AGL Energy has rejected a plea by the Federal Government to keep its Liddell coal-fired power station in New South Wales open beyond 2022. It will make up for the shortfall by investing in gas, solar, batteries and possibly hydro.
Prime Minister Malcolm Turnbull had asked AGL Chief Andy Vesey to extend the power plant’s lifespan in a meeting in September. In that meeting, AGL said that it would not object to selling the plant to an interested party, but made it clear that the company was “getting out of coal”.
AGL said that it will be able to meet the shortfall from the Liddell plant through developing gas, wind and solar generation plants in the run-up to 2022.
Reacting to AGL’s decision, Prime Minister Malcolm Turnbull said that it was not a “rebuke” of the government and that the scenario will be analysed by the Australian Energy Market Operator in mid-February.
Mr Turnbull also acknowledged that AGL had a plan to meet the shortfall which the closure will cause, avoiding the issues which surfaced following the closure of Victoria’s Hazelwood plant earlier this year.
Energy Minister Josh Frydenberg has also spoken about the situation and said that the government’s focus has always been on ensuring that the grid is not left 1,000 MW short of dispatchable power.
He said that the government wanted to ensure power reliability and affordability would be maintained, whatever AGL’s plan is.
Keeping Liddell open for another five years would cost $1 billion
AGL said an independent analysis found keeping the ageing station open for just five more years would cost almost $1 billion. Splitting the plant from surrounding infrastructure and selling it was also unfeasible, the company said.
AGL’s plan is to generate 1,600 megawatts from renewables, 500 MW from a new gas power plant, 250 MW from a gas plant slated for Newcastle and another 250 MW from a battery on the Liddell site. It is also exploring the feasibility of a pumped hydro project in the Hunter region of NSW.
AGL’s said that in view of the seven-years’ notice for closing Liddell and the company’s generation plans, power prices should not be affected.
New plan will see power produced at $83 per MWh compared to $106 if Liddell was kept operational
The company forecasts that under its new plan, it will be able to produce power at a cost of $83 a megawatt-hour, compared to $106 if Liddell’s life was extended.
The environment will also be a lot better off, AGL said, saying that the new generation portfolio would reduce its carbon footprint by 17.6 percent.
AGL Chairman Graeme Hunt said: “This plan demonstrates that old power plants can be replaced with a mixture of new, cleaner technology, while improving reliability and affordability.”
“Decisions for the investments are staged to enable flexibility to respond to the changing needs of the market and improvements in technology over the next five years.”
AGL’s board has already approved $490 million in capital expenditure for the first stage of its plan, which it says is aligned with the National Energy Guarantee focus of maintaining electricity supply and prevent blackouts.
Liddell decision ‘not a suprise’
Grattan Institute’s energy expert Tony Wood said the announcement was “hardly a surprise and fits in perfectly with the recommendations of the Energy Security Board” and chief scientist Alan Finkel’s recent energy review.
“That sort of combination is where Australia is heading – a combination of storage, renewable energy and batteries. And gas has a role to play in the transition,” he said. “It was never going to make sense for Liddell to be replaced with another coal-fired power station.”
Business Council of Australia boss Jennifer Westacott also praised the proposal as innovative, secure and environmentally sound.
Kelly O’Shanassy, chief executive of the Australian Conservation Foundation, said the Turnbull government’s attempt to “strongarm” AGL into keeping Liddell open had failed, and the government should now “drop its obsession with coal”.
“What we need is a strong, comprehensive plan that would speed up the retirement of polluting coal plants and accelerate the transition to clean energy,” she said.