Contract for closure money not savings

5 Sep 2012, 1:35 pm   -   Source: AAP

Labor's been told the money saved by abandoning its plan to pay dirty power stations to close down shouldn't be used to prop up the budget.

Hundreds of millions of dollars the federal government saves by abandoning its plan to pay dirty power stations to close down shouldn't be used to prop up the budget, a leading green think-tank says.

Labor on Wednesday abandoned its co-called contract for closure program a week after it scrapped the proposed $15 floor price for its emissions trading scheme.

Climate Institute chief John Connor says the money saved should be quarantined for other projects to increase clean energy.

"The funds that were committed, that would have been substantial from 2016, should be quarantined for climate-related matters," Mr Connor told AAP on Wednesday, adding they shouldn't be added to the budget bottom line or spent elsewhere.

He also argued if the power stations weren't prepared to play ball, Labor should reinstate its election pledge to introduce regulatory performance standards to mandate clean energy into the future.

Mr Connor said Wednesday's announcement by Energy Minister Martin Ferguson also demonstrated the flaws in the opposition's so-called direct action policy to tackle climate change.

"This highlights how difficult direct action is," he said.

"That's what this (contract for closure) was.

"It was saying to industry `there's a certain amount of money here; come and get it for emissions reductions'."

The contract for closure program had sought to support the closure of around 2000 megawatts of highly emissions-intensive generation capacity by 2020.

Opposition energy spokesman Ian Macfarlane said the government was creating more uncertainty for the power industry by abandoning the program.

"Power stations have been scrambling to negotiate the conditions for closure, a process with serious ramifications for electricity reliability and cost," he said in a statement.

The decision not to proceed was more proof the carbon tax was a flawed policy and government now risked creating more cost pressures for operators, he added.

Green group Environment Victoria said it was a devastating blow for clean energy policy and called on the government to scrap the $5.5 billion in compensation already being paid to station owners.

"You can't have a clean energy future with power stations like Hazelwood continuing to operate indefinitely - it becomes hollow rhetoric," campaigns director Mark Wakeham said.

"It suggests that the government wasn't really committed to securing an outcome."

Australian Conservation Foundation climate change spokesperson Tony Mohr says there's no value in giving $5.5 billion to dirty coal fired generators.

"If these dirty old clunkers are not shut down, the companies that own them certainly don't deserve $5.5 billion in handouts from the taxpayer for nothing," he said in a statement.

He called on the government to add 2000 megawatts to the existing renewable energy target.

The federal opposition called on Ms Gillard to apologise to workers at Victorian coal-fired power stations for the uncertainty caused by its now-abandoned contract-for-closure scheme.

Climate spokesman Greg Hunt said the government's announcement showed the carbon tax regime was rife with "chaos and uncertainty" and was further proof the government can't be trusted.

"The prime minister should go to the Latrobe valley and apologise to workers for creating complete uncertainty, and (she) should try to explain to Australians why they should ever trust anything she says ever again," he told reporters in Melbourne.

The energy industry said it was a good idea to close older power stations - but only if it was certain cleaner ones would be built to replace them.

"Right now that certainty just doesn't exist," Energy Supply Association of Australia chief executive Matthew Warren said in a statement.

He said without bipartisan agreement on climate change policies it was always going to be hard for the government and power station to do a deal.

"Do they do their sums on the basis the carbon price will continue or that a future coalition government will abolish it?" Mr Warren said, adding the European debt crisis had added to uncertainty by sending global carbon markets into a tailspin.

Hazelwood operator International Power, a wholly-owned subsidiary of GDF Suez, says it had participated in the negotiations "in good faith".

"(But) we have not been able to find common ground with the federal government on the terms of a closure," the company said in a statement.

"Throughout the process we have maintained we would respect and protect shareholder investment in our asset."

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