Tony Abbott backs calls to keep Hazelwood power plant open

Tony Abbott has supported calls to keep the Hazelwood power plant open to avoid power shortages.

“If we are serious about tackling Australia’s looming energy crisis, the last thing we should be doing is closing 20% plus of Victoria’s (and 5% of Australia’s) base load power supply,” the former prime minister wrote in the Herald Sun on Friday.

Closing Hazelwood before cost effective and reliable alternative supplies could be established was “sheer, avoidable folly”, Abbott wrote. He blamed “climate-induced political fiddling” over the past 15 years for rising power prices and said the dream of providing clean renewable energy had “led us to the verge of catastrophe”.

The chief executive of the Australian Industry Group, Innes Willox, said on Friday the federal and Victorian governments should be open to an emergency intervention to keep the plant open.

When it closes next week, the brown coal-fired power station in Victoria’s Latrobe Valley will remove 1,600 megawatts from the Australia’s energy market. It is the country’s dirtiest power station, producing 1.56 tonnes of carbon dioxide for each megawatt hour of electricity, making it 50% more polluting than the average black coal power station in New South Wales or Queensland.

But Willox said Australian Industry Group members were not convinced that the risks to the energy supply was being managed, and their confidence in energy prices and supply was eroding. The plant provides up to 25% of Victoria’s energy needs and just over 5% of the supply nationally.

The Australian Energy Market Operator (Aemo) has made it clear that demand would only continue to be met after Hazelwood’s closure if there was a market response to fill the gap.

Willox said he and his members were not convinced that enough had been done. “The federal government has made a welcome intervention in encouraging the gas industry to guarantee supply for electricity generation,” he said.

“The Council of Australian Governments, and particularly the federal and South Australian governments, have moved to bring new generation and storage projects online to improve security.

“But it is far from clear that these initiatives will succeed, and industry has no assurance that the necessary market response from other coal, gas and hydro generators is under way.

“In the absence of convincing and appropriately sequenced alternative strategies, the state and federal governments should remain open to finding an eleventh hour solution to keeping Hazelwood operating in some form.”

He admitted that keeping the plant operating even in the short-term would be costly, with substantial and expensive upgrades required to keep it going even in the near term. Arrangements for contractors, workers and the community would also be disrupted.

But he said those costs needed to be weighed up against the cost of failing to secure the energy grid.

Victoria’s energy minister, Lily D’Ambrosio, dismissed the concerns. She said Hazelwood was closing because of a commercial decision by its owner, Engie, to divest coal assets worldwide.

“Aemo has assured us that they are responding to market demands and that there will not be energy shortfalls in Victoria,” D’Ambrosio said.

“The Hazelwood power plant requires hundreds of millions of dollars for backlog maintenance just to stay open. Engie have made it abundantly clear that it is not economically viable to keep the plant open past April 1, and that there have been no credible approaches made.”

Guardian Australia understands that the commonwealth also won’t be intervening to keep the plant open.

In a statement, Aemo said it was working with all generators across the national energy market to maximise available supply, and was also working with gas production facilities and gas pipeline operators to ensure demand could be met during peak summer demand periods.

“Aemo’s assessment of supply adequacy across the national electricty market, in the absence of any market response with the announced retirement of Hazelwood power station shows a potential for reserve shortfalls in Victoria by summer 2017-18,” it said.

In a report released in November, Aemo said supply could continue to be met 99.98% of the time after the closure of Hazelwood if governments responded with measures such as conserving water in storage to allow more generation from the Murray hydroelectric power station next summer, and committing to other projects.

The Australian Industry Group said any shortfall in supply could be met if gas producers negotiated a “swap” arrangement to put additional gas into the domestic market while meeting a portion of their export commitments using gas sourced on international markets; removing excessive regulatory barriers to the development of new sources of gas; and assisting energy users to identify and implement energy efficiency improvements.

The chief executive of Environment Victoria, Mark Wakeham, said the lack of a strong energy and climate policy from the federal government was starting to have “ripple effects” in the economy.

“The energy market operator has raised no serious concerns about energy security with Hazelwood’s closure but there is no doubt that the lack of a coherent national energy policy is starting to have real impacts on much-needed investment in modernising our energy sector,” he said.