Government pushes to keep AGL’s Liddell Power Station open

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Prime Minister Malcolm Turnbull met with AGL executives in Canberra to discuss the future of the Liddell Power Station. While AGL plans to close the plant in 2020, the government is trying to keep it open for a further five years passed its scheduled closure in order to maintain stability in the electricity grid.

Following the meeting, AGL committed to deliver a plan in 90 days that details the actions it will take to avoid a market shortfall once the Liddell coal-fired power station retires in 2022.

AGL’s Managing Director and CEO, Andy Vesey, said, “I was asked to take to the AGL Board the Government’s request to continue the operation of Liddell post 2022 for five years and/or sell Liddell, which I agreed to do.”

In April 2015, as part of its Greenhouse Gas Policy, AGL committed to the closure of its coal-fired power stations at the end of their operating life, to support the Commonwealth Government’s commitment to work towards a global agreement to limit global warming to less than two degrees celsius above pre-industrial levels.

AGL has previously advised the market that replacement of capacity will likely be provided by a mix of load shaping and firming from gas peaking plant, demand response, pumped hydro and batteries.

As outlined in its FY17 Results in August 2017, AGL is currently investing $2 billion directly and indirectly in new supply to help provide the capacity and energy the system needs.

Short term, new development will continue to favour renewables supported by gas peaking. Longer term, we see this trend continuing with large-scale battery deployment enhancing the value of renewable technology. In this environment, we just don’t see new development of coal as economically rational, even before factoring in a carbon cost,” Mr Vesey said.

By giving advance notice of the closure of its coal-fired power plants, AGL is meeting one of the 49 recommendations in the Finkel Report that have been accepted by the Commonwealth Government.

“The long notice period we have given reflects our commitment to managing carbon risk for shareholders and avoiding the volatility created by recent sudden withdrawal of capacity,” Mr Vesey said.

Since AGL acquired Liddell from the NSW Government in 2015, it has invested $123 million in the plant to improve its reliability. Despite this investment, during the February 2017 heatwave, two units from Liddell were out of the market due to unforeseeable boiler tube leaks. As a result, there was not enough energy in the system, and NSW experienced blackouts in parts of the state.

“As Liddell approaches the end of its life in 2022, it will likely experience more unanticipated outages, which is why we will spend a further $159 million to improve reliability at Liddell before it closes,” Mr Vesey said.

Repurposing the plant

In a recent power generation infrastructure rehabilitation document, AGL outlined plans for the potential repowering of Liddell which could involve  installing gas-fired turbines to replace coal at the plant.

This idea was reiterated during a tour of the power station in mid-September 2017, when high-level AGL management outlined the potential, and likelihood, of the site being repurposed from coal-fired power.

AGL Macquarie Head of Operations Kevin Taylor outlined the importance of the site’s existing transmission infrastructure as one reason that repurposing or repowering was a strong potential option.

Selling the plant

Another option put forward by the government was the potential sale of the power station. In early September 2017, The Australian reported that a source had said there “may be more than one” company interested in buying the power station. One interested company was Delta Electricity.

In an interview with The Australia, Delta Managing Director, Greg Everett, said there was a “reasonable” case to keep Liddell operating beyond its scheduled shutdown date of 2022 but this would be subject to technical due diligence on the state of the power station.

However, less than two weeks after announcing this, the possible purchase was all but ruled out.

“It’s not for sale,” Steve Gurney, a spokesman for Delta, told The Australian.

“There’s nothing to buy – that ends the speculation.”

In response to these comments, The Sydney Morning Herald reported that Minister for the Environment and Energy, Josh Frydenberg, said, “If AGL believe Liddell is a worthless asset then they should test the market and put it up for sale and allow interested parties to undertake due diligence on the plant.”

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