Hazelwood closure: no just transition without a plan

November 25, 2016
Hazelwood power station is the most carbon polluting power station in Australia.

ENGIE, the French company that owns two of Victoria's coal power stations, announced on November 2 it will close the oldest, Hazelwood, by March, and is selling the other, Loy Yang B. The power stations are in the Latrobe Valley, east of Melbourne.

Hazelwood is notoriously Australia’s most carbon-polluting power station, with an emissions intensity of more than 1.5 tonnes of carbon dioxide for every megawatt-hour of electricity produced. This is slightly higher than its neighbour, the Yallourn power station, but substantially above the national average emissions intensity, which is below one tonne.

Closure has been a long time coming. Environmentalists have been protesting the plant's continued operation since the extension of operations was granted. Geoff Dyke, Secretary of the Construction Forestry Mining & Energy Union’s (CFMEU) that covers power station workers, told Green Left Weekly Hazelwood is 50 year’s old and was designed to be closed 20 years ago. Dyke added that he thinks “Yallourn power station has five to 10 years to go”.

However, the decision to close now has little to do with environmental concerns. Dyke said: “The National Party is blaming the [state government's recent] rise in coal royalties, which is only about $20 million from a profit of around $100 million.”

But, he said, the real reason lay elsewhere. “Really they haven't done proper maintenance for a long time. It's broken down. There were five PIN [safety improvement] notices issued on unsafe boilers.”

With ENGIE divesting from coal anyway, the directives from WorkSafe were to either make it safe or close it by March. 

Divesting from coal

The last time Hazelwood was in the news was the 2014 coal mine fire that blanketed local towns in toxic smoke for weeks. Coming out of that disaster, community members formed a group, Voices of the Valley, fearing that the health consequences of the disaster were being swept under the carpet by the then Coalition state government. Subsequently the group has begun campaigning for a transition to renewable energy in the Valley.

The incoming Labor government of Daniel Andrews fulfilled an election promise and reopened the inquiry into the mine fire. He also set up a “health innovation zone” in the Latrobe Valley with boosted funding for preventative measures and screening.

Voices of the Valley President Wendy Farmer told GLW the group formed out of health concerns and continues to monitor the outcomes on that issue. But in the process, they realised they needed to address the transition from coal for the Valley community. 

“Through the inquiry we felt we needed to look at the transition. There is high unemployment, up to 17% in Morwell. Regaining hope and purpose have to go with health,” Farmer said.

The closure announcement has increased pressure. “We had hoped that before any closure was announced, we'd see the start of a just transition, with new jobs providing something to move towards, rather than people being pushed away from mining.”

Jobs shock

The shock of closing Hazelwood will put a strain on the Valley. Figures from the CFMEU put employment in Hazelwood at 500 employees, with a further 300 contractors. Memories of the 1990s privatisation remain in the community, when the State Electricity Commission workforce went from some 10,000 employees in the Valley in 1988 to just 4000 in 1995, half of those outsourced to private contractors. Regional unemployment soared to 19% and is still high. 

The CFMEU is calling for a regional redundancy scheme, which would mean that older workers ready to retire could take retirement packages and let younger workers from Hazelwood fill their positions, easing the shock of unemployment.

Dyke said some of the energy companies were expressing tentative interest, and that meetings had begun with state government ministers. “The Federal government hasn't offered anything at this stage,” Dyke said.

He pointed out that other generators, including in NSW, were already seeing higher prices on forward contracts for electricity due to the announced closure of Hazelwood. 

The state government has promised assistance in the wake of the announcement. Initially a $22 million package was announced to support Hazelwood employees, and another $20 million to establish a Latrobe Valley Authority to manage the transition. These were part of a larger $266 million package directed to the Latrobe Valley and neighbouring Wellington and Baw Baw shires.

Farmer said that Voices of the Valley welcomes support, but is critical of how it is being delivered. “The community has to start taking ownership”, she said. “We want to work with the government without them telling us what we need.”

Most recently, a new “Hi-Tech Precinct” worth $17 million has been announced in partnership with technology firm Fujitsu, Federation University and others. Farmer said: “They say 'build it and they will come'. We say you have to work out what's needed, not just put in a new building. We have lots of empty buildings.”

Farmer thinks the money should be spent directly in Latrobe Valley, not neighbouring shires. “You pour the water into the teacup and it spills into the saucer. You don't pour it into the saucer and expect it to spill into the cup,” she explained. “Latrobe will miss out. They should listen to the community, not to business groups coming up with these plans.” 

Energy futures beyond coal

The focus of the Voices of the Valley’s campaign is a transition to clean energy. They want a transition centre guiding the process, linking community initiative with government, businesses and educational institutions. The centre would support the development of an industry manufacturing and installing solar technology, a community-owned electricity retailer to plough profits back into the project, and training workers for new roles. “There’s not even a solar power training course right now in the Valley,” Farmer said. 

Farmer is clear, however, that the move is away from coal. The Valley is littered with failed projects for new uses for coal, such as the proposed coal-gasification power station proposed by HRL a few years ago, or an earlier proposal for a coal-to-oil processing facility. 

“Coal may have another use, but so much money has been thrown at it, so many millions for clean coal, coal to oil etcetera, and it hasn't worked,” Farmer said. “Often international companies end up taking the money. If something was going to work, why hasn't it yet? We have to look at other options, not just coal. Coal is not good for humanity.”

One immediate source of new jobs is mine rehabilitation. An outcome of the inquiry into the mine fire was that the state government increased the bonds set for rehabilitation of the coal mines. This put ENGIE's bond for Hazelwood up from $15 million to $73.4 million, which is still only half the estimated cost of rehabilitation. The work will employ some 200 people after the mine has closed. The potential for growing the ecological restoration industry was something that Farmer agreed should also be considered in the transition. 

Coal closures: dominoes waiting to fall?

Some years ago, the late John Parker, then secretary of the Gippsland Trades and Labour Council, told me he had an ongoing bet with another union official over whether Hazelwood or Yallourn power station would close first, given how run down they were becoming since privatisation.

In a meeting with supporters in Melbourne on November 16, Farmer said she fears Hazelwood is only the first closure. “Yallourn power station is also on its last legs,” she said. “I don't think ENGIE will find a buyer for Loy Yang B. Will the Victorian government have to buy it for energy security?” 

Farmer said the implications of the federal government signing the Paris Agreement on climate change are that power stations will close, but federal assistance to the Valley has not been forthcoming. Most worrying, she said, there is no plan for how and when the stations will close. Without a plan, the Valley community will suffer and the security of the state's energy supply could come into question. 

Dyke also criticised the lack of planning in the electricity market system. “If it had remained as SEC [State Electricity Commission] they probably would have shut Hazelwood ten years ago. Because the SEC also owned gas and hydro, they coordinated all that. Now it's privatised everyone's running their own agenda. There's no planning across the system,” he said.

“The wholesale price has been flat for about 20 years. That seems strange, but they keep the wholesale price really low, while the retail price is going through the roof. The low price is an entry barrier to building new generators. It’s a way of making a market monopoly.” 

Having announced an increased renewable energy target, increased rehabilitation bonds for coalmines and a significant increase in coal royalties to the state, the state government is doing more than any other recent government to plan for transition. But whether it is enough, or can overcome the entrenched power of the electricity market monopolists, is another question.

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