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Hazelwood ends an era; energy future now in our hands

"The announced closure of Hazelwood Power Station increases the urgency of reform to ensure that reliability and affordability of energy are maintained through the major transition taking place in Australia's energy system," Ai Group Chief Executive Innes Willox said today.

"Over more than fifty years in service, Hazelwood has helped power growth in Victoria and across the National Electricity Market. It met a fifth of Victoria’s demand for reliable energy at low cost. But old facilities cannot last forever. Refurbishment or replacement have proven to be uneconomic, given the immense costs involved and the difficulties faced by coal-fired generators in Australia's changing energy system.

"Forward prices for electricity have risen dramatically across the National Electricity Market over the past year, reflecting a generally tighter supply-demand balance; the impact of higher gas prices; and more supply from generators with higher marginal costs, like gas to back up renewables. Consumers are definitely set to pay higher power prices, but it is unclear whether Hazelwood's closure is already priced in to the futures market, or whether there is more pain to come now that the closure is official.

"In any case, this closure is just one step in a larger transition.  Ageing plants and Australia's Paris emissions reduction commitments will see more and more base load coal power closed. Today New South Wales announced that it aspires towards net zero greenhouse gas emissions by 2050, a goal already adopted by Victoria and South Australia. That is a huge transition. New electricity generation seems very likely to come from wind and solar power, whose costs are declining rapidly. But these energy sources are variable and intermittent, and the energy system is not yet ready to integrate high levels of variable supply while maintaining reliability and affordability.

"The Australian Energy Market Operator already anticipated the closure of a significant amount of coal fired power in its latest statement on supply adequacy – and found that while there is no immediate crisis, there will be a growing reduction in reliability if we do nothing in response. Hazelwood's closure should further increase the urgency of the work now under way in the COAG Energy Council and the Finkel Review of Energy Security. The challenge of variable supply can be solved, but not without reforms to reward demand-side flexibility, encourage diversity of generation types and locations, increase the supply of gas for backup power, and make the most of the growing energy storage opportunity.  

"It is also important to help the businesses and communities of the Latrobe Valley through the major change they are about to go through. Supply chains will need to adjust, and workers will need to retrain.

"When Hazelwood was built our energy system was different – planned and owned by the State for a world of centralized networks and continuous demand growth with no worries about greenhouse emissions. Now we face the challenge of building a system that will harness private investment and new technology to deliver secure, affordable and sustainable energy to Australians for the next fifty years. There is no time to waste," Mr Willox said.  

Media enquiries: Tony Melville – 0419 190 347

Further comment: Ai Group VIC Branch Head, Tim Piper – 0411 430 301