Investor News

Fears Yallourn power station could close early

Recent news (here and here) has talked about the possibility of the Yallourn power station closing as early as 2025 (rather than 2032) due to Victorian government policies aimed at reaching 50% renewable energy by 2030.

Yallourn's owner, EnergyAustralia, has made the following statement in response:

The Yallourn power station generates enough electricity every day to supply 2 million Australian homes. More than 500 people work at the plant and it spends millions of dollars every year with local businesses.

We’re working hard to make Yallourn more efficient. At the same time, we continue to talk to stakeholders, including our workers and the community, to support opportunities and plan for the transition already underway in the Latrobe Valley. And we’re investing to modernise Australia’s energy system with new, cleaner power generation.

Australia’s shrinking capacity to generate reliable energy has been a major cause of rising household power prices. Losing Yallourn’s electricity supply would, without careful planning, compound the problem and impact the local community.

Our plans are to run the plant to 2032 or for as long as policy and regulation permit, and there’s not a substantial change in the market.

We have promised our workers and the local community that, should things change, and circumstances remain within our control, we will give at least five years’ notice before closing Yallourn.  


This is a perfectly reasonable response from EnergyAustralia.

They can't control government policy and can only react to such market intervention. And if government policy causes a change in circumstances beyond their control, then the consequences lie with the policymakers, not with EnergyAustralia.

This exposes the underlying problem.

For years we've been told that wind and solar are becoming cheaper than coal and gas. And it's true, they have come down in price, a lot. However, wind and solar advocates have gone to great lengths to hide the cost of intermittency from the direct calculation of their generation cost.

But in reality, wind and solar aren't stand-alone devices. Grid operators, utilities, and backup electricity providers must provide 'hidden' subsidies to make the system deliver the kind of electricity we need.

As we add subsidised wind and solar to the grid, that act, by itself, changes the pricing needed for all of the other types of electricity generation. The price per MWh needs to increase because their returns fall as they are forced to be used in a less efficient manner. Thus, our current pricing approach makes intermittent wind and solar look much more beneficial than they really are.

And as we've already seen, the price of electricity increases when we close a coal plant and add more wind and solar:

Source: AEMO - Victorian Wholesale Electricity Price

The chart above shows how much the wholesale electricity price has increased since 2015.

Hazelwood power station closed in March 2017, removing 1600MW of capacity, which provided around 12,000 GWh a year.

Since then, around 600MW of wind has been added, contributing ~1,600 GWh per annum.

Solar PV installations have added another ~420 GWh per year.

The difference between what we lost when Hazelwood closed and what we've added from wind and solar is just under 10,000 GWh per year. The gap has been filled by natural gas, hydro and imports (of mostly fossil fuel-fired power) from other states.

At 1400 MW, Yallourn is smaller than Hazelwood, generating ~10,500GWh a year, equivalent to 22% of Victorias and 8% of Australia's total demand.

To replace that we'd need ~4,000MW of wind or ~6,000MW of solar PV. To make up for both we need double that.

In reality, it would be a mix of both wind and solar, rather than one or the other. We'd also need enough storage to ensure reliability due to intermittency.

Speaking of reliability, many wind and solar advocates have pointed out that Yallorn is the least reliable coal-fired power station in Australia.

Ironically, even at its worst, Yallourn is more reliable than wind.

Here's Yallorn's operating profile for the current month of June 2019:

Yallourn power generation as a percentage of capacity - June 2019
Black line is the average

Compare to the 'reliability' of wind power for the same period:

Wind power generation as a percentage of capacity - June 2019
Dark grey line is the average

Here's a zoom in on a single day at Yallourn:

Yallourn power station output as a percentage of capacity - 26 June 2019
Black line is the average

And a zoom in on the same day, for wind:

Wind power generation as a percentage of capacity - 26 June 2019
Black line is the average

Wind hits about 26% capacity during the first peak at 8 am, dies off the remainder of the day, dropping to 10% at 4 pm then remaining below 26% during the evening peak from 5-8pm.

And let's not forget solar rooftop:

Source: AEMO data via

Solar PV is less erratic than wind. It follows a curve that is relatively consistent. At night it's zero. At midday, it's at maximum. Here's the zoom in on solar for the same day, 26 June 2019:

And as a percentage of installed capacity:

As wind varies on short timeframes and solar waxes and wanes through its daily cycle, gas, hydro and imports from interstate fill the gap:

Gas fired power generation - Victoria - 26 June 2019
Black line is the average
Hydropower generation - Victoria - 26 June 2019
Black line is the average

All together, power generation in Victoria looked like this on 26 June:

Brown coal providing steady, predictable baseload. Hydro stepping in, along with gas to cover the morning peak until the sun picked up, doing most of its work between 11 am and 2 pm.

We understand it. Wind and solar advocates are keen to reduce CO2 emissions. But this end does not justify fudging the facts on the way through. Let's be balanced and unbiased in our assessment and acknowledge that more wind and solar means either higher cost or less reliability.

And if Yallorn is forced to close early, let's hold policymakers to account for the conditions created by their intervention.

If we need more time to transition or need to keep the lights on and businesses running, then maybe there's a rational alternative.

ECT's Coldry process can deliver an immediate CO2 reduction of up to 15% by blending dried coal with as-mined wet coal. No changes to the power station required.

With a few changes to the plant, CO2 could be reduced by 30%.

A brand new Coldry-enabled HELE power station could cut emissions by up to 62% compared to old brown coal technology, bringing it closer to natural gas in terms of CO2 intensity.

We realise this is currently unlikely to happen while we hide the real cost of wind and solar, but if we come to our senses and decide to restore reliability and affordability, we can help achieve that with lower CO2 emissions.