Options for managing the transition away from coal fired power stations
Stakeholders to the inquiry commented at length on how a phased closure
of coal generators could be best managed. In particular, the need for the
development of a national transition plan was highlighted, integrating energy
and climate policy as well as coordinating the response to assist affected workers
Need for a national transition plan
Support for a consistent, long-term national transition plan was
widespread among submitters to the inquiry. Engineers Australia argued:
...the Australian government needs to create a transition plan
which outlines policy mechanisms to encourage the retirement of Australia's
highest emitting power stations, while also providing options for affected
workers and communities...Without a clear plan, Australia risks the potential to
lose a large portion of its generating capacity in a short period without any
alternatives in place, while at the same time undermining its Paris COP21
Engineers Australia submitted that this transition plan should outline:
how Australia will achieve its emission reduction targets through
the electricity generation sector, outlining a transition from fossil fuel
power plants to renewable and low carbon emission options;
a timeline for when Australia will begin the transition away from
major capacity fossil-fuelled power stations, and what generation options will
be used to replace them;
the obligation costs that the major fossil fuel power stations
will incur when exiting the market, outlining incentives to exit where
incentives for investors of new zero and low emission
technologies with policies to run alongside research and development, drawing
on market forces where possible;
changes to the electricity grid to accommodate more distributed
generation and management of supply availability and resilience; and
policies for increased reliability and resilience of Australia's
electricity system through a mix of generation and distribution applications,
energy storage solutions and smart-grid technologies.
In relation to transition planning, Alinta Energy stated:
An area for further thought and improvement to consider is in
the area of planning the transition to closure where orderly exit can be
greatly enhanced by an effective generator transition plan published in advance
for the entire market and an appropriate energy and renewable policy framework.
The Electrical Trades Union (ETU) argued that a national transition plan
is required to 'ensure that Australia's transition is managed in a fair and
just manner, where affected workers and communities are supported to find
secure and decent jobs in a clean energy economy'.
Some submitters and witnesses commented that the different climate and
energy policy settings pursued by various state and territory jurisdictions in
Australia increased complexity and uncertainty for market participants, and
that a more cohesive national framework is required. The Australian Energy
Without material changes to better integrate carbon and
energy policy in national frameworks, Australian energy customers will pay more
for their electricity, or potentially face more supply risk, in the transition
to achieving a cleaner energy system. A national carbon reduction mechanism
will provide more efficient and reliable national abatement outcomes than a
series of disconnected targets and schemes in individual jurisdictions.
The Australian Mines and Metals Association submitted that Australia
should develop a National Energy Transition Plan, including harmonised
renewable energy targets that ensures affordable, reliable and secure energy
and delivers just, stable, predictable and measured transitions.
Establishment of a statutory
authority to manage the transition process
Several stakeholders argued that establishing a new statutory authority
to manage this transition would be the most effective way to ensure a
consistent, long‑term national plan.
The Australian Council of Trade Unions (ACTU) recommended that the Australian
Government establish a national independent statutory authority, named Energy
Transition Australia (ETA), within the environment and energy portfolio, 'to
navigate the transition to a clean energy economy'. The ACTU outlined the
benefit of this approach as follows:
The key focus of the ETA will be to minimise the impact of
unplanned closures on workers and their communities through managing this
transition in a regulated manner and developing plans to ensure the ongoing
economic prosperity of affected regions. Given Australia's current energy mix
and the need for substantial investment in renewable energy, it is important
that this transition is managed carefully and in a manner that supports the
continued supply of electricity...
Creating a body that has the freedom, independence and
mandate to adopt a long term approach to managing this transition will help
ensure that decarbonisation occurs efficiently and fairly – without working
people and their families bearing the brunt of this transition and being
plunged into unemployment or insecure work through a sudden plant closure.
The ACTU argued that while a number of federal bodies have already been
established to advise on climate policy and support investment in renewable
energy, an independent authority to manage the overall transition process is
'an important part of the mix' to implementing a cohesive national policy
framework in this area.
The proposed new authority would be overseen by a tripartite advisory
board comprising industry, unions and government, and would be responsible for
reporting to parliament and the responsible minister.
