Renewing Hazelwood - a lost opportunity - 4th July 2011
Date
Theo Theophanous
Hazelwood had the potential to be the
first coal powerstation to run with virtually zero emissions. Photo: Reuters
Victorian Labor's pre-election policy to shut one-quarter of the
Hazelwood power station at a potential cost to consumers and taxpayers of $2
billion was an attempt to garner Green votes. Labor's adoption of the policy
was seen as a success for the Greens and increased anxiety among Labor's
traditional voters about impending electricity price rises. It contributed to
Labor's electoral loss.
Labor had previously pursued other ways of reducing Hazelwood's
emissions. It is well known that some years ago the Victorian government
entered into an agreement with Hazelwood that included conditions for new
technology to cut emissions by 35 million tonnes in exchange for extending its
life.
What is not commonly known is that about four years ago the government
almost clinched a three-way deal with aluminium producer Alcoa and
International Power, the owner of Hazelwood. This would have seen the state's
annual commitment to subsidise power to Alcoa until 2016 paid as a lump sum. In
exchange, Alcoa, which uses a huge amount of power, would help pay to refurbish
Hazelwood. This would give Alcoa more than 20 years of power supply.
As part of the deal, Hazelwood was to refurbish or rebuild up to six of
its eight units to include state-of-the-art super-critical burners and
coal-drying technology. This could potentially cut carbon emissions from 1.6
tonnes a megawatt hour to 900 kilograms. The estimated cost of converting each
unit at the time was $200 million to $300 million, which would have been partly
absorbed by International Power and partly by Alcoa. Both would have gained
from a long-term contract and a ''greener'' image. Alcoa flagged it might
increase its workforce and production. But the government thought the deal's
political risks too high.
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Since then Alcoa has entered into a long-term power supply agreement
with Loy Yang A. Sadly, this deal does not include commitments to cut emissions
by introducing new technology.
Federal Labor's reported new proposal to pay for the shutting down of
Hazelwood will be seen as another Greens win but the cost to the community will
be considerable, not only from the buyout but from the higher costs of gas or
renewable energy that will be needed to replace the power. This will not be
popular with Labor's heartland.
Gas is not an emissions-free way of producing electricity. It still
results in about 500 kilograms of carbon going into the atmosphere per megawatt
hour. Gas is a scarce resource and is much more efficiently used directly for
heating, cooking or hot water than producing base load electricity. Even if we
were to see gas as a transition to a clean coal or a renewable future it makes
sense to use it to accommodate the increased load from population growth rather
than to shut down existing power stations.
A far better proposition would be to go back to the idea of renewing or
rebuilding Hazelwood. The funds proposed to compensate Hazelwood and shut it
down could be used to modernise all eight of its units. The advantage of such a
proposal is that it would not involve any loss of power capacity as it could be
done gradually. The reconstruction would also create thousands of new jobs and
the deal could require technology to make Hazelwood geosequestration ready, so
emissions could eventually go underground. This could make it the first coal
power station in the world to run with virtually zero emissions.
Such a proposal would be greatly helped by a carbon tax or emissions
trading scheme. Government assistance and a carbon price trigger would make the
proposal commercially viable.
If Labor is to maximise its chances of winning elections it must back
proposals that not only protect the environment but create jobs and transform
energy production. Clean coal is part of that future and only the ALP can
deliver it. A policy that seeks to gear off putting a price on carbon to pursue
clean coal would be opposed by the Liberals and the Greens but that's probably
what makes it right.
Theo Theophanous is a former minister
for energy and industry in Victoria.
Alcoa power deal abandoned
By Alex
Sinnott
July 4, 2011, 9:59 a.m.
A CONTENTIOUS state subsidy arrangement with aluminium
manufacturer Alcoa would have been redirected by Spring Street to help finance
an overhaul of Hazelwood power station, a former minister has revealed.
Former industry minister Theo Theophanous has claimed a
three-party deal between the Brumby government, Alcoa and Hazelwood’s owner
International Power would have been more financially expedient and provided
greater investment in renewable energy.
However, the talks between the three parties fell through some
time in 2007 due to political sensitivities.
Mr Theophanous revealed in The Age yesterday that the Brumby
government almost clinched a three-party deal with the power provider and
Alcoa, which would have resulted in the state’s annual commitment to subsidise
power at the smelter until 2016 being paid as a lump sum.
In exchange, Alcoa would help pay to refurbish the ageing
Hazelwood plant located in the Latrobe Valley.
“As part of the deal, Hazelwood was to refurbish or rebuild up
to six of its eight units to include state-of-the-art super-critical burners
and coal-drying technology,” Mr Theophanous wrote.
“This could potentially cut carbon emissions from 1.6 tonnes a
megawatt hour to 900 kilograms.”
Mr Theophanous claimed Alcoa would have either increased its
workforce or production from its Portland and Point Henry smelters as a result
of the deal.
A long-running arrangement by the state government to subsidise
power supplied to Alcoa was brokered by former premier John Cain in the mid
1980s.
The deal was due to expire in 2016. However, the Brumby
government secured a new deal in March 2010 to redirect Alcoa’s power supply
from Hazelwood to Loy Yang power station.
Regional Cities Minister Denis Napthine said the original deal
outline by Mr Theophanous would have provided a “triple-win situation” for
Victorian taxpayers, electricity providers and environmental interests.
He said the decision by former premiers Steve Bracks and John
Brumby to call off the deal was a move to appease the Australian Greens.
“It was an extraordinarily frank article from Mr Theophanous
which has highlighted that the Bracks/Brumby government sold out the interests
of Victorian taxpayers,” Dr Napthine said.
“This could have been a win-win-win situation for Victorian
taxpayers, for workers at Portland Aluminium and for green energy.
“It sounds like there was a very positive prospect on the table
which would have been a great outcome for Victoria.
"This deal was called off because political interests and a
motivation by Labor to appease the Greens.”
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