One of Victoria's last coal-fired power stations will remain available until at least mid-2035 but could close sooner than planned under a new transition deal.
In a statement to the Australian Securities Exchange on Monday, AGL Energy announced it had signed a structured transition agreement with the Victorian government for its Loy Yang A station.
The agreement provided greater certainty around the Latrobe Valley power station's ongoing operations, future closure and costs, AGL said.
It sets out to avoid an unplanned closure of the plant before the scheduled date of June 30, 2035, rehabilitate its associated mine, invest in replacing lost power generation, and ensure reliable and secure power supply.
But the deal leaves the door ajar for the energy giant to pull the plug even earlier than 2035, pending the blessing of the state government and Australian Energy Market Operator.
"The STA allows for scenarios where the LYA PS (Loy Yang A power station) can close earlier than 30 June 2035, with agreement from the state, including if the power station is not needed for the reliable and secure supply of electricity in Victoria (as determined by AEMO)," it said.
In September last year, AGL brought forward the closure of the Latrobe Valley power plant to mid-2035, up to 10 years sooner than planned.
Loy Yang A - one of only three Victorian coal-fired plants still operating - generates about 30 per cent of the state's electricity and is the biggest carbon polluter among power stations in the country.
The nearby coal-fired power plant at Yallourn is scheduled to close in 2028, with Alinta Energy-owned Loy Yang B officially set to follow by 2047.
Under the terms of the transition deal, AGL will continue to operate the station at agreed levels and pay $50 million for site repurposing and community benefit activities.
Victorian Energy Minister Lily D'Ambrosio said the package would help staff retrain, reskill and find new work opportunities close to home and deliver investment certainty.
"One of the biggest barriers for renewable energy investors is clarity around when fossil generators will close - a guaranteed closure timeline provides improved certainty around Victoria's energy demand," she said.
Victoria has set a target for 95 per cent renewable energy generation by 2035 and plans to spend at least $1 billion to generate 4.5 gigawatts of power through renewable projects as part of reviving the State Electricity Commission.
The Victorian Greens want the Andrews government to assure Victorians it is not taking a future financial risk by propping up the power plant and are calling for a faster transition to renewables.
"If we want to accelerate our transition to renewable energy and do our part in tackling the worsening climate crisis, we need a faster phased transition out of coal in this state," Greens MP Tim Read said.
While welcoming the agreement, Environment Victoria chief executive Jono La Nauze said 2035 was still too late to be burning coal if the world was to avoid catastrophic global warming.
"It is incumbent on AGL and the Victorian government to do everything in their power to ensure that Loy Yang can close even sooner," he said.
AGL and the Victorian government can suspend obligations or terminate the agreement altogether with the other party's consent.
