Hazelwood closure underlines need for national energy policy

The closure of Hazelwood exposes a woeful lack of energy policy direction and should spur the government to act.

Hazelwood Power Plant worker Bruce McLure after finding out he will lose his job. (Picture: Rob Leeson)

The closure of the Hazelwood power station today has long been forecast but, at a government level, there’s been little in the way of planning to help minimise the loss of 25 per cent of Victoria’s power output.

The starting point needs to be a national climate change policy so everyone knows where we are heading.

Energy Minister Josh Frydenberg, to his credit, has said he will come up with a plan next year but that begs the question of just what his predecessors have been doing for the past decade or so.

Power prices will rise initially on the basis that when you remove supply and demand stays the same then prices lift.

This is good for existing power suppliers like Origin and AGL and the latter, as the owner of another big brown coal plant in Victoria, has around 22 kilowatts of supply and makes roughly $20m from every $1 increase in prices. On present estimates, this means an extra $400m in pre-tax profits.

Price moves are meant to signal where investment goes but the lack of overall policy means no-one really knows where to invest for the future.

This is not exactly right and AGL, for its part, is investing in renewable supply, including big new solar plant studies.

The next test comes with chief scientist Alan Finkel’s report to COAG on the national energy market.

This will provide a useful starting point and just maybe the first investment should go to more interconnector plants, so that states like Victoria, which is now a net energy exporter, can import more power when — with Hazelwood’s demise — it loses that status.

Certainly the Alcoa smelter will be questioned and the Victorian Government has rightly ruled out further subsidies to maintain that operation.

The French-government-owned Engie, which is a part owner of Hazelwood with Mitsui, needs to formally shut the plant to deal with its future contracts and, of course, it also owns a gas fired plant at Pelican Point in South Australia.

The formal closure is at least now a line in the sand that hopefully will fast forward decisions on just where and how Australia will power itself in the future.