricity bills will ­increase from $1600 to $1935 a year from 2035.

The Herald Sun revealed on Wednesday night that AGL Energy, which owns the Loy Yang A coal-fired power plant in the Latrobe Valley, would close the power station in 2035, 10 years ahead of schedule.

The shock move, confirmed on Thursday, follows a sustained campaign by the company’s biggest shareholder, Sydney billionaire Mike Cannon-Brookes, to accelerate its move away from coal.

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

Mr Cannon-Brookes stayed silent after the announcement but his company Grok Ventures released a statement saying it was “pleased with the board’s commitment to accelerate AGL’s coal plant closures and pivot to capture the major opportunity presented by the renewable energy transition”.

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

The IPA’s Daniel Wild said: “It might be all right for billionaires and inner-city elites to live with expensive and unreliable energy as AGL is proposing. However, it is the families that cannot afford ever-­increasing power bills and the workers who will lose their jobs that will pay for this ­renewable energy fashion statement.”

Energy expert Tony Wood, of the Grattan Institute, warned that the early closure dramatically increased the chance that the cost of getting off fossil fuels while keeping the lights on would “blow out dramatically”.

“Each time the closure of one of these plants is brought forward, it has an incremental impact not just on the state it is in but all the interconnected states,” he said.

Latrobe Valley power station worker Tony Wolfe.

“And given that all states are trying to make the transition away from coal and gas at the same time, this is putting huge pressure on the physical and human resources needed to build new transmission lines and storage and facilities.

“We have to do a lot better at this. There will be a huge ­impact on cost and reliability if we don’t get this right.”

Victorian Energy Minister Lily D’Ambrosio was unable to answer how the closure of the station would affect bills.

“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.

When asked if she could guarantee that power prices would not rocket due to the closure, she said “today’s not the day for me to make comments about what more is to come”.

Mr Wild criticised the lack of planning to prevent “the lights going out in Victoria”.

“The job losses, unaffordable energy price rises and ­elevated risk of rolling blackouts from the early, unanticipated closure of critical coal-fired power stations is evidence of the policy of net zero emissions in action,” he said.

Interim AGL chief Damien Nicks said the accelerated closure of Loy Yang A represented a major step forward in Australia’s decarbonisation journey.

Mining and Energy Union secretary Mark Richards questioned AGL’s commitment to supporting the Latrobe community through the transition.

The ex-Hazelwood worker said there would be long-term consequences for the community without a strategy.

He noted the privatisation of the Victorian electricity ­industry in the 1990s led to major job losses.

Liberal deputy leader David Southwick 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 families across the Latrobe 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.”

The accelerated closure of the state’s biggest power station came after AGL finalised a review of its business.

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.

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

Interim AGL chief executive Damien Nicks said the sped-up closure of Loy Yang A was a major step in Australia’s decarbonisation journey.

The earlier closure would avoid up to 200 million tonnes of greenhouse gases being emitted, compared with the previous closure date, he said.

“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,” Mr Nicks said.