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As analysts warn of the increased risk of early closure at some Latrobe Valley mines and stations, commercial pressure is rising on the giant coal-fired power stations providing much of Victoria’s electricity.

The growth of renewables in the power sector has forced prices to a seven-year low and is gradually undermining the viability of the Loy Yang and Yallourn projects, described as “unreliable and aging” by the state government.
The state government aims to press forward with the upgrade of the Victoria 20th century grid to enable further wind and solar projects to interconnect, and it is expected that the announcement of the state’s provisional pollution reduction goals, postponed by the COVID-19 crisis, would further reduce the ability of coal to compete.

But the companies that operate Loy Yang A, Loy Yang B and Yallourn, which together hire up to 1,200 employees and contractors, said that despite one senior executive referring to a changing “operating environment,” their long-term plans for the plant did not change.
The state government aims to press forward with the upgrade of the Victoria 20th century grid so that further wind and solar projects can be connected, and it is expected that the announcement of the state’s provisional pollution reduction goals, postponed by the COVID-19 crisis, would further reduce the ability of coal to compete.

But the companies that operate Loy Yang A, Loy Yang B and Yallourn, who together hire up to 1,200 employees and contractors, said that despite one senior executive referring to a changing “operating environment,” their long-term plans for the plant did not change.
AGL, which owns Loy Yang A and its adjacent coal mine, shocked the markets this month with a $2.7 billion writedown, blamed in part on falling wholesale electricity prices.

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Schneider Electric energy markets director Lisa Zembrodt said coal generation operations were being squeezed on both the supply and demand sides.

“Coal is going to continue to face pressure,” Ms Zembrodt said.

“On the supply side, they’re being squeezed out by the growth in renewable capacity and output.

“Demand is declining as people put solar … on their roofs, and larger end users get smarter in the way they consume or perform energy efficiency projects.”

Ms Zembrodt also said the carbon intensity of the brown coal used by the Latrobe Valley stations, which are responsible for 40 per cent of Victoria’s emissions, would become increasingly problematic.
Victoria University energy expert Bruce Mountain told The Age that recent events showed that brown coal generation was in trouble and that the challenge for the state government was to ensure that enough alternative power sources were available to replace the enormous capacity of the three Latrobe Valley stations.

“On brown coal closure, the odds are shortening on it happening sooner rather than later,” Professor Mountain said.
“It’s not panic stations, but the thrust of government policy must be to bring in alternative sources quickly.”

Victoria’s Environment Minister Lily D’Ambrosio last week launched the latest phase in the state’s $540 million effort to reboot its electricity grid. The system was originally designed around large-scale coal stations and has struggled to accommodate all the renewables projects waiting to connect.
“When we’re done, Victoria’s renewable energy zones will be home to 16 gigawatts of capacity – the equivalent of putting solar on every roof in Victoria,” Ms D’Ambrosio said.
“As our ageing coal-fired generators reach the end of their service lives, our long-term climate and energy targets provide the market with much-needed certainty to enable a well-planned transition to clean energy.”
Alinta chief executive Jeff Dimery said the company’s Loy Yang B plant was the youngest and most efficient brown coal power station in the Latrobe Valley and there were no plans to change its official 2037 closure date.

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“While our plans haven’t changed the operating environment has, and will continue to change, as we move towards a lower carbon future,” Mr Dimery said.

“If the situation changes and we have any concerns about our ability to keep the station running, we’ll be up front about it.”

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