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Update on Hazelwood closure

Engie announced on 3 November 2016 that they would close down their 1,600 MW Hazelwood power station in March 2017. The markets have reacted to the news of the closure by increasing the forward cost of electricity across the National Electricity Market.

The outlook from the Australian Energy Market Operator (AEMO) is not looking good for Victoria. If the state experiences hot weather next summer there may not be enough generation available to meet peak demand without further load reductions. Their medium term outlook is published at least weekly and the most current to 17 March 2017 shows that the 2017-18 summer could see reserve shortfalls if there is a warm summer.

Table 1: Medium Term Outlook for Victoria
Source: AEMO

Currently seven of the eight units at Hazelwood is running. Unit eight came off on Sunday 12 March 2017 with an unplanned outage citing a boiler leak. This would not have been part of the shutdown plan but boiler leaks can usually be repaired within a few days so Engie might have decided that it is not worth bringing back on.

The current plant is to take three units out of service on 27 March 2017, another three the next day and the final two units on 29 March 2017. Following this there will be a decommissioning of the plant and a rehabilitation of the site including the mine which can take up to four years.

Hazelwood is a source of heavy pollution in the electricity market and is part of an older generation of technology which needs to be replaced in order to reduce carbon emissions. It has been a very cost effective and reliable source of power for the past 52 years helping to stabilise Victorian power prices and provide support to the rest of the market since interconnection. It will also have a profound impact on the people working in the region.