Several events, including state-wide blackouts in South Australia and the closure of the Hazelwood Power Station in Victoria, have re-ignited debate about energy resources and energy economics. The announcement of the Hazelwood Power Station closure on 4 November 2016 prompted debate about the current and future state of energy supply in Victoria. French energy company, ENGIE, the majority owner of the power station, announced power supply operations would most likely cease in March 2017 as they are no longer economically viable to run.
The closure of Hazelwood has affected Victorian energy markets and will likely have an impact on retail energy prices. Most low-cost electricity in Victoria is generated from brown coal, which brings substantial economic benefits but also contributes to about half of the state’s greenhouse gas emissions. Victoria relies heavily on brown coal for electricity generation and tends to export surplus electricity to other regions in the NEM. The state is considered a high-emissions jurisdiction; in 2014–15, Victoria’s energy consumption accounted for 23.8 per cent of total Australian energy consumption.
The transition to renewable energy sources, which includes the gradual phasing out of fossil fuel powered generators, is having an impact on wholesale and retail electricity prices. Fundamental transformations in wholesale gas markets, notably in the eastern gas market, are presenting substantial challenges to all participants. The change from a domestic to an internationally linked gas market will have an impact not only on prices but also on security of supply. The comparative advantage Victoria has enjoyed through the development and use of high-emissions, low-cost energy may be disappearing.