Victoria’s Yallourn coal power plant to close early as clean shift slashes prices

Australia’s most carbon-intensive coal-fired power station, Yallourn, will close four years earlier than scheduled, casting doubt over the future of hundreds of jobs.

EnergyAustralia is licensed to run the brown coal-burning power plant in the Latrobe Valley east of Melbourne until 2032. But the company told staff on Wednesday it would shut in mid-2028. It plans to build a massive battery to help compensate for the loss of output.

EnergyAustralia’s Yallourn coal-fired power plant in the Latrobe Valley.Credit: Luis Enrique Ascui

Yallourn supplies up to 22 per cent of Victoria’s electricity demand and employs about 500 workers.

“Coal-fired power stations have been the backbone of our energy system for decades,” EnergyAustralia executive Liz Westcott said.

“But that is changing. More recently we’ve observed coal is less required as more renewables enter this system ... because the system is changing before our eyes and, with every passing day, we take a step forward to this clean future.”

Catherine Tanna, EnergyAustralia’s chief executive, said the company would install a massive battery at one of its nearby gas power plants to help compensate for the loss of output from Yallourn.

“By the end of 2026, we will commission Australia’s first four-hour battery storage facility, 350 megawatts in size, larger than any battery operating in the world today,” she said.

“This is a commitment, not a proposal.”

The company’s closure decision comes as a flood of new renewable energy has been driving down daytime power prices and piling enormous pressure on Australia’s ageing coal-fired power plants, which are far more expensive to operate and, increasingly, are struggling to compete.

New figures reveal baseload electricity prices in Victoria have crashed 70 per cent from about $80 a megawatt-hour in March 2020 to $24 this month.

Price falls across the nation’s main grid have been driven largely by the pandemic-led downturn in energy demand, a cooler-than-usual summer and the accelerating rollout of wind and solar farms and rooftop solar panels.

While demand is recovering, the pressure caused by the influx of cheap renewable energy continues. With four gigawatts of new wind and solar already committed to enter the grid between 2021 and 2023 and state governments in Victoria and NSW mapping out ambitious pro-renewables policies, energy analysts are projecting a “huge uplift” in renewable penetration that could keep prices depressed.

Ultra-low wholesale prices, now sitting at levels not seen since 2015, have prompted top Australian energy supplier AGL to slash $2.7 billion off the value of its assets and warn of the elevated risk of a “supply-side response”.

EnergyAustralia is planning a multimillion-dollar support package for workers affected by the closure.

Yallourn – which has been generating power for 100 years, although the current plant was built in the 1970s – is the nation’s most carbon-intensive power generator. Ms Tanna said closing the plant would reduce EnergyAustralia’s emissions by 60 per cent on today’s levels.

Victoria’s own laws require it to set climate emissions reduction targets for 2025 and 2030, but these have been delayed for a year due to the coronavirus pandemic and are likely to be announced within weeks.

CFMEU Mining and Energy Victorian president Trevor Williams said workers had been expecting the announcement but still felt disappointed. He urged the government and Energy Australia to develop a comprehensive plan over the next seven years.

“Energy workers at Yallourn have been powering Victoria for decades and they don’t deserve to be thrown on the scrapheap,” he said.

Melbourne University energy analyst Dylan McConnell said Yallourn’s closure would remove up to 15 million tonnes of carbon dioxide pollution each year, making deeper emissions reduction targets more palatable. Last year, it produced about 13 per cent of the state’s emissions.

“It should make it easier for the Victorian government and give them some imprimatur to set ambitious targets,” Mr McConnell said.

The early shutdown of Yallourn continues the trend of private power companies bringing forward closure dates of ageing coal-fired power stations, which are increasingly expensive to run, despite the Morrison government’s insistence that coal is the key to ensuring ongoing reliable and cheap electricity.

Federal Energy Minister Angus Taylor has repeatedly criticised the Victorian government’s push to dramatically increase the state’s reliance on weather-dependent renewable energy, which he says could elevate the risk of price spikes and blackouts in the event that peak demand periods such as heatwaves coincided with overcast and windless periods – when conditions for renewable energy were not favourable.

Environment Victoria chief executive Jono La Nauze called on the state and federal governments to create transition plans to replace all of Australia’s approximately 20 coal-fired power plants with renewable energy by 2030.

“Are we going to have 20 separate closure announcements, each one dictated by an energy company based on the whims of the market, with months of speculation beforehand?” Mr La Nauze said.

“Governments across Australia need to step in and create a timeline to phase out all coal power stations by 2030 in order to reduce pollution and address the climate crisis.”

Coal and gas-fired generation remain the dominant sources of Australia’s energy supply, together accounting for more than 70 per cent. But a surge in investments has driven projections that wind, solar and hydro power could soon increase sharply.

Latrobe City Council mayor Sharon Gibson said Wednesday’s announcement had taken the community by surprise and she questioned why the company and state and federal governments had not yet begun workforce transition talks.

“The valley can’t sustain these hits,” Cr Gibson said. “For every direct job, there’s three or four indirect jobs lost. You cannot sustain that.”

Local state MP Russell Northe, an independent and a former Nationals MP, called the news “very disappointing for workers, their families and other associated businesses”.

“A seven-year lead time is at least better than the six months given for Hazelwood power station. Now the onus is on supporting these workers, but moreover investing in a greater diversity of jobs in the Latrobe Valley.”

Victorian Energy Minister Lily D’Ambrosio said EnergyAustralia had committed to the government to keep Yallourn until 2028, but she would not reveal the deal she had struck with the company, citing commercial in confidence.

“We have received a commitment from Energy Australia that their intention is to provide minimum standards in terms of their maintenance regime, so that we can rely on the Yallourn power station being in place, operating and providing power to Victorians until the middle of 2028,” she said in a press conference on Wednesday afternoon.

She said the seven-year transition plan would give the government and the operator “ample” opportunity to work with employees for alternative arrangements.

Environmental Justice Australia lawyer Bronya Lipski said Energy Australia was rightly supporting workers to transition but had allocated no funding to reducing health impacts of pollution over the next seven years.

“What is EnergyAustralia going to do about the excessive toxic emissions that continue to pollute the air in the Latrobe Valley ... and the excessive coal dust that coats their homes?” Ms Lipski said.

With Sumeyya Ilanbey

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