A LEGAL analysis throws into doubt the economic viability of a planned coal-fired power station in Victoria, finding the proposed emissions trading scheme will offer it no compensation for an estimated annual carbon bill of $50 million.
The $750 million power plant — signed off last month by the State Government, but without finalisation of its funding — does not qualify for either of the industry compensation schemes outlined in the Federal Government's emissions trading blueprint, according to analysis by community legal centre the Environment Defenders Office.
As the station is a local electricity supplier, it cannot be argued that it is trade-exposed, and it was commissioned too recently — after the June 3, 2007 cut-off — to qualify for the compensation available to shareholders of existing brown-coal power stations.
"Even if you are quite generous about it, I don't think you will find this is a case where compensation is available. This is still a twinkle in someone's eye," Environment Defenders Office principal solicitor Brendan Sydes said.
A joint venture between coal technology specialist HRL and Chinese giant Harbin Power, the station will trial a drying and gasification process estimated to cut greenhouse emissions from brown coal by 30%.
HRL spokeswoman Maria Brejcha declined to comment beyond saying the Government's emissions trading scheme was not yet finalised.
The HRL plant has been pushed back four years to 2012 due to delays in securing a suitable site.
Environment Victoria campaigns director Mark Wakeham, who commissioned the legal advice, said without compensation the plant was unlikely to compete with new renewable energy projects and gas-fired electricity generation.
Assuming a carbon price of $20 a tonne — the scenario used in the Government's emissions trading green paper — HRL would have to buy at least $50 million worth of carbon permits to cover its annual emissions of more than 2.5 million tonnes, he said.
State Energy Minister Peter Batchelor's spokesman, Dan Ward, said emissions trading would make technology that cut emissions from coal-fired stations more attractive, not less.
"Eligibility for compensation under (emissions trading) is not the sole determining factor in whether the plant is financially competitive."