Victoria’s Coal Keeper rejection sparks criticism
Energy Minister says the state has rejected a proposed power-market reform, setting up a clash with the Morrison government.
The Victorian government has been criticised after opposing “Coal-Keeper” subsidies to extend the life of plants using the fossil fuel just months after hatching a secret deal providing financial backing to keep EnergyAustralia’s Yallourn coal plant open until 2028.
A new “capacity mechanism” aims to offer financial incentives to encourage the construction of dispatchable power sources and prevent the premature closure of coal generators under proposed reforms to the energy market.
But Victoria‘s Energy Minister Lily D’Ambrosio said the state government had rejected the reform, following through on earlier comments last month that it might oppose the mechanism.
“Victoria won’t support Coal-Keeper payments,” Ms D’Ambrosio said on Twitter. ”We won’t jeopardise our commitment to halve emissions and reach 50 per cent renewables by 2030 by making additional payments to coal and gas. Victoria remains the state of choice for clean energy investment and jobs.”
Victoria‘s stance sets up a clash at a September 24 national cabinet meeting of energy ministers where the topic is expected to be thrashed out after an initial meeting on August 20.
Australia’s energy ministers at the August meeting gave initial backing to a controversial new payment incentive to keep sources of power generation including coal in Australia’s electricity system, swatting away renewable investors who demanded they reject the plan.
Ms D’Ambrosio’s statement has also sparked criticism after the Victorian government provided secret financial backing in March to ensure EnergyAustralia’s Yallourn plant stays in the state’s power system until 2028.
“Isn’t the Vic Gov making special payments to @EnergyAustralia to keep Yallourn open?” Energy Networks Australia chief executive Andrew Dillon tweeted in response to Ms D’Ambrosio on Friday.
The Victorian government has refused to release details of its confidential deal which is understood to feature a minimum price guarantee for some of Yallourn’s capacity, to ensure the Latrobe Valley plant does not exit the grid earlier than forecast amid a flood of renewables.
“Didn’t she recently sign a contract with Yallourn to keep it open for another seven years and refuses to release contract details,” Creative Energy Consulting owner Dave Smith wrote on LinkedIn. “This is more about state versus federal/COAG governance than about clean vs dirty power.”
The Andrews government has previously said the design of the capacity mechanism would have to align with the state’s ambition to lower emissions by 45-50 per cent of 2005 levels by 2030 – a target nearly double that of the Morrison government.
Ms D’Ambrosio said the ‘Coal-Keeper’ mechanism devised by the Energy Security Board was blunting investment in the state’s energy sector.
"Victoria will not be supporting Coal-Keeper payments to ageing fossil-fuel generators. Speculation that the ESB is designing a ‘Coal-Keeper’ mechanism is driving down investor confidence. A capacity mechanism is a possible solution to the lack of investment certainty – but it must be designed properly,” Ms D’Ambrosio said in a statement.
“Victoria is the pre-eminent place for investment in the new zero emissions energy capacity and we don’t want to see investors lose confidence. Our government will never shirk the need for leadership and that is why we are making our position clear."
Energy Security Board chair Kerry Schott on Thursday rejected claims the electricity subsidy could be used to extend the life of coal, saying the fossil fuel power stations should not stay in the market “one minute” longer than needed.
NSW Energy Minister Matt Kean, an outspoken critic of the Morrison government’s climate change ambition, has given his preliminary backing to the plan but did caution he was worried about costs should it proceed.
The capacity mechanism has been endorsed by the Australian Workers’ Union and the CFMEU, but Australian Industry Group chief executive Innes Willox warned it was “impossible to evaluate, given its vagueness”.
Renewable energy companies and investors including the powerful Clean Energy Investor Group say the move will kill investment in new supplies and drive up costs for consumers by subsidising old coal plants.