Under the ACTU's proposal, the role of the new authority would be to:
oversee a planned and orderly closure of Australia's coal fired
manage an industry-wide multi-employer pooling and redeployment
scheme, where existing workers would have an opportunity to be redeployed to
remaining power stations or low-emissions generators; and
develop a labour adjustment package to support workers obtain new
decent and secure jobs, including by providing funding for workers to access
job assistance support, retraining, early retirement and travel and relocation
The ACTU noted that various models, including the Jotzo model, have been
proposed in relation to determining the order and timing of plant closures, and
proposed that the new statutory authority would be responsible for selecting
and administering the most appropriate mechanism to facilitate these closures.
The ACTU's proposal states that the new authority could also undertake a
review of the NEM regulatory bodies
to ensure that the roles and activities of these agencies are consistent with
the low emissions modernisation of the electricity sector.
Developing region-specific plans
Additionally, the ACTU's proposed new authority would work with all
three levels of government in Australia to develop specific plans for regions
affected by the closure of coal fired power stations.
This would include:
mapping potential new industries to affected regions based on
competitive and other advantages as well as worker skills. As part of this mapping
exercise, infrastructure gaps should be identified and prioritised.
developing and implementing specific industry and environmental
policies to attract new investment, the growth of new industries and the
creation of quality, secure jobs in affected regions. Such policies could
include additional renewable energy investment incentives, investment tax
incentives and the prioritised construction of new infrastructure.
WWF–Australia supported the ACTU's proposal, arguing that the
establishment of an oversight body to manage the transition process has been a
key to successful transitions in other international jurisdictions.
The Australian Greens introduced a bill into the House of
Representatives on 21 November 2016, which seeks to establish a statutory
authority, Renew Australia, to plan and drive the transition to a new clean
energy system in Australia. The functions of Renew Australia would include:
overseeing the implementation of new energy objectives to achieve
90 per cent renewable electricity generation in Australia by 2030; and
laying out a timetable for the planned closure of coal fired
power stations in Australia, with a default plan involving the closure of all
plants by 2030.
A 'just transition' for workers and communities
One of the arguments posed in favour of a strategic national plan to
retire coal fired power stations is that it reduces uncertainty for workers in
the industry and allows them to plan for a future without coal.
In the past fifteen years, there has been a push by labour organisations
and environmentalists across the world for what is termed a 'just transition'.
A 'just transition' is defined as linking 'ecological sustainability with
issues of work, equity and social justice'.
In discussing 'just transition' policies in Australia, Geoff Evans of the
University of Newcastle states that:
A just transition process recognises the needs of both
current and future generations for safe, secure and satisfying jobs.
Participants in a just transition seek to build collaborations rather than
conflict, and in particular, to avoid a false 'jobs vs. the environment'
conflict. A just transition is needed to ensure that the costs of change do not
fall on vulnerable workers and communities.
The ETU noted that prior to the Paris meeting, the International Labour Organisation
(ILO) had published guidelines on how to achieve a 'just transition' for
workers and communities.
The concept of a just transition was subsequently incorporated into the
preamble of the Paris Agreement, which states that Parties, in signing up to
the agreement will:
[Take] into account the imperatives of a just
transition of the workforce and the creation of decent work and quality jobs in
accordance with nationally defined development priorities...
Ms Ged Kearney, President, ACTU, explained the principles of 'just
transition' as follows:
From our perspective, the key principles underpinning a just
transition include: equitable sharing of responsibilities and fair distribution
of the costs across society; institutionalised formal consultations with
relevant stakeholders, including trade unions, employers and communities at
both national and regional levels; the promotion of clean job opportunities and
the greening of existing jobs and industries through public and private
investment in low-carbon development strategies, and, alongside that, organised
economic diversification policies for those communities at risk; formal
education training, retraining and lifelong learning for working people; and
social protection measures—that is, active labour market policies; access to
health services and social insurances, among other things; and respect for and
protection of human and labour rights. We believe that, in signing the Paris
Agreement, the federal government has an obligation to responsibly plan and
manage the transition to a clean-energy economy in a way that puts working
people and their communities first.
