Fall in demand dents shift to low emissions
THE shelving of EnergyAustralia's gas-fired power plant in Victoria raises fresh doubts about the incentives for power companies to move from high-polluting coal to lower-emitting technology, with one expert saying more projects could be cancelled.
The proposed plant, on the Yallourn power station site, was one of several gas-fired projects put on the drawing board several years ago by power companies to reduce emissions, and therefore costs, under the carbon price.
But the downturn in electricity demand due to retail price rises and the strong dollar has put pressure on generators to abandon new projects.
Bruce Mountain, the director of Carbon Market Economics, said more energy companies would be forced to consider moving away from low-emissions investments because of these changes.
"Many market pundits had three years ago indicated there would be more rapid transfer to low-emission technologies like gas-fired power generation," he said. "But with lower demand and higher gas prices, that shift is being pushed back in time."
He said power companies were more likely to close parts of their coal capacity to save money.
"Existing generators are having to fight very hard to compete in the market," he said. "The partial closures of brown coal plants makes more sense, because although they lose contribution to their profits, they are able to drive prices higher."