Australian Generator Curtails Coal Power Output, Citing Pinch from Carbon Tax, Renewables Target  

The owner of one of Victoria’s largest coal-fired power stations announced on Wednesday it would cut output at the Gippsland-based Yallourn power station, saying the July 1-implemented carbon tax is driving up operating costs and that Australia’s renewable energy target is squashing wholesale power prices to uneconomic levels.

EnergyAustralia’s 1,450-MW power plant generates about a fifth of the southeastern state’s electricity. The company plans to shutter one of the station’s four 360-MW coal units.

Other coal-fired power plants across the country have also been completely or partially shuttered, including Tarong in Queensland, Munmorah in New South Wales, Energy Brix in Victoria, Playford in South Australia, and Northern in South Australia. The closures total about 2,500 MW, reported the Business Spectator on Thursday.

"The current design of the Renewable Energy Target threatens the sustainability of Australia’s electricity market and needs to be recalibrated in line with falling demand, easing cost pressures on Australian electricity customers," the newspaper quoted EnergyAustralia’s group executive manager of energy markets Mark Collette as saying.

Under a federal government plan, generators must source 20% of their electricity from renewable sources by 2020. But based on current lower energy demand forecasts "this legislated 60,000 GWh target would actually lead to around 25% of energy coming from renewable sources and would involve a subsidy of [US$55.1] billion to 2030 resulting in unnecessary increased costs to households," the company said in statement earlier last month, citing new modeling.

"We want our energy greener and we want to use more energy at peak times. But then somehow we expect our energy to be cheaper," said Richard McIndoe, managing director of EnergyAustralia’s parent company TRUenergy in a Sept. 7 speech to an infrastructure and investment conference in Melbourne. "A price on carbon – a measure we support – also puts upward pressure on energy costs. However, fixed carbon prices at such globally high levels, together with restrictions on the use of low-cost abatement only adds unnecessarily to this cost."

The Australian Energy Markets Commission reportedly warned on Oct. 18 that the renewables energy target was distorting power markets by depressing wholesale power prices and driving retail prices up, reported the Sydney Morning Herald.

Sources: POWERnews, EnergyAustralia, Business Spectator, Sydney Morning Herald

—Sonal Patel, Senior Writer (@POWERmagazine)