The end of Hazelwood power station
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France's Engie will close the Hazelwood power station by March 31 next year - with the loss of 750 jobs - because it iss "no longer economic to operate".
Engie also announced it will appoint an adviser for the possible sale of Loy Yang B power station, also in the Latrobe valley and the Kwinana co-generation facility in Western Australia.
"We would only consider a sale of these valuable assets if they met our shareholders' requirements. If a sale process were to proceed, it would be expected to be completed by late 2017," Engie chief executive Alex Keisser said in a statement.
Mr Keisser said the "extremely difficult decision" to close the Hazelwood plant was taken because it was more than 50 years old and required the investment of "many hundreds of millions of dollars to ensure viable and continued safe operation".
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"Given current and forecast market conditions, that level of investment cannot be justified," he said in a statement.
Loy Yang B sale
Engie said the 1,000 megawatt brown coal fired Loy Yang B power station provided up to 17 per cent of Victoria's power needs. It employs about 200 people.
The 122 megawatt Kwinana gas-fired plant supplies steam and electrical power directly to the BP Australia Kwinana Oil Refinery and electricity only to the state-owned utility, Synergy.
"As the newest and most efficient brown coal fired-power station in the Latrobe Valley, Loy Yang B will be attractive to potential investors. Similarly, Kwinana holds a unique position in the WA energy market that may attract interest from both local and overseas investors," Mr Keisser said.
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Hazelwood rehabilitation
Hazelwood will need up to 250 people until 2023 to manage the mine and power station site rehabilitation but this will include 130 Engie employees and 110 to 130 subcontractors next year. The numbers after 2019 will depend on the scope of mine rehabilitation work.
The hard-pressed community has just five months to prepare for the long expected closure, and faces the prospect of other brown coal power stations closing in the coming years.
The federal government has announced a $43 million package to support Hazelwood workers, including $20 million in support for local infrastructure, $3 million to help employees and a $20 million regional jobs package.
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"This is a very tough time. A very tough time for the valley," prime minister Malcolm Turnbull said.
"Our thoughts today are with the tough times for the men and women who work at Hazelwood and of course the many others in that community whose jobs depend on that power station.
Wendy Farmer, president of community group Voices of the Valley, heard the news from her husband Brett, who's worked at the 50 year old power station for about 27 years.
Ms Farmer said the day was an emotional one for them. "I got a bit teary...it's basically from March that he'll be unemployed. Yes he may get a package, but it really isn't what we planned," she said.
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"In saying that, we knew when he started at Hazelwood it wouldn't last forever. He was in the days of privatisation where they sat them in a shed and really disempowered them."
Engie, the majority owner, told the workers at the Hazelwood plant near Morwell mid-morning on Thursday. Japan's Mitsui owns a 28 per cent stake in the low cost but highly polluting plant.
Social catastrophe
The Latrobe Valley has Victoria's highest unemployment at more than 8 per cent, and towns like Morwell and Moe have double digit unemployment rates.
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Victorian Council of Social Service chief executive Emma King said the region faces a social catastrophe and Engie, Mitsui, and the Victorian and federal governments all had to step up and support the community.
"Power industry leaders need to open their wallets to help these communities," Ms King said.
"These power companies have made a lot of money over the years extracting natural resources and processing them for sale. Now they have a responsibility to help with the region's long-term recovery."
Victorian Premier Daniel Andrews is chairing a task force to assist the workers and the region through a period of adjustment that could see other brown coal power stations close as more wind and solar energy is pumped into the electricity market.
The federal government had established a ministerial group including local led by local coalition MPs Russell Broadbent and Darren Chester to support the Latrobe Valley community and ensure there are jobs and opportunities for the workers that will lose their jobs as a result of this power station closing.
Yallourn could be next
EnergyAustralia's Yallourn plant - 14 kilometres from Morwell - is the second most highly polluting plant in Australia after Hazelwood and is tipped to be the next to go.
The future of Alcoa's Portland aluminum smelter in the state's southwest also hangs n the balance - with 2000 more jobs at stake.
Ms King said the companies and governments need to invest in local health and community services including mental health providers to meet an expected spike in demand, and in training and new jobs opportunities for laid off workers in plant decommissioning and rehabilitation, renewable energy, energy efficiency and the booming health and social services sector.
Latrobe City chief executive Gary Van Driel wants government departments such as mining, environment and consumer affairs relocated to the region, citing the move of Worksafe to Geelong, and a piece of the federal government's massive defence procurement program for the region's power and mining workers.
System Security
Energy minister Josh Frydenberg said electricity prices in Victoria would doubtless rise because the state had enjoyed cheap brown coal power and Hazelwood's generation would be replaced by more costly power from NSW black coal, gas and renewable energy.Â
But Mr Frydenberg said the Australian Energy Market Operator had advised that the National Electricity Market will continue to supply reliably despite Hazelwood's closure.
"In the words of AEMO they will have to watch closely what happens from here but the expectation is that there will be an effective market response."Â
The next critical peak demand period after Hazelwood's closure will be in February of 2018 which gives the market 15 months to adjust. AEMO expects Victoria will import more NSW coal power, hydro power from Tasmania while new supply will come from increased gas and renewables generation.Â
Mr Frydenberg said energy security and affordability would be priorities in the government's response.Â
"Affordability of electricity is absolutely critical to the Victorian economy and the cost of living for Victorian families," he said
Call to speed emissions transition
Climate Institute chief executive John Connor said with Hazelwood due to close in five months, the Turnbull government's reluctance to plan Australia's transition to a low carbon economy is setting up more shocks for communities, energy users and the power system.
"When giant multinational power companies like Hazelwood's owner Engie decide that they're going to get out of coal, it's irresponsible for the government to ignore the implications," said Mr Connor.
"Forward-looking businesses are planning for a world with net zero emissions, and it's time the government did the same."
Engie, the world's largest electricity company, also owns the more modern Loy Yang B brown coal plant with Mitsui but it plans to exit coal generation and grow its renewable energy capacity.