Australian Emissions Targets to Shut Power Plants, Group Says

By Angela Macdonald-Smith

July 25 (Bloomberg) -- Australia's plans to reduce greenhouse gas emissions may result in the shutdown of as much as 23 percent of power generation capacity on the eastern coast, an industry group said.

Setting targets to cut greenhouse gas emissions from the electricity industry by 10 percent or 20 percent below 2000 levels by 2020 would prompt the closure of ``several'' large power stations, mostly in Victoria and South Australia states, the Energy Supply Association of Australia said today in an e- mailed statement.

The Australian government plans to start an emissions trading system in 2010 to help tackle global warming and is due to set medium-term targets for emissions reductions later this year. More than 80 percent of Australia's electricity supply is generated from coal, which emits more greenhouse gases when burnt than natural gas.

``The extent of generation-plant retirement and construction of new facilities is vastly bigger than Australia has ever attempted previously in the space of a decade,'' Brad Page, chief executive of the industry group, said in the statement, which accompanied a report from economic analysts ACIL Tasman Pty.

ACIL Tasman studied two scenarios, one requiring a 10 percent reduction in emissions from 2000 levels and the second requiring a 20 percent cut. It assumed permit prices starting at A$20 ($19.17) a metric ton of carbon dioxide, rising to either A$45 or A$55 by 2020 depending on the target.

A 10 percent cut in emissions would shut down 6,700 megawatts of generators in the national electricity market, while a 20 percent cut would shut down 10,400 megawatts of capacity, it said. A mix of gas-fired and renewable generating plants would be required, contributing to an estimated A$33 billion of investment needed over the next 12 years, the study found.

To contact the reporter on this story: Angela Macdonald-Smith in Sydney at amacdonaldsm@bloomberg.net