Compo offer for coal plants

Age
Friday 3/10/2008 Page: 8

CLIMATE Change Minister Penny Wong has reassured coal-fired power generators they will be compensated under emissions trading. This is despite climate adviser Ross Garnaut finding that most will remain profitable until at least 2020, without help. Senator Wong said she had heard the electricity industry's case and was aware it needed help to adjust as Australia cut greenhouse pollution.

The Government planned to set up a fund to help coal-fired power adjust, and give out free carbon permits, she said. "One of the sectors which will undergo most change in the years to come as a result of movement to a low-carbon future is the energy sector, and governments will need to work with that sector to enable that transition," Senator Wong said.

Professor Garnaut's final report reinforces his view that electricity generators do not warrant free permits. He would offer $1 billion in help but restrict it to matching investment in clean coal technology by power plants in coal-reliant communities such as the Latrobe Valley or assisting the re-education of workers.

The Garnaut review found a 10% emissions cut below 2000 levels by 2020 - the best short-term target - would result in 93% of brown coal capacity still being viable at the end of next decade. Under a more ambitious 25% target, about two-thirds of brown coal and three-quarters of black coal capacity would remain profitable. Professor Garnaut expects most new energy generation in the medium term to come from gas, which is cleaner than coal.

His modelling is at odds with work on behalf of the coal power industry. National Generators Forum chief executive John Boshier said its preliminary assessment was a potentially substantial loss of value before 2020. International Power Australia estimates even a low carbon price of $5 a tonne would affect the viability of generators such as the Latrobe Valley's Hazelwood station. "Our modelling is showing a different result to Professor Garnaut. The only way to be definitive is once we see the Treasury modelling later this month." Mr Boshier said.