Australia's biggest coal decision lies ahead

The HRL coal-fired power station is all but buried and while it is welcome news, a bigger decision lies ahead for the federal government.

On Friday energy minister Martin Ferguson announced that the government would withdraw its $100 million grant from the proponents of a proposed new coal-fired power station, HRL.

This is a very welcome decision, and is aligned with community aspirations for less coal-fired power and a cleaner energy supply.

As a result, the Victorian government is now reconsidering its remaining financial commitment to the proposal of $30 million ($20 million of the original $50 million grant has reportedly already been spent, although it would be more than reasonable to ask ‘on what?').

These government grants were the life-support that this polluting project has been relying on for years as potential funders of the project have withdrawn or turned their backs completely. Australia's big four banks declared in 2010 they wouldn't touch the project, and a number of international banks have said it doesn't meet their pollution limits for new investments.

Without this funding it is now impossible to see how HRL would convince any reasonable investor that pumping more than $1.2 billion into a project so openly disdained would be a worthwhile venture.

The HRL coal-fired power station now appears to be all but buried, and with it the dreams of a new fleet of coal-fired power stations in Australia have vanished.

It's took a major community campaign over many years to convince the federal government to withdraw their funding of the power station – a decision that should really have been simply common sense.

While the merits of handing over $100 million of taxpayer money were questionable from the start, there is now abundant reason for the HRL funding to be pulled.

A lot has changed since 2007 when the then Howard government first signed up to the proposal. Australia now has a price on carbon, driving up the costs of new polluting power stations and making renewable energy alternatives cheaper by comparison. We have a renewable energy target intended to ensure that Australia receives 20 per cent of our electricity from renewable energy by 2020. So called ‘clean coal' projects have continuously failed to deliver.

Difficult budgetary times now require that government spending is focused on existing priorities (and $100 million could come in mighty handy in the quest for a budget surplus). In addition we now have steadily falling demand for electricity – an occurrence not expected a few years ago, but none-the-less having a significant impact on the energy market and reducing the need for new power stations, particularly ones as polluting as the HRL proposal.  

What's more, the decision makes good on Julia Gillard's promise at the 2010 election that no new dirty coal-fired power stations would ever be built in Australia again. The HRL funding threatened to undermine this commitment, but Friday's decision is a clear indication that the prime minister can and will deliver on her promises.

The decision to withdraw HRLs funding is a great one. It's a nail in the coffin for the proposal and for all new coal-fired power stations across Australia. It says that government isn't prepared to continue to prop up these so-called ‘clean coal' technologies forever – technologies will actually have to prove themselves. The era of genuinely clean energy technologies is upon us, with Australians having installed 1700MW of solar power on our roofs over the past four years alongside thousands of megawatts of wind power.

But if we're serious about cleaning up our energy supply, it's going to take a lot more than just stopping new polluting power stations from getting off the ground. We need to start replacing the ones we've got. The decision to pull HRL's funding was a good one, but by comparison it was the easy one.

Australia's new carbon price is a significant piece of the puzzle, but even this isn't strong enough to deliver the changes to the energy mix required to retire our dirtiest power stations – a limitation of the scheme that is well understood. It was for this reason that the Gillard government committed that as part of the Clean Energy Future package, it would seek to close 2000MW of our dirtiest coal-fired power stations like Hazelwood, the least efficient and dirtiest power station in Australia.

Five power stations including Hazelwood have bid into the federal government's process. To achieve the 2000MW closure target the government will need to announce a plan to close down at least one large generator and two small ones. 

But the announcement of the plan's outcome was delayed in June beyond the legislated timeframe due to difficult negotiations with the generators. At the time the government said that negotiations could take months to deliver a result and some are concerned that the government could try and sweep this commitment under the rug.

While closing any of our power stations is certainly a more difficult piece of the puzzle, it's the essential one and without it the decision to stop HRL will amount to no more than treading water.  It's also one that has recently become much easier with the recent disaster at Yallourn highlighting that Victoria can cope extremely well without one of its major generators (at least through the cooler months) and falling demand means energy security fears can be put to rest. 

What's more, the closure of our dirtiest power stations like Hazelwood through a planned exit scheme with government involvement is the best possible outcome for local communities in the Latrobe Valley. Already regional transition planning is underway with strong engagement from across the community and across different sectors of the local economy (which is far more diverse than some in the coal-fired electricity industry would have you believe).

Local, state and federal governments are all positively engaged, but the money to make this happen will only be available as part of a transition plan that sees the old polluters closed and new industries established or further developed. 

Withdrawing HRL's funding was a great decision, but it was also the easy decision to make. If the government is serious about a clean energy future and delivering on its promises it must secure the closer of 2000MW of our dirtiest power stations as outlined as a key plank of the Clean Energy Future legislation. It's this policy, along with the carbon price, that will truly get on with the job of cleaning up Australia's energy supply.

Victoria McKenzie-McHarg is the Safe Climate Campaigner at Environment Victoria. Along with Greenpeace, Quit Coal and numerous community groups across the state, Environment Victoria has been campaigning to stop HRL for the past five years.