In its submission, the Construction, Forestry, Mining & Energy Union
(CFMEU) stated that:
...if Australia is capable of having climate policy that
requires all or most of the electricity sector to be low or zero greenhouse gas
emission, then it should also be capable of planning for the social impacts
that arise from that. Governments have a duty to manage the impacts of their
The Australian Manufacturing Workers Union (AMWU) submitted that in
regions affected by coal station closures, the government must take steps to
support investment which attracts businesses able to utilise the existing
skills base of affected workers:
For example, solar-thermal power provides a renewable source
of base-load energy generation and requires a much larger workforce than
solar-radiation power generation. Many of the skills required to maintain and
operate such a power station are very similar to those required in a coal fired
power station. In addition, manufacturing businesses would be well suited to
many of the affected regions because they require employees with very similar
skills to power station workers.
Attracting new businesses to these areas and assisting
existing small and medium sized businesses to grow is the missing piece of the
federal government's usual approach to address the problems created by the
closure of a major employer. This approach supports workers, their families and
their communities by creating quality jobs that provide decent work in the
Comparison with international
The committee took evidence from witnesses with experience managing the
current transition of the coalmining industry in Germany. Mr Norbert Maus of
the RAG Corporation explained to the committee that a decision was made in
2007 that the coalmining industry in Germany would 'most likely' end by 2018:
We had a total of 11 years, of which nine have passed, to
prepare and work towards this. We talked with our colleagues; we talked with
everybody; we held all the necessary discussions to make clear to everybody
that the political decision to end coalmining by 2018 had been taken. Of
course, in 2007 we had the figures around how many people would be eligible for
early retirement and, if they were not, what we could do, how many people were
in fixed term contracts and so on. Our focus has always been on the people, to
make sure that we help them and support them. We will now work till the end of
2018 within the funding that we have and we will continue to produce coal until
then. I am very happy with the way we have implemented the process so far.
The ETU stated that, historically, industry transitions had not been
carried out well in Australia:
Transitioning an industry is a massive economic and social
disruption and is something that has been done poorly to date in Australia.
History shows that workers and communities often bear the brunt of such
transitions suffering hardship, unemployment and generations of economic and
In particular, the experiences described in Germany can be contrasted
with the recent announcement of the closure of the Hazelwood power station. On 25 May 2016,
ENGIE's chief executive officer Ms Isabelle Kocher stated before a French
senate committee that ENGIE was planning to gradually withdraw from coal fired
power generation in its international operations. Ms Kocher told the
French senate committee that:
For the Hazelwood
plant, we are studying all possible scenarios, including closure, or a sale if
the state of Victoria tells us that it cannot meet power‑generating needs
without this plant.
After Ms Kocher's comments were published in the Australian media, ENGIE released
a media statement which emphasised that any decision on the future of the
station must be made by the ENGIE Board with approval from the ENGIE and Mitsui
shareholders. ENGIE stated that this decision was yet to take place, and that
business would continue despite the difficult trading conditions.
From May to November 2016, it was unclear whether ENGIE would move to
close the plant. Victorian Energy Minister the Hon Lily D'Ambrosio, stated in
May 2016 that she had been told that 'there are no immediate plans to shutdown
or sell off Hazelwood'.
However, on 24 September 2016, it was reported that ENGIE was expected to hold
a board meeting in mid-October in order to finalise a decision regarding the
potential closure of Hazelwood.
On 3 November 2016, ENGIE announced that it would close Hazelwood by the
end of March 2017. Mr Alex Keisser, Chief Executive of ENGIE in Australia,
stated in a media release that:
Hazelwood is now more
than 50 years old. It has been a wonderful contributor to the National
Electricity Market but we have now reached the point where it is no longer
economic to operate...ENGIE in Australia would need to invest many hundreds of
millions of dollars to ensure viable and, most importantly, continued safe
operation. Given current and forecast market conditions, that level of investment
cannot be justified.
Mr Keisser said that a number of options had been assessed, such as
revamping the existing infrastructure, repowering with different sources of
energy, or reducing the number of operational units. However, this was found to
be economically unviable and the station's eight generators would be closed by
31 March 2017.
An open letter was also issued to the public by Mr Keisser, which
recognised the impact that closure would have on workers and the neighbouring
communities. The letter stated:
At this time, our
priority is to support our people as we prepare for closure. Departing ENGIE
employees will receive all their entitlements, including a redundancy package.
