AGL En­ergy is back at the ta­ble with a re­new­able en­ergy plan to se­cure NSW en­ergy sup­ply af­ter the loom­ing 2022 clo­sure of its Lid­dell coal-fired power plant.

The Australian Energy Review - - CONTENTS - CAMERON DRUMMOND

IN April 2015, AGL En­ergy an­nounced a com­mit­ment to close its coal-fired power sta­tions at the end of their re­spec­tive op­er­at­ing lives.

This in­cluded the Lid­dell power sta­tion in New South Wales’ Hunter Val­ley re­gion, which was ear­marked for clo­sure in 2022.

In re­cent months, the Fed­eral Gov­ern­ment had ex­pressed its con­cern that Lid­dell’s planned clo­sure would re­sult in a 1000 megawatt (MW) ca­pac­ity short­fall in the Na­tional Elec­tric­ity Mar­ket (NEM) that year.

In a for­mal meet­ing on 11 Septem­ber, the Gov­ern­ment pro­posed that AGL con­sider the con­tin­u­a­tion of Lid­dell’s op­er­a­tions post 2022 for five years and/ or the sale of the plant and re­turn with a de­ci­sion mid-de­cem­ber.

AGL chair­man Graeme Hunt said the com­pany would con­sider the Gov­ern­ment’s pro­posal, how­ever down­played the like­li­hood of the plant re­main­ing open be­yond 2022.

“When con­sid­er­ing the fu­ture of Lid­dell, it is im­por­tant to ac­knowl­edge that it is a plant that is ap­prox­i­mately 45-years old and that, at the time that AGL ac­quired it, the in­ten­tion of the NSW Gov­ern­ment, its pre­vi­ous owner, was to close the plant in 2022,” Mr Hunt said.

“While it may be tech­ni­cally pos­si­ble to ex­tend the life of the power sta­tion, the costs of do­ing so in a way that en­sures that the plant is even mod­er­ately re­li­able are cer­tain to be sub­stan­tial.

“On the other hand, the sale of such an as­set would be chal­leng­ing be­cause it will be dif­fi­cult to ‘un­bun­dle’ from AGL’S whole­sale port­fo­lio, and phys­i­cally from the ad­ja­cent, in­ter­con­nected, Bayswa­ter plant.”

NSW Gen­er­a­tion Plan

The AGL board said it had con­sid­ered sell­ing Lid­dell, but de­ter­mined that a sale would not be pur­sued as Lid­dell was needed to sup­ply en­ergy to its cus­tomers and would be re­pur­posed to form part of its al­ter­na­tive gen­er­a­tion post 2022.

In ad­di­tion, as Lid­dell shares in­fra­struc­ture with Bayswa­ter Power Sta­tion – such as coal un­load­ing fa­cil­i­ties and water sys­tems – sep­a­rat­ing it would re­quire du­pli­ca­tion of this in­fra­struc­ture.

On 9 De­cem­ber, AGL un­veiled its $1.36 bil­lion NSW Gen­er­a­tion Plan, a three-stage pro­gram that would pro­vide up to 30 years of elec­tric­ity at $83 per megawatt hour (MWH), com­pared with $106/MWH if Lid­dell’s life was ex­tended.

It in­volves a mix of high-ef­fi­ciency gas peak­ers, re­new­ables, bat­tery stor­age and de­mand re­sponse; cou­pled with an ef­fi­ciency up­grade at the nearby Bayswa­ter Power Sta­tion and con­ver­sion of gen­er­a­tors at Lid­dell into syn­chro­nous con­densers.

If im­ple­mented, the plan would gen­er­ate 1600MW from re­new­ables, 500MW from a new gas power plant, 250MW from a planned New­cas­tle gas plant and 250MW from a bat­tery on the Lid­dell site.

The fea­si­bil­ity of a pumped hy­dro project in the Hunter Val­ley would also be ex­plored with the NSW Gov­ern­ment, and stage its project pipe­line to adapt to the coal-fired plant’s clo­sure in or­der to avoid a gap in power gen­er­a­tion.

“This plan demon­strates that old power plants can be re­placed with a mix­ture of new, cleaner tech­nol­ogy, while im­prov­ing re­li­a­bil­ity and af­ford­abil­ity,” Mr Hunt said.

“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.”

Prime Minister Mal­colm Turn­bull said the Aus­tralian En­ergy Mar­ket Op­er­a­tor (AEMO) would as­sess the suit­abil­ity of AGL’S plan.

“AGL has got a plan which they have pro­duced for the first time which they say will meet that gap,” Mr Turn­bull said.

“It is be­ing ex­am­ined by AEMO now and we will look for­ward to dis­cus­sions with AEMO,” he said.


AGL'S statu­tory profit af­ter tax for FY17 was $539 mil­lion, com­pared with a loss of $408m for FY16.

The com­pany said the in­crease was the re­sult of strong un­der­ly­ing earn­ings growth, the non-re­cur­rence of sig­nif­i­cant items that af­fected the FY16 re­sult, and a de­crease in the move­ment in the fair value of fi­nan­cial in­stru­ments.

It also posted an un­der­ly­ing profit of $802m – up 14 per cent on FY16 – mark­ing the com­pany’s third con­sec­u­tive year that un­der­ly­ing profit had in­creased by above 10 per cent on the pre­vi­ous year.

A fi­nal FY17 div­i­dend of 50 cents per share was paid on 22 Septem­ber, adding to a to­tal div­i­dend of 91 cents per share, franked at 80 per cent for the fi­nan­cial year – an in­crease of 23 cents per share year-on-year.

“This pleas­ing re­sult was driven prin­ci­pally by the strong per­for­mance of AGL’S ther­mal and re­new­able gen­er­a­tion as­sets which have per­formed well in an en­vi­ron­ment of ris­ing whole­sale elec­tric­ity prices,” Mr Hunt said.

“The com­pany’s strong fi­nan­cial per­for­mance has also been un­der­pinned by a con­tin­u­ing fo­cus on cost dis­ci­pline and op­er­a­tional ex­e­cu­tion – it is im­por­tant to note that our op­er­at­ing as­sets can only gen­er­ate rev­enue if they are ef­fi­ciently main­tained to be avail­able for pro­duc­tion as and when the mar­ket re­quires them.”

“This plan demon­strates that old power plants can be re­placed with a mix­ture of new, cleaner tech­nol­ogy, while im­prov­ing re­li­a­bil­ity and af­ford­abil­ity.”

All images: AGL.

The Lid­dell coal-fired power sta­tion will close its doors in 2022.

The New­cas­tle gas project.

AGL said it would com­mit to re­plac­ing the Lid­dell power sta­tion with a mix­ture of gas and re­new­able en­ergy so­lu­tions.

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