One of Australia’s dirtiest coal-fired power stations, Yallourn in Victoria’s Latrobe valley, will close four years earlier than scheduled and be replaced, in part, by a giant battery.
EnergyAustralia announced on Wednesday it would shut the 1970s-built, 1,480-megawatt brown coal plant in mid-2028.
There have been several outages at the ageing generator in recent years and a widespread expectation that at least one coal plant would shut early due to an influx of cheap renewable energy making them financially unviable.
About 500 workers at the plant and connected coalmine were told of the decision on Wednesday morning. The company’s managing director, Catherine Tanna, told a subsequent press conference that EnergyAustralia had a plan that was supported by the Victorian government and included a $10m workforce support package.
She said the company would built a long-duration large battery, with four hours’ storage and maximum power capacity of 350 megawatts, by 2026 to help ensure a secure energy supply when the plant shut. She said it was bigger than any battery now operating, but larger batteries were proposed elsewhere.
Tanna said the world of energy was changing rapidly, and the company was committed to ensuring storage was installed before Yallourn shut.
“EnergyAustralia is determined to demonstrate that coal-fired power can exit the market in a way that supports our people and ensures customers continue to receive reliable energy,” she said.
Yallourn has the capacity to supply about 20% of Victoria’s electricity and 8% of the generation in the national grid, which covers the five eastern states and the ACT.
It has suffered through several outages in recent years. The Australia Institute said it had broken down 50 times in a little over three years.
Its closure will leave just two plants that run on brown coal, the dirtiest fuel used in power generation in Australia – Loy Yang A and Loy Yang B, both also in the Latrobe valley.
Both brown and black coal plants have faced heightened financial pressure in recent years as solar and wind have been built faster than most experts expected.
A recent analysis by two groups – Green Energy Markets and the Institute for Energy Economics and Financial Analysis (Ieefa) – found that, between 2018 and 2025, new solar and wind plants would add about 70,000 gigawatt hours of clean supply each year.
This is equivalent to more than a third of the national grid’s usage. The result has been a slump in wholesale electricity prices, which has been good for consumers but not fossil fuel generators.
The drop – up to 70% in Victoria over the past year – has put particular pressure on inflexible coal plants that are not designed to ramp up and down, and cannot compete with the massive surge of near-free solar energy in the middle of the day.
Experts including Kerry Schott, the chair of the national Energy Security Board, have warned the expected early coal closures and the rise of variable renewable energy demand a major revamp of rules governing the national energy market. Its advice on the issue is due this year.
The federal energy and emissions reduction minister, Angus Taylor, said the government understood EnergyAustralia had made a commercial decision and that the plant’s closure would bring “reliability and affordability concerns”.
“As an essential service, the commonwealth government expects the market to step up to deliver enough dispatchable generation to keep the lights on and prices low once Yallourn closes,” he said.
Taylor said his thoughts were with the plant’s workers, their families and local business owners who relied on the plant for their livelihoods.
He said the government would model the impact of the closure “to hold industry to account” and ensure there was enough flexible capacity in the system needed to ensure electricity was affordable and reliable for consumers.
Climate campaigners welcomed the news of the closure, which would remove about 13% of Victoria’s and 3% of national carbon emissions, and called for a government-supported transition plan for affected Gippsland towns.
Richie Merzian, from the Australia Institute, said Yallourn’s early closure was “another reminder” that Australia lacked a climate and energy plan to deal with the inevitable closure of coal power stations.
Kane Thornton, the chief executive of the Clean Energy Council, called on industry, government and unions to work together to ensure “people and their communities aren’t left behind”.
“There are enormous opportunities in the new energy world, but it requires leadership, planning and commitment to unlock and take everyone with us,” he said.
Yallourn’s closure will have flow-on effects for other coal power plants. The Green Energy Markets and Ieefa analysis found if one plant were to close early, it would change the viability of those that remained as they would benefit from a short-term increase in electricity prices, but prices would be expected to reduce again – and the financial pressure to increase – as more renewable energy came online.
It found up to five plants, including Yallourn, could be unviable by 2025.
The Australian Energy Market Operator (Aemo) last year released a blueprint for an optimal grid that found between 6GW and 19GW of new flexible energy capacity would be needed by 2040 to support a grid that predominantly ran on solar and wind.
It found this could come from batteries, pumped hydro, demand management (users being paid to reduce electricity use at peak times) and gas, but suggested new gas-fired power – the only fossil fuel on the list – was likely to be more expensive than other options.
The Morrison government says more gas power capacity is essential, and it wants a “gas-fired recovery” from recession. Tanna said on Wednesday that EnergyAustralia had not ruled out building a new gas plant, but had set a goal of being carbon neutral by 2050.
Pressure is growing within the international community, from governments and investors, for a faster move away from coal. The new US special climate envoy, John Kerry, is among those to have called for a faster exit from coal as he pushes for greater commitments and action before a major climate conference in Glasgow in November.