Hazelwood power station closure drives up bills, forces gas reliance

THE closure of Hazelwood has driven up household power bills across the country and forced a greater reliance on gas that is expected to lead to an alarming shortage within four years.

THE closure of Hazelwood has driven up power bills across the country and forced a greater reliance on gas that is expected to lead to an alarming shortage within four years.

Two damning reports, to be released today, reveal Victoria was forced to rely on other states to keep the lights on last year for the first time in a decade and faces a fresh gas crisis.

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The Australian Energy Market Operator will warn the state will not have enough gas to meet its needs in 2022 during an average winter unless there is a major expansion of new gas production or other measures to boost supply.

The problem has been compounded by the closure of the Hazelwood coal-fired power station in March last year which has meant that household and business electricity bills have been increasingly driven by the price of gas.

The closure of Hazelwood has driven up household power bills across the country. Picture: AAP/Mal Fairclough

In a separate report, the Australian Energy Regulator found the close of the Latrobe Valley plant has caused “significant” price increases right across the electricity network.

Wholesale spot prices in Victoria last year were up 85 per cent on the year before, driving up consumer costs as wholesale charges make up as much as 45 per cent of bills.

The report says Victoria, which has long supported the energy needs of other states, a switch from being a net exporter to being a net importer because of the loss of cheap brown coal.

In a blow to Victoria’s energy security, even South Australia became a net exporter to the state despite its own ongoing supply issues.

“High wholesale prices in the national electricity market are not unprecedented and indeed have been higher in the past, but the 2017 increases were sustained over the year and occurred simultaneously across the NEM,” AER chair Paula Conboy said.

AER chair Paula Conboy. Picture: Aaron Francis

“The replacement of Hazelwood’s low-cost brown coal generation by higher cost black coal, gas and hydro generation — coinciding with rising black coal and gas fuel prices during the period — was found to be the underlying driver of the wholesale price increases.”

AEMO said it was working closely with the Victorian government and the industry to resolve the forecast shortfall which has been highlighted by a string of major reports over the past year.

“Market participants have advised us that they are currently investigating additional sources of gas supply including peak day capacity,” AEMO’s executive general manager of operations Damien Sanford said.

“Other options include increased production and storage capacity, additional pipeline import capacity into Victoria, and a liquefied natural gas import terminal.”

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