Power generation in Latrobe 'to rise'

Age
5 August 2011, Page: 4

THE Latrobe Valley power generation industry will continue to grow for decades to come under a carbon price, according to economic modelling released by federal Treasury. Analyses released yesterday also suggest Australia will not meet its bipartisan target of 20% of electricity coming from renewable sources by 2020 without a carbon price or significant changes to existing renewable energy legislation.

In a challenge to claims that the Latrobe Valley would be devastated by forcing coal power plants to pay for their emissions, modelling by ROAM Consulting found the amount of power generated in the area would double under even a high carbon price by 2050.

Brown coal power generation is expected to continue to be the main source of power from the valley until at least 2030. It will gradually be replaced by baseload gas-fired power, which has about a third of the emissions of brown coal. The ROAM report says "that the Latrobe Valley remains a generation hub for all scenarios although under a carbon price there is incentive for increased diversification into gas, renewable and [carbon capture and storage] technologies".

The finding by ROAM is backed by a second consultancy, Sinclair Knight Merz, which found there was likely to be massive expansion of gas and renewable energy generation across Gippsland. The Sinclair report attributes the region's generation growth to its proximity to natural gas reserves, and strong wind, biomass and geothermal sources: "The exploitation of these resources under carbon pricing means that the overall level of electricity generation may not fall".

Other findings of five reports released by Treasury yesterday include:

• It would be cheaper under existing law for electricity companies to pay a penalty than meet the 20% renewable target by building new wind farms.
• $212 billion in new generation technology investment will be needed by the mid-century under a carbon price, almost double the investment needed without one.
• Retail electricity prices are estimated to increase between 7% and 48% depending on the size of emissions cuts in the period to 2020.
• The Department of Climate Change and Energy Efficiency found the government's carbon farming scheme which aims to reduce CO₂ from the land and livestock was likely to cut emissions by just 7 million tonnes of CO₂ a year by 2020.

Australia needs to cut emissions by about 160 million tonnes. The reports were commissioned as part of Treasury's modelling on the economic impacts of a carbon price. The Latrobe Valley findings are based on a starting carbon price of just under $20 a tonne and moderate global action to reduce emissions. The government carbon tax will start at $23 a tonne.

The modelling does not include the government's plans to pay to close two brown coal power plants, most likely Hazelwood in Victoria and Playford in South Australia.