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Western Australia will shut its last coal-fired power unit before the end of the decade and spend an extra half a billion dollars to foster new jobs for displayed workers, the state government said.

Later this year, the first of the 854-megawatt Muja power station’s units near Collie, south of Perth, will close, with the entire plant to be shut by 2029. The nearby 340MW Collie plant will exit the market by the end of 2027, the premier, Mark McGowan, said in a statement on Tuesday.

The state will join South Australia, the Northern Territory, the Australian Capital Territory and Tasmania to be coal-free in its power generation. A report by the Australian Energy Market Operator (Aemo) last year said Australia could exit coal-fired power entirely by 2043.

WA runs its power grid separately from the rest of the country. The rise of solar power – particularly on rooftops – had led to the two remaining coal plants becoming less viable, the government said.

On Tuesday afternoon, coal, solar and gas were providing roughly equal shares of the market.Advertisement

“Our current electricity system is becoming increasingly unsustainable due to the uptake of rooftop solar and growing demand for renewable options for generation,” McGowan said. “Western Australia will implement a sensible, managed transition to a greater use of renewables for electricity generation, while ensuring we maintain electricity reliability as a priority.”

The support package includes an extra $547.4m to be spent in the Collie region to back the exit of coal workers into new industries. That comes on top of the $115m already committed.

“This investment makes economic sense, as it pays for itself by 2030-31, instead of continuing to pay increasing subsidies under the status quo,” McGowan said.

State-owned Synergy now runs the two coal plants as part of the south-west power grid serving the WA’s main population centres. It will oversee the investment of an estimated $3.8bn in “new green power infrastructure around the state” including windfarms and new storage, the statement said.

About 1,200 staff from Collie and the surrounding areas will be affected by the closure, ABC reported.Advertisement

Household power bill increases will be kept in line with inflation, McGowan said. Without taking the action to ditch coal, those bills would rise from their current average rate of about $1,800 to more than $3,000 a year, and subsidies to Synergy would swell to $3bn by 2029-30 to cover mounting losses.

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As part of the changes, the government committed to not commission any new natural gas-fired power stations on the south-west grid after 2030. The gas supplies are reserved as part of a 15% carve-out of gas production in the state, a system that some would like to see applied in eastern Australia to ensure supplies and cap price increases.

By phasing out coal-fired power, Synergy’s carbon emissions will be reduced by 80% by 2030, including a 40% emissions reduction on the south-west grid, compared with 2020-21 levels, the government said.

The WA energy minister, Bill Johnston, said the state was adding the equivalent of adding a new coal-fired generation unit every year in new rooftop solar.

“We will be working closely with impacted businesses, workers and communities to ensure we create new jobs and training opportunities to future-proof Collie for the coming decades,” he said.