AGL: Out with the old, in with the renewables

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 18 Dec 2017   Posted by admin

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All images: AGL.


BY CAMERON DRUMMOND


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.

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.


Financials

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.”

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