Loy Yang A and B stations to close in 2032

A plan to close two coal-fired power stations earlier than expected has sparked fears of potential blackouts and soaring prices in the coming years.

Loy Yang A and B stations in the Latrobe Valley will be mothballed by 2032.

Victoria is facing an energy supply crunch, with two coal-fired power stations that provide half of the state’s electricity expected to shut down in just over a decade.

The national energy market operator is planning for the closures to be fast-tracked by 15 years, sparking an urgent call for action to prevent blackouts and soaring prices.

The Herald Sun can reveal the market operator expects the Latrobe Valley’s Loy Yang A and B stations to shut by 2032, rather than their promised retirement dates of 2048 and 2047.

Energy giants AGL and Alinta, which own the coal-fired generators, are remaining tight-lipped about their plans but concede the end of coal is coming far sooner than expected.

With the closure of the Yallourn station already fast-tracked to 2028, the CFMMEU warns governments “better start digging” to build new gas and hydrogen plants to keep the lights on and provide a transition plan for hundreds of coal workers.

Federal Energy Minister Angus Taylor said the government was planning new generators, an expanded transmission network and market reforms to maintain the security of the grid.

“The reality is, some of these generators are getting very old and they need to be replaced and that’s exactly what we’re doing,” Mr Taylor said.

Yallourn North looking towards Loy Yang A Power station. Picture: Jason Edwards

The market operator’s plan also exposes an issue in federal Labor’s climate policy, which assumes the retirement of coal-fired generators will not accelerate even though the opposition promises 82 per cent of our power will come from renewables by 2030 — higher than the market operator’s 79 per cent forecast.

Under state government rules, coal stations must provide five years’ notice before closing.

An AGL spokeswoman there was “no doubt that coal-fired generation will exit the system earlier than previously believed”.

“This must be an orderly and affordable transition that leaves no customer or community behind,” she said.

Alinta chief Jeff Dimery said in October he “wouldn’t be surprised” if Loy Yang B closed shortly after 2030. The generator’s latest sustainability report said it would operate until the electricity grid was “mature enough” to provide stable power supplies without it.

The market operator flagged the need by 2050 for a nine-fold increase in large-scale solar and wind, five times the number of rooftop solar panels, triple the grid’s firming capacity with new batteries, hydro storage and gas plants, and 10,000km of transmission lines.

Mr Taylor is also developing a “capacity mechanism” to pay subsidies to reliable generators.

He said authorities could not “leave a gap in the market” and existing reliable generators could not be “put at risk as this will increase costs for families and businesses, and jeopardise the security of our energy system”.

But Victoria has vowed to stop the new mechanism backing coal.

State Energy Minister Lily D’Ambrosio said the market operator’s plan vindicated her focus on renewable energy.

“Victoria is the clean energy capital of Australia — we’ve led the way on renewables, created thousands of jobs, supported a thriving supply chain of businesses and attracted billions in investment,” she said.

CFMMEU mining and energy division state secretary Geoff Dyke said it was “delusional” to think the grid could be overhauled in time for brown coal to shut down in 2032.

“To me there is a disconnect between AEMO’s report and what the government is actually doing to transition communities,” he said.

“The government has a responsibility to transition us to real jobs, not make-believe jobs.”

Mr Taylor acknowledged the need for massive transmission projects to connect new solar and wind farms, with the report calling for $12.5bn in poles and wires, although he warned against “goldplating that was a key driver of electricity price increases in the past”.

He said transmission costs could be “baked into bills for up to 50 years”.

The Energy Users’ Association of Australia, representing commercial energy users, warned consumers were concerned about paying for “assets that do not have net benefits”.

“There is a large level of uncertainty and we need to ensure that any decision … will indeed be a ‘no regrets’ decision,” chief Andrew Richards said.

The Australian Energy Council, representing electricity retailers, similarly backed the need for careful planning of transmission upgrades. If so, chief Sarah McNamara said broader electrification of the economy could start this decade.

Federal opposition energy spokesman Chris Bowen is yet to respond to the market operator’s plan, saying Labor would “take our time working through it”.