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Professor, Director - Industrial Relations Research Centre

How threatened coal-energy towns can have a future

Summer reading | 17 April 2019

Peter Sheldon

Professor, Director - Industrial Relations Research Centre

Planning ahead for plant closures brings renewal rather than rubble

When big employers walk away from a company town, shutting down their operations and laying off workers, the devastation can last generations.

If communities are given little warning, they scramble to help workers retrain or find new jobs. Dependent businesses have little chance to prepare and authorities (such as local and state governments) struggle to deliver programs to assist and are often too late to prevent the worst outcomes.

In Australia’s coal-fired power industry, 10 power stations have closed during the past six years. The industry itself predicts the remaining 23 will all be gone by 2050; some say 2035.

Mostly, this is because they are at the end of their operational lives. Increasing and cheaper contributions from renewable sources help explain why coal-fired plant owners will not open new ones.

What will remain – socio-economic rubble or renewal – will depend on whether a federal government is prepared to learn from the past.

Governments have generally left all decisions regarding plant closures to their owners, which have closed their plants at very short-notice and with no planning or consultation beyond their legal obligations: mostly just paying their workers’ entitlements and remediating their sites.

Workers and their communities – which include an ecosystem of associated businesses – receive little warning of an impending closure. In the case of ENGIE’s Hazelwood power station and mine in Victoria’s Latrobe Valley, the announcement came just five months before the facility was shut down in 2017.

'They may be able to move, through job-pooling, to other power stations which will continue functioning for at least a few years'
PETER SHELDON

Advance notice

A notable exception is AGL’s early announcement of its plans for its Liddell power station in NSW’s Hunter Valley. These include a range of onsite gas and renewable power generation activities after it closes in 2022 as well as planned alternative employment for its workforce.

Crucially, AGL committed itself to no forced redundancies, helping to positively transition those workers and their community in ways often described as a ‘Just Transition’.

According to Peter Sheldon, a professor and director of UNSW Business School’s Industrial Relations Research Centre (IRRC), “The much longer advance notice period – seven years for Liddell as against only the five months ENGIE offered at Hazelwood – indicates a company choosing to take seriously its broader economic and social responsibilities.

“If we, as a society, care about a Just Transition that provides employment and income security levels in those communities, it makes perfect sense to plan this at least five years out,” says Sheldon.

His recent IRRC report, 'The Ruhr or Appalachia? Deciding the future of Australia’s coal power workers and communities' – co-authored with visiting professor Raja Junankar, and researcher Anthony De Rosa Pontello – found international experience strongly indicates how an industry-wide Just Transition can bring renewal rather than rubble.

The best examples, such as Germany’s dramatic and enormous coal-mine closure program in the Ruhr, offer one set of lessons; the worst examples, such as the coal-mine closures in the Appalachian areas in the US, offer similar telling lessons, typically as mirror opposites.

Coordinate and manage

Studies show that major closures without a Just Transition approach leave around one-third of the workforce in a worse employment position or without a job at all. A further one-third take early retirement, sometimes unhappily and to their disadvantage.

Examples that have produced damaging economic, health and family related outcomes include the series of mine and plant closures in the Latrobe Valley since the 1990s.

The core lesson, the report argues, is to not leave the important choices regarding plant closures solely to the owners. It calls for the federal government to establish a national Energy Transition Authority (ETA) to plan, coordinate and manage that transition.

An ETA, composed of representation from government (federal and state), industry owners and workers (through their union), would provide top-down oversight, planning, decision-making and funding. Each power station’s management, workforce and local community could have necessary information years ahead of any planned closure.

Sheldon says an ETA would enforce good behaviour, as well as ensuring “good employers” were not disadvantaged by having to pay higher costs than those less committed to their workers and local communities.

It would also necessarily encourage problem-solving collaboration and co-operation among competitors, plants and regions.

For instance, workers from a scheduled-to-close plant – who are approaching retirement, but not ready to leave the workforce – may be hired by other nearby power stations.

“They may be able to move, through job-pooling, to other power stations which will continue functioning for at least a few years,” Sheldon says. “This was one of the innovations in the Ruhr.”

Other innovations have come through establishing new universities and technical colleges that then helped create and develop new local production ecosystems, whether through transitioning existing supplier firms into new sectors or encouraging the arrival or birth of entirely new local industries.

Also crucial were investment in new industries and site remediation for creative re-use.

'The biggest victims are those people and their families who have provided all of us with electricity, sometimes while suffering polluted workplaces and neighbourhoods'
PETER SHELDON

Too little, too late

Systematic bottom-up information-seeking, local brainstorming and community consultations are also crucial. Each locality is different, with its own strengths and potential as well as areas of vulnerability. Tapping into networks of local knowledge and experience can help produce more relevant and creative solutions.

That input and discussion should include local governments, business associations and single employers, workers and their unions as well as other local NGOs, universities and R&D bodies, technical colleges and schools.

Sheldon says the social cost of getting transition wrong can be devastating:

“The biggest victims are those people and their families who have provided all of us with electricity, sometimes while suffering polluted workplaces and neighbourhoods. Unjust transitions produce widespread, devastating family economic outcomes, and terrible health outcomes, including for mental health.

“And, their towns can become impoverished and emptied as other businesses, jobs and government services leave town. But, after that, taxpayers, through the state and federal governments, tend to pick up the cost and then it becomes a welfare expenditure, rather than an economic diversification and social development expenditure. And that is often far too little and far too late.

“So, thinking about Just Transition, I don't see it as a question of cost. I see it as a question of investment. If you don't do a Just Transition, then it's a cost,” Sheldon says.

