A clean energy future is closer than you think

While the Baillieu Government may be backing away from a clean energy future, the state still remains in a great position to shake off the dominance of coal-fired power.

Amidst the negativity – at last some good news on energy. Last week, Planning Minister Mathew Guy gave planning approval for the 460 megawatt first stage of a new AGL gas-fired power station at Tarrone in Victoria's western district. It will share a new transmission terminal with AGL's 420 megawatt McArthur wind farm, which is already under construction.

This brings Victoria yet another step towards its goal of a greener energy supply and losing its title as the worst polluting state in Australia for greenhouse gas emissions.

The 2010 Victorian White Paper on Climate Change proposed that the proportion of electricity generated from brown coal should be cut from 95 per cent to less than 80 per cent by 2020 in order to reduce carbon emissions to 20 per cent below 2000 levels.

Despite the Baillieu Government scrapping this target – along with the rest of the commitments in the White Paper – there is every indication that market forces and the new national carbon price starting in July will keep Victoria on track to this goal.

And regardless of the Baillieu Government's strong aversion to new wind farms there are actually a large number of planning permits already issued. In March alone, five new wind plants announced they would commence construction, totalling 400MW, at Hawkesdale, Ryan Corner, Mount Gellibrand, Woolsthorpe and Salt Creek – all in Victoria's south west.

Despite the slashing of state feed-in tariff for rooftop solar cells, the market continues to boom as the price of Chinese photovoltaic cells tumble. Some 82,000 Victorian households now have PV cells on their roof and the number continues to grow. This represents over 150 megawatts of capacity and is a factor in the very flat retail sales of electricity.

The retendering of the federal government's Solar Flagships $1.5 billion funding gives renewed hope that the solar plant proposed by TRUenergy for Mildura could come back out of mothballs.

Despite the axing of $104 million for Climate Communities programs to encourage energy conservation and the termination of many state government programs, the retail demand for electricity has been steady since the GFC driven downturn in 2009. The public appear to be responding to all the messages and learning to switch off.

The Victorian White Paper called for the first two 200 megawatt units of Victoria's dirtiest power station, Hazelwood, to be retired by 2014 with the other six to be phased out by 2020. Despite the Baillieu Government terminating negotiations and making aggressive noises about keeping Hazelwood – the truth is the 40-year-old plant's days are numbered.

The Victorian power companies have already begun to receive federal government compensation associated with the carbon price. They will also be given free carbon permits to help them over the transition of the first three years. Most importantly, by July the federal government will announce the outcome of its tender to retire 2000 megawatts of inefficient coal generators.

Hazelwood's owners have played an aggressive hand, demanding heavy compensation. But the tender process puts them at a disadvantage to their competitors – particularly TRUenergy, which owns the coal-fired Yallourn power station and wants to replace it with gas.

The proposal by HRL to build a 600 megawatt "new technology" power station to create a new future for the Latrobe Valley resource has been very unpopular with environmentalists. This company was spun off from the old State Electricity Commission research laboratories and is working to turn coal to gas so it can be used with greatly reduced emissions. Both State and Federal Governments have supported pursuing this option to provide a cleaner alternative future use for coal- although their funding commitments may expire if there is further delay.

VCAT recently overturned an EPA decision to only licence a half sized HRL plant but added a critical rider that it could only be built when an equivalent amount of brown coal power was retired. Consequently, HRL has now frozen development until the outcome of the Federal tender process is known, which gives either Government an excuse to kill the project. The HRL plant would produce the same amount of electricity as three of Hazelwood's eight units with almost half the emissions.

The Victorian White Paper proposed a cap on emissions of 0.8 tonnes of carbon dioxide for every megawatt hour produced by new power stations – approximately equivalent to a black coal station. However this cap was also recently scrapped by the Baillieu Government. In the same week, the US EPA introduced its own new standard that capped future coal emissions at 0.45 tonnes – the level produced by an efficient gas-fired plant.

The Victorian EPA still retains responsibility for issuing a licence for the HRL plant and can still set a level to ensure a considerable reduction in emissions whilst speeding the demise of Hazelwood.

Victoria is rapidly heading towards a greener energy future and a much more balanced electricity system. Instead of the overwhelming dominance of Latrobe Valley brown coal within a few years there will be sizeable amounts of power collectively coming from gas and wind from the south west, hydro from the north east, and solar from the north-west.

Energy makes big money and attracts intense competition. Advances in technology and the inevitability of international controls on greenhouse gases are driving big companies to make major decisions that are putting them well ahead of politicians and pundits.

The public and the environment will be the beneficiaries.

Andrew Herington is a former Labor Ministerial Adviser who was involved in the development of Climate Change policy and is now a Melbourne freelance writer.

InvestSMART FORUM: Come and meet the team

We're loading up the van and going on tour from April to June, with events on the NSW central & north coast, the QLD mid-north coast and in Perth, Adelaide, Melbourne, Sydney and Canberra. Come and meet the team and take home simple strategies that you can use to build an investment portfolio to weather any storm. Book your spot here.

Want access to our latest research and new buy ideas?

Start a free 15 day trial and gain access to our research, recommendations and market-beating model portfolios.

Sign up for free

Related Articles