Lakes managing director Roland Sleeman told Energy News yesterday the state could fix so many of its energy woes if it allows Lakes to drill conventional wells at the Wombat tight gas field or the promising Portland Energy Project.

"Renewables are well and good when the sun is shining and the wind is blowing, but there are times when renewable energy is so cheap it makes no sense to keep the big turbines turning in these old, inefficient coal plants.

"No wonder the big boys are getting out.

"You need to run these baseload plants at a certain level for efficiencies, and if you can't do that then you need something like gas peaking plants as baseload.

"We have that gas, but we're not allowed to even try to flow it.

"This is potentially bad news for energy consumers and the manufacturing sector, which needs gas as a feedstock.

"We have the gas, and while we'd never be prepared to accept reservation we'd be open to making cheap gas available to a closed-cycle gas turbine plant at Portland to keep the alumina smelter operating.

"It would be our contribution to the state, but of course we can't do anything at all."

He said onshore gas production would be cheaper than any new offshore gas developments, that cheap gas could rejuvenate Victoria's manufacturing sector, as cheap shale gas had done in the US.

Lakes believes it can successfully drill a well into the 360 billion cubic feet Wombat field in the Gippsland Basin, and that work to date suggests there is gas that can be recovered without fraccing near Portland, home of Alcoa's smelter, from the thick Eumerella Formation of the Otway Basin.

Sleeman said Victoria was entering a new age of uncertainty, and that gas is the simplest solution to matching the state's 50% renewable energy target with a reliable and cheap source of baseload power.

"But as it is, we can do nothing. Origin Energy want to shoot some seismic in our blocks to support their offshore exploration, and that means placing some geophones in our area," he said.

"We have an agreement to let them do that, but if we tried to shoot seismic for our own exploration it would be knocked back because of the ban."

The Australian Petroleum Production and Exploration Association said the announcement highlighted the pressing need for a coordinated national approach to energy security and for structural adjustment support for the Latrobe Valley.

"Hazelwood's closure reinforces the need for the Commonwealth and the states to commit to a genuine national plan to manage the transition to a cleaner energy sector," APPEA CEO Malcolm Roberts said.

"COAG's decision to commission the Finkel Review to develop a ‘national electricity blueprint' to ensure Australia's energy security could not be more timely.

"To work, such a blueprint will need state governments to commit to coordinated action. The national electricity market was formed almost 20 years ago to eliminate the waste and political games of separate state systems. The gains for consumers have been huge but are now at risk from ‘feel-good' state policies announced to capture headlines.

"State-based renewable energy targets should be dropped. There can be a healthy debate about the size of the national renewable energy target but few would argue that a patchwork of state targets is efficient.

"State policies stifling the development of cleaner energy options, such as gas-fired generation, should also be removed."

With warnings of gas supply shortfalls in Victoria as early as 2019, the Victorian government must recognise that gas is the only option for reliable back-up to intermittent renewable sources, he said.

He said the ban on all gas exploration until 2020, and a permanent ban on unconventional exploration, made no environmental or energy policy sense.

Victoria's gas moratorium was brought in by the state's former Liberal government, and made permanent by the Andrews Labor Government.

The pro-coal Minerals Council of Australia agreed the closure of Hazelwood should provide the impetus for federal and state governments to reset the energy policy settings, because it said Australia had lost its long-held competitive advantage in low cost electricity over the last decade.

A decade ago Australia had the lowest cost energy in the OECD. Now it has the twenty-seventh lowest.

The consequences for energy intensive sectors have been as inevitable as they were predictable, the MCA said.

The lobby group argued that lignite should not be written off, and that federal and state governments could not continue to "pick winners" in the energy mix.

"The bottom line is simple - brown coal generation and sharply lower CO2 emissions are not mutually exclusive," the MCA said in a statement.

It said CO2 emissions can be reduced by half using new technologies.

"If the federal and state governments close the door on new brown coal generation replacing aging plants then electricity prices will be higher than necessary and supply more unreliable than it should be," the group said.