Firm freezes $1.2 bln coal-gas Australia power plant

Tue Apr 17, 2012 1:35am EDT

Related Topics

* Controversial power plant frozen after legal ruling

* 600 MW plant designed to use brown coal and gas

By David Fogarty

SINGAPORE, April 17 (Reuters) - An Australian firm has frozen development of a controversial A$1.2 billion ($1.23 billion) brown coal-gas hybrid power plant after a ruling by a tribunal effectively delayed construction, putting the future of the project in doubt.

Energy technology firm HRL, one of a number of companies trying to develop clean-coal power plants, said it had frozen design and pre-construction work on a proposed 600-megawatt plant in the southern state of Victoria.

It made the decision after a state tribunal ruling last month linked a go-ahead for the project to Australian government efforts to shut down some of the power industry's biggest greenhouse gas emitters under a programme known as "contract for closure".

"As a consequence of the imposition of the condition, there is considerable uncertainty as to the date on which construction of the project could commence, if at all if there is no contracts for closure," HRL said in a statement.

HRL aims to cut greenhouse gas emissions from using brown coal for power generation, but its plant has been criticised by green groups who say emissions would still be higher than more efficient gas-fired power plants. They also favour greater use of renewable energy such as wind and solar.

The firm has won pledged funding of $100 million from the Australian government and $50 million from the state government in Victoria, which has the world's second-largest reserves of brown coal. However, the latest delay means it could miss out on the $100 million federal grant.

A HRL spokeswoman confirmed the project, in development for more than 5 years, had been frozen. The plant had been slated for construction in Morwell, in the Latrobe Valley east of Melbourne, the state capital.

The valley's power plants generate most of the state's electricity and use brown coal from adjacent open-cut mines. But the level of greenhouse gas emissions has come under intense scrutiny as the nation tries to curb the growth in carbon dioxide (CO2) emissions.

A national carbon pricing scheme across most industrial sectors starts in July. Emissions from the power sector comprise more than a third of Australia's total carbon emissions and have grown 50 percent since 1990. Coal produces about 80 percent of the nation's electricity.

CLEANER OPTIONS

Brown coal power plants in Victoria generate between 1.25 and 1.4 tonnes of CO2 per megawatt/hour, versus 0.90 for black coal and 0.4 to 0.5 for new-build gas-fired power plants.

According to project documents, HRL's hybrid plant would be the first of its type in Australia at a commercial scale and emit about 40 percent less CO2 than existing brown coal plants.

The HRL design first dries out the brown coal, then gasifies it before mixing it with piped-in natural gas.

Last month, the tribunal ruled in favour of the HRL plant but added a condition that construction could not proceed until the federal government had reached agreement with other generators to shut down at least 600 MW of coal-fired generation in Victoria.

The federal government, under its carbon pricing scheme, is negotiating with generators, including International Power GDF Suez , to close up to 2,000 MW of Australia's most carbon-polluting power stations, three of which are in the Latrobe Valley.

It has set a June 30 deadline for negotiations, the same date for HRL to meet key project milestones, including bank financing, before it can receive the A$100 million grant. (Editing by Richard Pullin)

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