By Rob Taylor 
 

CANBERRA, Australia--Lawmakers have sought to douse concerns of power disruptions after France's Engie S.A. (ENGI.FR) said it would close the country's most polluting coal plant next year, adding to a simmering furor about energy security and renewable generation in the electricity net.

Engie said it would close the ageing Hazelwood power station--one of the country's oldest plants using brown coal--in March, while it would also examine sale of two other generators, including the nearby Loy Yang B plant in the Latrobe valley of southeast Victoria state.

"It has been a wonderful contributor to the National Electricity Market but we have now reached the point where it is no longer economic to operate," Engie's Australian Chief Executive Alex Keisser said.

The closure plan comes just weeks after a storm knocked out power to the entire state of South Australia, prompting the national government to question the growing role of solar and wind energy plants in the country's electricity grid. Prime Minister Malcolm Turnbull accused states governed by center-left Labor opponents of putting energy security at risk due to an ideological opposition to coal in the wake of global climate talks in Paris.

Some economists have warned that the exit of a major brown coal-fired generator could trigger a supply shock to Victoria state, home to almost 6 million people and with an economy bigger than Singapore, as well as impact the country's National Electricity Market, or NEM.

The Hazelwood Power Station, while old and the country's most emissions-intensive generator, was accounted for 20% of Victorian power production and 5.4% of output across the entire NEM, think-tank Frontier Economics said.

Still, Victoria Premier Daniel Andrews said there was an energy oversupply across the country, with enough power in the national network to deal with Hazelwood's closure without triggering a big rise in prices.

"There is not one coal-fired power station operating at 100% anywhere across our nation," Mr. Andrews said following Engie's announcement.

Engie said keeping open the plant, which was first commissioned in the late 1960s, would have required fresh investment of "many hundreds of millions of dollars to ensure viable and continued safe operation."

Environment groups hailed the closure as a step toward cutting Australia's greenhouse gas emissions, which are among the world's highest in per capita terms due to reliance on coal for two-thirds of the country's electricity generation. The plant has been blamed for high levels of atmospheric pollution and health problems in the Latrobe Valley.

Fossil fuels accounted for 88% of electricity generation in the 2014-15 financial year, according to the country's statistics office, down from 93% in 2008-9. At the same time renewable generation has risen from under 10% to 12% over the past three years, with some state setting targets for as much as 50% of electricity generation to come from wind and solar.

"Hazelwood's closure should be a wake-up call," said Environment Victoria chief executive Mark Wakeham. "Australia needs to take control of its energy future by developing a plan for the orderly closure of our outdated and polluting power stations … as we make the transition to a renewable energy powered economy."

-Write to Rob Taylor at rob.taylor@wsj.com

(END) Dow Jones Newswires

November 03, 2016 00:49 ET (04:49 GMT)