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EnergyAustralia’s Yallourn plant at the mercy of green targets

Victoria’s looming emissions reduction goals and ambitious renewables targets may limit the lifespan of a major coal generator in the state amid a renewed focus on the stuttering transition to green energy in the nation’s power grid.

The timeline for closing EnergyAustralia’s 1480 megawatt Yallourn station in the Latrobe Valley — which supplies 22 per cent of Victoria’s electricity and 8 per cent of the national market — could partly hinge on the state’s pending emissions policy and increasing competition from renewables.

The future of Yallourn “does depend on what happens with policy and other things that are potentially outside our control,” EnergyAustralia managing director Catherine Tanna told The Australian when asked about the implications of the state’s efforts to slash emissions.

“It is subject to changes that might happen in the future.”

Yallourn is due to close by 2032 but concern is growing it may be forced out of the market sooner as part of a radical shake-up of Australia’s electricity mix.

The issue of grid stability has been reignited after AGL Energy backed down last week on a strict 2022 target for closing its ageing Liddell coal plant in NSW, agreeing to keep units open for a further year to ensure the lights stay on during peak demand in summer.

Federal Energy Minister Angus Taylor described the AGL move as a good interim step, raising speculation it may push AGL to keep the plant open for even longer, despite the faltering performance of a chunk of the nation’s coal fleet last summer.

Modelling by the Australian Energy Market Operator indicates that if Victoria does meet a 50 per cent renewable target by 2030, at least one unit of the Yallourn station faces challenging economics due to additional renewable generation.

Victoria also aims to have net zero emissions by 2050 and is in talks with industry on an interim target, likely to be a reduction of between 45 per cent to 60 per cent by 2030, eclipsing federal Labor’s plan, with a decision due in March next year.

After the price upheaval that hit the national electricity market following the sudden exit of Victoria’s Hazelwood plant in 2017, the EnergyAustralia chief said it was critical to keep Yallourn in the mix to help ensure an orderly transition to renewables.

“The Victorian government does have a requirement to set interim and final targets and will come out with that in March next year. We’ll have to see what comes out of the report. We don’t know what’s going to come out,” Ms Tanna said. “We have 500 people work for us in the Latrobe Valley and we try and be as open and transparent with them as we possibly can about the future plans for Yallourn because it matters. These are good people with good jobs but we think Yallourn is needed for the stability of the ­system.”

Victoria’s Energy Minister Lily D’Ambrosio said last week the Andrews government was committed to ambitious leadership to help drive the state’s clean energy economy, including seeing through recommendations from the independent expert panel chaired by former Labor minister Greg Combet.

“The panel’s report clearly shows that the benefits of taking action to reduce emissions far outweigh the cost, and action on climate change will attract investment, create jobs and drive down power prices,” Ms D’Ambrosio said. “This is something we should never forget when we discuss the challenges of climate change — early action brings significant economic benefits for our state.”

Further out, Australia needs to spend $27 billion replacing retiring coal plants in the next two decades through a mix of solar, wind, storage and gas.

But a big plunge in renewables investment is raising concern over the move away from coal at a time when many Australian states are mandating ambitious targets to drive their economies towards cleaner supply sources and less emissions in the absence of an overarching federal policy.

Renewables investment in Australia sank by half in the first six months of 2019 after hitting record levels in the prior two years, BloombergNEF data shows, with transmission constraints, volatile wholesale prices and variable profitability on projects curbing spending by developers.

“The transition isn’t at all smooth. It’s actually very painful,” AEMO’s chief system designer Alex Wonhas told a clean energy conference last week, noting problems connecting renewables projects to the network.

While coal still provides about 70 per cent of Australia’s power generation mix, there’s concern that plants may be forced out of the grid earlier than expected.

Yallourn was nominated as one plant at risk in June by AEMO which cited lower demand, a higher renewables component in the generation mix, cuts to wind, solar and battery costs and higher maintenance costs for the ageing coal fleet.

Source: The Australian