Owners of ageing coal-fired power plants would be required to give at least five years’ notice before shutting under a last-minute rule change proposed by Angus Taylor shortly before the federal election is expected to be called.
Taylor, the energy and emissions reduction minister, said on Thursday he had written to the Australian Electricity Market Commission asking it to extend the notice period for generators to shut from 3.5 to five years to “safeguard the delivery of affordable, reliable power for consumers”.
The proposal was backed by the New South Wales government, but electricity generators and analysts questioned whether it was necessary and suggested it would make little difference if a coal plant was failing or its owner was broke.
The proposal, which will now be subject to a formal commission process including two rounds of public submissions, follows announcements that coal plants would close earlier than scheduled as they increasingly struggle to compete with cheaper renewable energy.
In the most recent example, Origin Energy announced in February the country’s largest coal-fired power plant, the Eraring station on the shore of Lake Macquarie in New South Wales, would close in 2025, seven years earlier than previously planned.
Taylor was not told of Origin’s decision until the night before its announcement. On Thursday, he said the notice period extension was a “critical reform” to ensure the energy industry had enough time to build new generation capacity to replace closing plants.
Tristan Edis, from the consultants Green Energy Markets, said the decision made little sense. He said it was already possible to build batteries to replace coal plants in much less than 3.5 years, and he doubted a five-year notice period would be enforceable if there was an early closure due to a plant suffering a catastrophic failure or if the owner became financially unviable. “In those circumstances, how can you make them?” he said.
Sarah McNamara, chief executive of the Australian Energy Council, which represents generators, questioned whether the change was needed. She said it could be counterproductive if it forced a company to publish a closure date long before the plant’s operational circumstances were clear.
“It should be recognised that generators, like any business operation, are subject to many unknowns and risks that such a rule cannot address. For example, plants may have physical failures or may be required to unexpectedly cease operations due to health and safety or environmental regulations. Company directors also have obligations under the [Corporations Act] in relation to operations that have become unexpectedly uneconomic,” she said.
“All of these issues would limit the effectiveness of such a rule.”
Taylor was sharply critical of Origin’s announcement in February that it could shut Eraring, a 2,880MW black coal generator, from August 2025. The company said its decision reflected “the rapidly changing conditions in the national electricity market, which are increasingly not well suited to traditional baseload power stations”.
It followed AGL announcing it would bring forward the closure of the Bayswater generator in NSW from 2035 to no later than 2033, and its brown coal-fired Loy Yang A plant in Victoria from 2048 to 2045. EnergyAustralia’s Yallourn power plant, also in the Latrobe Valley, will shut in 2028 rather than 2032.
The early closure announcements have been prompted by the rapid rise of cheaper renewable energy, which reached more than 30% of grid generation last year and is forecast to hit at least 69% by 2030.
At the time, the Australian Energy Market Operator’s chief executive, Daniel Westerman, said NSW would have access to enough electricity generation when Eraring closed due to planned additional capacity, including new transmission and a new battery announced by the state government.
On Thursday, the NSW treasurer and energy minister, Matt Kean, said he welcomed Taylor’s proposal. “Building the new electricity infrastructure like pumped hydro and renewable energy zones needed to replace retiring power stations takes many years, and it is important that investors have as much notice as possible to develop these projects,” he said.
But Richie Merzian, climate and energy program director at the Australia Institute, suggested Taylor had made a “knee-jerk” request for a rule change after being left out of negotiations between Origin and the NSW government over Eraring’s closure.
“It is abundantly clear that coal plants are going to accelerate their closures, closing faster than their official retirement dates. If this government was genuine about providing certainty to coal communities, it would develop a national coal closure roadmap rather than attempting to strong-arm coal plants one by one,” he said. “Failure to develop a coal closure roadmap leaves workers and communities without support or a plan for the future.”
Through a spokesperson, federal Labor’s climate change and energy shadow minister, Chris Bowen, said “the AEMC sets the rules on these matters and we’ll continue to follow their advice”.
The Greens leader, Adam Bandt, said the minor party would push the next government to close all coal plants by 2030. “More coal means more devastating floods and bushfires,” he said. “With the Liberals keeping coal for longer and Labor vowing they won’t close coal fired power stations early, we’re heading for the climate cliff.”
