Hazelwood's majority owner, French energy giant Engie, confirmed on Thursday that the ageing plant will be shut down entirely by the end of March, in a blow to the Latrobe Valley that will cost hundreds of jobs.

The federal government scrambled in the wake of the historic announcement to provide reassurance that the electricity grid could cope with the closure of the plant, which supplies up to one-quarter of Victoria's power.

The federal and state governments also announced investment and job plans for the valley – including a radical plan by the Andrews government to create a new "economic growth zone" offering tax incentives, cash grants and other assistance worth $266 million.

Engie has set aside about $150 million to pay out the redundancies and leave of the plant's workers, many of whom are aged in their 50s and have worked there for decades.  The average payout of $330,000 will be equivalent to almost double the median house price in Morwell.

A day of rolling announcements about the future of the plant and the valley began with a briefing to workers at the plant at 10am, confirming the complete closure of Hazelwood by the end of March, as revealed in September by Fairfax Media.

"Another kick in the guts for the Latrobe Valley," said CFMEU Victoria mining and energy president Trevor Williams, shortly afterwards at the plant's gates.

The union had wanted a staged closure to ease the impact, Mr Williams said. "Some of the workers there would think that they've been left in the lurch, and also the Latrobe Valley community."

Engie Australia chief executive Alex Keisser said up to 250 workers would be needed to work at the site following its closure.

It is not yet known how much it will cost to rehabilitate the mine and turn it into a lake, Mr Keisser said, although it will take about 12 years.

"There will be a lot of work that will be required in order to transform our operation into a safe, stable lake, which will be given back to the community," he said.

"I would love to provide a job for everybody, but we don't have that. But we are doing our best to really help all our employees to transition respectfully through this period."

He stressed that the company had not accelerated the decision to close Hazelwood in response to the mine fire of 2014.

"Engie has taken the decision to reduce its operation in carbon plants, and is hence looking around the world to potentially sell some of them in order to redeploy all the capital that has been raised for the energy transition activities," he said.

The company has also confirmed plans to sell Loy Yang B, which is near Traralgon. The closure of Hazelwood is also expected to dramatically drive up the value of the Loy Yang B power station, which is mostly owned by Engie.

Federal Energy Minister Josh Frydenberg said the Hazelwood closure represented the end of an era. He said the energy market could cope with the loss of the plant, with the state, previously a net energy exporter, expected to pipe in power from other states during peak periods to keep the lights on.

A report released on Thursday by the Australian Energy Market Operator indicated that black coal generation in NSW and gas-fired energy in South Australia would increase to compensate for the loss of Hazelwood.

Victoria could also be forced to import power from NSW and Tasmania in high demand periods.

The valley's other three plants – Yallourn, Loy Yang A and Loy Yang B – will continue to operate, though Loy Yang A is subject to industrial action that its owner, AGL, has warned could force it offline.

Their long-term future cannot be guaranteed as companies and governments around the world move away from coal-powered generators.

Beyond the workers and their entitlements, the closure of Hazelwood, a plant that employed 750 people, is a bitter blow for an economically depressed area.

"There's no sugar-coating" the Latrobe Valley's high unemployment figures, Premier Daniel Andrews said at a lunchtime press conference at Morwell's Centenary Rose Garden. "That just means we have to work harder."

Mr Andrews condemned as "distasteful" reports that anyone was celebrating the closure of the plant.

He acknowledged that a hike in electricity prices would put pressure on family budgets but dismissed estimates of a 25 per cent increase as "wild, inaccurate". Any price rise would be close to 4 per cent, or an average of 85 cents a week, he said.

The Latrobe Valley is one of the most disadvantaged parts of Victoria, having struggled to recover since losing thousands of jobs when the electricity system was privatised in the 1990s.

Unemployment is as high as 19.7 per cent in Morwell and 14.6 per cent in Moe.

Prime Minister Malcolm Turnbull pledged to work with the Victorian government to support workers who lose their jobs.

"This is a very, very tough time for the valley," Mr Turnbull said in Sydney.

The federal government had established a ministerial task group "to provide the support the community needs to ensure there are jobs and opportunities", he said.

Before news emerged of the closure, Wendy Farmer, from community group Voices for the Valley, said it was a day of mixed feelings for herself and the community.

"The community have known for the last 10-20 years that this day would happen, we've just never known when. The last six months has really been a time of being left in limbo," she said.

The plant's closure was welcomed by environment groups, including Environment Victoria, who warned it was time to start planning for a transition from coal-fired power to renewable energy.

But the Minerals Council and various business groups said brown coal remained crucial to the state's energy supplies.

Opposition Leader Matthew Guy blamed the Andrews government, claiming decisions to triple the brown coal royalty rate and announce a 40 per cent renewable energy target had forced the plants premature closure.