Coal news and updates

Taxpayers will fund compensation of up to $450 million for Rio Tinto to offset the impact of a coal price cap on its Gladstone Power Station in Queensland.

The federal government is negotiating coal price caps of $125 a tonne with Queensland and NSW, in a bid to put drive down household and business electricity bills.

The Queensland government has already issued a formal direction to state-owned generators to bid into the national grid at a price consistent with a domestic coal price of $125.

The state and federal governments have also agreed to split the bill to compensate Rio over the impact of the cap on its Gladstone Power Plant, one of only two wholly private generators selling to the grid in Queensland.

The 1680MW plant in central Queensland usually generates electricity for Rio's aluminium smelter in Gladstone, but it has been selling to the grid to fill a shortfall left by the Callide Power Station after one of its generation units was destroyed in a May 2021 explosion.

"The Commonwealth and Queensland governments will share 50-50 the costs of the rebate to the Gladstone Power Station to be based on actual costs," a government spokesperson told AAP on Wednesday.

"As part of this partnership on energy security, the Commonwealth will work with the Queensland government on a package of commitments to support the clean energy transition."

The state and federal governments are still in talks with Rio over the deal and are prepared to lift the compensation amount if necessary, but officials expect it to be lower once Callide Power Station returns to full capacity.