Victoria Bracing for the Economic Impact After Second Coal Plant Announces Closure

The Yallourn coal-fired power station in Latrobe Valley, Victoria, Australia on Oct. 9, 2002. (AAP Image/Julian Smith)

The Victorian government will launch an inquiry into the early closure of the Yallourn coal-fired power station in the Latrobe Valley after state MP Melina Bath called for a report (pdf) into the economic impact of the power station’s shutdown.

EnergyAustralia, the owner of Yallourn Power Station, originally announced the facility would close in 2032—but on March 10, this was revised, with the new date brought forward four years to 2028. Yallourn is a key energy generator of Victoria, currently supplying 22 percent of Victoria’s electricity and 8 percent of the national market.

Bath is concerned about the shortened time span after the sudden closure of the Victorian Hazelwood power station—a neighbouring coal-fired station shut down in 2017—which had serious effects on the state’s economy.

The Hazelwood station was forced to cease operations with only a 6-month warning after Victorian Premier Daniel Andrews imposed heavy taxation on carbon emissions, forcing Hazelwood to pay a fine of around $88 million.

Bath explained that the fine forced the power station to close during the Legislative Council hearing, saying, “Unfortunately, it was not phased or planned; it was a shove.”

Workers leave Hazelwood Power Station after their final shift in Hazelwood, Australia, on Mar. 31, 2017. Around 750 workers have been left jobless after the plant was closed. (Scott Barbour/Getty Images)

It also resulted in the loss of 750 direct jobs and another 300 associated jobs and had detrimental effects on both the Latrobe Valley and the state economy.

“One Latrobe Valley council report of the time, in 2017, stated that Hazelwood’s closure resulted in a decrease in total regional output of more than $1.58 billion,” Bath said.

Bath emphasised the need for a critical evaluation and to provide practical methods for mitigation, pointing out previous plans proposed to handle the Hazelwood shutdown was never upheld, referring to them as a “complete disappointment.”

Minister for Energy and Emissions Reduction Angus Taylor also expressed concern over the new closure date in a media release on March 10.

“The exit of 1480 MW of reliable energy generation brings with it reliability and affordability concerns,” he said.

Australia's Energy Minister Angus Taylor speaks during question time in the House of Representatives at Parliament House in Canberra, Australia. on July 4, 2019. (Tracey Nearmy/Getty Images)

EnergyAustralia Managing Director, Catherine Tanna, said the purpose of Yallourn’s retirement was to “transition to cleaner energy in a way that does not leave the workforce or the community behind.”

However, EnergyAustralia will only construct a 350 MW battery by 2026  that is capable of operating at maximum capacity for four hours as a replacement for the power plant.

The decision by EnergyAustralia comes after falls in energy prices over the last few years, which has affected Yallourn’s overall profitability.

Over the past several years, Victoria’s energy prices have declined sharply as renewable energy stations have diversified the power generation market.

The average energy spot price was $109 per Megawatt-hour in 2019, generating an estimated $1.1 trillion from the Yallourn power station alone.

In 2020, this amount plummeted to $52, at an estimated $540 million a year in revenue.

So far, into March of 2021, the average spot price further fell to $24 per Megawatt-hour, with the estimated revenue for Yallourn just over $250 million in 2021.

According to Energy Australia, Yallourn requires $200 to $300 million of investments per year to ensure the plant’s continued operation, making the plant financial unviable.

The Victorian State governments Economy and Infrastructure Committee is set to produce the final report on the closure of Yallourn by December this year.

It is expected to pay particular attention to the closure’s economic consequences, which will hit the state after more than 1000 people will lose their livelihoods.