EnergyAustralia on Wednesday announced its Yallourn Power Station in Victoria's Latrobe Valley will close in mid-2028, despite being licensed to operate until 2032.

"While the announcement may have surprised some of our people, its context didn't," managing director Catherine Tanna told reporters.

"We are acutely aware that the world of energy is rapidly changing as we transition to cleaner forms."

She said the company will build a 350-megawatt battery at one of its nearby gas power plants by 2026 to compensate for the loss of Yallourn.

"This will provide energy for up to four hours at a time and is larger than any battery operating in the world today," Ms Tanna said.

EnergyAustralia is also working with the state government on a "multimillion-dollar support package" to re-skill about 500 affected workers.

"We are determined to show Australia it is possible to move from the old to the new in a way that does not leave people behind," Ms Tanna said.

Energy Minister Lily D'Ambrosio said the government is also working to create 5000 megawatts of new power generation over the next seven years.

"Every Victorian can be absolutely confident that we will have more than sufficient power to meet all of our needs," Ms D'Ambrosio said.

Federal Energy Minister Angus Taylor said the plant's closure brings with it reliability and affordability concerns.

"The major impact for consumers will be the significant increase in prices if not adequately replaced with dispatchable capacity," he said in a statement.

"We have already seen this happen with the closures of Northern in South Australia and most recently Hazelwood in Victoria, where wholesale prices skyrocketed by 85 per cent."

The state opposition and mining union also don't want a repeat of the Hazelwood power station closure, which shut in 2017 with less than six months' notice.

"When Hazelwood closed this government said they'd help the Valley. They said they would help the people who could never be retrained and they haven't. They've forgotten them," opposition MP Matthew Guy said.

Trevor Williams from the CFMEU wants the government to look at developing early retirement packages, worker transfer schemes and securing jobs in the region.

"This is a chance for EnergyAustralia and the Victorian government to step up with a comprehensive plan for affected workers and the Latrobe community. We need to do better than Hazelwood," he said.

Yallourn supplies up to 22 per cent of Victoria's electricity and eight per cent of Australia's.

It has been operating for 100 years and is among the nation's most carbon-intensive power generators.

Closing it will reduce EnergyAustralia's emissions by 60 per cent, Ms Tanna said.

Richie Merzian from the Australia Institute, an independent think-tank based in Canberra, said Yallourn is "the most unreliable power station in the entire country".

He said it has broken down 50 times since December 2017.

"The early closure of Yallourn is another reminder that Australia lacks a climate and energy plan to smooth out the inevitable closure of coal power stations," Mr Mezian said.

The Greens similarly are calling for a long-term plan for coal closures.

"Coal had had its day but instead of planning for this closure, Liberal and Labor have taken millions in donations from big coal corporations, leaving workers and communities at the whim of decisions made in overseas boardrooms," federal leader Adam Bandt said in a statement.

Meanwhile, Environmental Justice Australia wants EnergyAustralia to develop a plan to reduce the "health burden" of Yallourn until it closes.

They estimate 30,611 children will suffer asthma attacks, 1813 babies will be born underweight and 1435 people will die prematurely as a direct result of toxic pollution from the Latrobe Valley's three coal-fired power stations between now and 2028.

Australian Associated Press