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<h1>How threatened coal-energy towns can have a future</h1>

<figure><img src="https://assets-us-01.kc-usercontent.com:443/4df0558d-5779-0012-00f2-b3fa06d6c950/579bc882-85b6-4e77-aa0d-6968e8303f77/coal%20power.jpg?w=1320" alt="coal pwer station" /><figcaption>coal pwer station</figcaption></figure>
 When big employers walk away from a company town, shutting down their operations and laying off workers, the devastation can last generations. 
If communities are given little warning, they scramble to help workers retrain or find new jobs. Dependent businesses have little chance to prepare and authorities (such as local and state governments) struggle to deliver programs to assist and are often too late to prevent the worst outcomes.
In Australia’s coal-fired power industry, 10 power stations have closed during the past six years. The industry itself predicts the remaining 23 will all be gone by 2050; some say 2035. 
Mostly, this is because they are at the end of their operational lives. Increasing and cheaper contributions from renewable sources help explain why coal-fired plant owners will not open new ones. 
What will remain – socio-economic rubble or renewal – will depend on whether a federal government is prepared to learn from the past. 
Governments have generally left all decisions regarding plant closures to their owners, which have closed their plants at very short-notice and with no planning or consultation beyond their legal obligations: mostly just paying their workers’ entitlements and remediating their sites. 
Workers and their communities – which include an ecosystem of associated businesses – receive little warning of an impending closure. In the case of ENGIE’s Hazelwood power station and mine in Victoria’s Latrobe Valley, the announcement came just five months before the facility was shut down in 2017.
<blockquote>'They may be able to move, through job-pooling, to other power stations which will continue functioning for at least a few years' PETER SHELDON</blockquote>
<h4>Advance notice</h4>
A notable exception is AGL’s early announcement of its plans for its Liddell power station in NSW’s Hunter Valley. These include a range of onsite gas and renewable power generation activities after it closes in 2022 as well as planned alternative employment for its workforce. 
Crucially, AGL committed itself to no forced redundancies, helping to positively transition those workers and their community in ways often described as a ‘Just Transition’.
According to Peter Sheldon, a professor and director of UNSW Business School’s Industrial Relations Research Centre (IRRC), “The much longer advance notice period – seven years for Liddell as against only the five months ENGIE offered at Hazelwood – indicates a company choosing to take seriously its broader economic and social responsibilities. 
“If we, as a society, care about a Just Transition that provides employment and income security levels in those communities, it makes perfect sense to plan this at least five years out,” says Sheldon.
His recent IRRC report, 'The Ruhr or Appalachia? Deciding the future of Australia’s coal power workers and communities' – co-authored with visiting professor Raja Junankar, and researcher Anthony De Rosa Pontello – found international experience strongly indicates how an industry-wide Just Transition can bring renewal rather than rubble. 
The best examples, such as Germany’s dramatic and enormous coal-mine closure program in the Ruhr, offer one set of lessons; the worst examples, such as the coal-mine closures in the Appalachian areas in the US, offer similar telling lessons, typically as mirror opposites. 
<h4>Coordinate and manage</h4>
Studies show that major closures without a Just Transition approach leave around one-third of the workforce in a worse employment position or without a job at all. A further one-third take early retirement, sometimes unhappily and to their disadvantage. 
Examples that have produced damaging economic, health and family related outcomes include the series of mine and plant closures in the Latrobe Valley since the 1990s.
The core lesson, the report argues, is to not leave the important choices regarding plant closures solely to the owners. It calls for the federal government to establish a national Energy Transition Authority (ETA) to plan, coordinate and manage that transition. 
An ETA, composed of representation from government (federal and state), industry owners and workers (through their union), would provide top-down oversight, planning, decision-making and funding. Each power station’s management, workforce and local community could have necessary information years ahead of any planned closure. 
Sheldon says an ETA would enforce good behaviour, as well as ensuring “good employers” were not disadvantaged by having to pay higher costs than those less committed to their workers and local communities. 
It would also necessarily encourage problem-solving collaboration and co-operation among competitors, plants and regions. 
For instance, workers from a scheduled-to-close plant – who are approaching retirement, but not ready to leave the workforce – may be hired by other nearby power stations. 
“They may be able to move, through job-pooling, to other power stations which will continue functioning for at least a few years,” Sheldon says. “This was one of the innovations in the Ruhr.”
Other innovations have come through establishing new universities and technical colleges that then helped create and develop new local production ecosystems, whether through transitioning existing supplier firms into new sectors or encouraging the arrival or birth of entirely new local industries. 
Also crucial were investment in new industries and site remediation for creative re-use. 
<blockquote>'The biggest victims are those people and their families who have provided all of us with electricity, sometimes while suffering polluted workplaces and neighbourhoods' PETER SHELDON</blockquote>
<h4>Too little, too late</h4>
Systematic bottom-up information-seeking, local brainstorming and community consultations are also crucial. Each locality is different, with its own strengths and potential as well as areas of vulnerability. Tapping into networks of local knowledge and experience can help produce more relevant and creative solutions. 
That input and discussion should include local governments, business associations and single employers, workers and their unions as well as other local NGOs, universities and R&D bodies, technical colleges and schools. 
Sheldon says the social cost of getting transition wrong can be devastating:
“The biggest victims are those people and their families who have provided all of us with electricity, sometimes while suffering polluted workplaces and neighbourhoods. Unjust transitions produce widespread, devastating family economic outcomes, and terrible health outcomes, including for mental health. 
“And, their towns can become impoverished and emptied as other businesses, jobs and government services leave town. But, after that, taxpayers, through the state and federal governments, tend to pick up the cost and then it becomes a welfare expenditure, rather than an economic diversification and social development expenditure. And that is often far too little and far too late.
“So, thinking about Just Transition, I don't see it as a question of cost. I see it as a question of investment. If you don't do a Just Transition, then it's a cost,” Sheldon says.

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