They will also have access to a range of support services.
In relation to the closure process, ENGIE's letter stated:
While this decision
will obviously have an impact on the local community, I assure you we will work
with governments, regulators, unions and regional residents to ensure an
orderly closure, including comprehensive rehabilitation of the mine and
remediation of the power station site.
ENGIE also foreshadowed the possibility of the sale of the
Loy Yang B coal fired power station in the Latrobe Valley, which
provides up to 17 per cent of Victoria's power supply.
At the committee's public hearing in Melbourne, residents from the
Latrobe Valley highlighted the impact of this uncertainty has had. Mr Ron Ipsen,
Vice President of Voices of the Valley, told the committee:
We are finding that a lot of the distress in the workers and
within the community is around uncertainty, and we believe that the only way
around that uncertainty is—the opposite of uncertainty—vision.
Mr Ipsen outlined for the committee the plan that his organisation was
working on for the Latrobe Valley community:
We have worked on a plan. We sat down and figured out what the
elements were that were needed for transition. They include new industries. On
those new industries, we have built further new industries. We are looking at
tackling the renewable energy target for Victoria. We are going to ask the
state government for 10 per cent of the renewable energy target. We are going
to ask them for $10 million to build a solar panel factory. We want to produce
770,000 solar panels in the valley. We want them Australian made. We want them
made in the valley. We want to build transition panels for a transition. We
want to transition the community. It takes 50,000 houses to produce 200
megawatts, which is one Hazelwood unit. We cannot do eight Hazelwood units, but
we reckon we can do one. We reckon, if we get the union and the green movement
behind us, we can build our virtual power station. If we have our research, our
incubators and the usual sort of 'catch the workers and retrain them', we
reckon we can have a go. That is pretty much what the plan is.
The committee was informed by Repower Port Augusta that an almost
identical scenario has played out following the closure of the Alinta-owned
power stations in Port Augusta in May 2016:
The closure of the Port Augusta power station was announced
with no plan to support the community to transition. Six months on from the
closure the community is still to receive significant support from Federal or
Since 2011, members of the Port Augusta community have pushed
for solar thermal plants with storage to be built in the region creating new
jobs and delivering on-demand clean power. This is a plan that should have been
in place before coal closure was announced.
The experience of the Port Augusta closure emphasises the
need for a national plan for the phase out of fossil fuels that is accompanied
with serious transition packages for local communities and workers.
The committee notes recent media reports that some of Hazelwood's
skilled workers will be able to transfer to other power stations once Hazelwood
The ETU also referred to transitions proposals in the UK, which would
see workers move to the renewable energy industry. The '1 Million Climate Jobs'
report was compiled by the UK's Trade Union Group against Climate Change and
the group subsequently lobbied the government to hire a million people to do
new climate jobs via an integrated National Climate Service:
Whilst the report is [much] broader than a transition plan
for workers, a critical component is that under the plan anyone who loses a job
in an old high carbon sector like mining, oil, power stations or car sales must
be guaranteed a permanent job in the National Climate Service at the same rate
of pay. UK labour Leader Jeremy Corbyn has endorsed the plan and committed to
it if elected.
In subsequent public hearings the committee heard further evidence of
the importance of transition planning for workers at coal fired power stations,
particularly in relation to the communities of Muswellbrook in NSW and Collie
in Western Australia.
Councillor Martin Rush, Mayor of Muswellbrook Shire Council, emphasised
the need to focus on the workers in planning for transition:
When we are setting targets for climate change and targets for
structural adjustment around energy policy, we also need to be making sure that
the communities that have generated, for a significant amount of time, power
for the state and federal economies are protected, from a human perspective,
through that transition.
Ms Leonie Scoffern, who lives at Allanson near Collie, also highlighted
the need for community involvement in any transition planning:
...if we can have an open discussion about it in Collie and get
the wider community's point of view, that is all that really needs to happen. I
do not want things to be discussed over the top of our heads. Involvement for
all of us here is what we need.
Councillor Rush argued that the failure to consider communities had been
one of the 'severe oversights' in federal policy in managing the transition:
What we need to start doing is to talk about the transition,
have a plan and give the communities that have long provided cheap, affordable,
reliable energy to the people of New South Wales and Australia confidence that
they will not be the victims of this transition. That has always been the key
problem in the transition planning.
Planning for transition before
Mr Steve McCartney, State Secretary, AMWU Western Australia Branch,
recommended that any discussion of shutting down a coal fired power station
needs to be pre-empted by the question: 'what are we going to do with the
Mr McCartney illustrated his point using the example of the community in
What are we going to do about the mental health of the people
who live in the town? What are we going to do to make sure that this town stays
a town? And what sorts of long-term jobs are we going to give or industry are
we going to build in the town or around the town that is going to facilitate
their and their children's future?
Mr McCartney continued:
What we imagine could happen in Collie is that we will have a
problem with youth unemployment rising because governments have not got a plan
for a transition. You know and I know that companies are not going to invest in
new skills, skills development and apprentices unless they are absolutely
supported by government. If they are going to have to invest it themselves,
they are not going to invest it, because of the pressure that is on the mine or
on the power station... Before you talk about shutting down the power station
in the area, what actual industry are you going to start in that place before
it happens so that the transition starts with their children? The young people
in the town are where the transition should start, and no-one is thinking about
Mr McCartney stated it is important for governments to invest in
transition upfront. However, Mr McCartney understood that the operators of coal
fired power stations might be 'dubious' of such an approach because they may
'lose good labour':
What happens, of course, is that as part of that transition
re-employable people who are prepared to move just bolt, and all of a sudden
the business becomes untenable. That is why we are saying that a just
transition needs to be a company that can still function until it is closed,
with a business that can grow off the back of it, and the business that grows
off the back of it needs to be supported.
Mr Glenn McLaren, Lead Organiser, AWMU Western Australia Branch added:
The transition plan that we talk about cannot lead to
unemployment and social disadvantage. We see enough of that in Australia as it
is, in rural sectors.
Mr McCartney argued that the impact on workers when a coal fired power
station was retired was amplified because operators were already cutting pay
Hundreds of thousands of dollars have been removed from the
left-hand side of the ledger of these companies. For instance, take people who
have worked in that industry for 30 years accumulating entitlements. They have
had all of their accumulated entitlements cut down by 43 per cent and their
agreement, their [Enterprise Bargaining Agreement], redundancy removed and
replaced with [National Employment Standards]. So, for a guy that was working
there for 30 years—and a good percentage of these people have worked in the
coalmine since their early teens, so there are a lot of people who have been
there for 20 or 30 years—the redundancy would have been about $280,000. So, if
you had a shutdown of that particular mine, say, because of the impact of
shutting down a coal-fired power station, those people would have some sort of
semblance of tide-over money to keep them going as a family or something in
their back pocket for them to start looking for a future. But, if the way of
companies in this industry is going to be that they slash and burn the
entitlements of workers as the pressure on those companies gets harder, we are
actually doubling the impact of closing down coal-fired power stations.
Councillor Rush outlined some of the initiatives underway in
Muswellbrook Shire to prepare for transition:
We have had an intimate connection with the provision of energy
in our community for over 100 years, but we look forward to the day that we can
continue that by providing renewable energy, albeit in a rural context. We are
working with the University of Newcastle and Hunter TAFE, as well as a number
of key agricultural stakeholders including the Farmers Federation, on how we
can provide that renewable energy within that rural context. That includes
feedstocks for biofuels, including green diesel, wind generation and, of
course, solar, as well as pumped water storage by using the residual mining
voids for reuse by providing essentially pumped water storage as a form of
battery storage for some of the more intermittent forms of renewable energy
Mr McCarthy proposed the following plan for Collie:
The important thing, I think, is that if we are going to be
serious about this making it into the 21st century and it not just a being
flight of fancy we have to link to the TAFE and universities, because part of
getting this is getting design and engineering. It is no good being a train
builder unless you are the best train builder. You want to be able to be in competition
with the rest of Asia. The way you do that is build a 21st-century facility,
not upgrade an old one. When you create that opportunity, then people are
prepared to invest money to go there. When it makes that investment opportunity
a little easier because it is landing on, say, gifted land or tax concessions,
it gives them an opportunity for the start-up to actually start up.
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