AGL and Tomago on a collision course over future energy needs

SOLAR and wind are “the most economic” options to replace Liddell coal-fired energy after the power station closes in 2022, said AGL Macquarie chief executive Andy Vesey on Thursday after dismissing calls for a new coal-fired power station as not “economically rational”.

“We just don’t see the development of a new coal-fired power station as economically rational, even before carbon costs,” he said, only days after the state’s largest electricity user, Tomago Aluminium, confirmed it had been lobbying politicians to support a high-efficiency, low emissions (HELI) coal-fired power station to replace Liddell.

Mr Vesey ruled out extending Liddell’s life after the planned 2022 closure date because of the carbon risk, and the significant investment needed to produce a less reliable and more costly energy source than renewables.

He used release of the company’s annual profits reports to reiterate increasingly sharp calls from energy providers and Australian business leaders for the Federal Government to set a clean energy target.

“The challenge is that we are at a point where the lack of certainty around carbon policy is preventing people from investing in the right options, which we think is wind, solar, and storage,” he said.

AGL released a rehabilitation report showing a commitment of $898 million to close and rehabilitate Liddell and Bayswater power stations near Muswellbrook, with confirmation Bayswater will close in 2035.

It announced an 18-month program until early 2019, which it described as “similar to a public tender process”, designed to attract proposals from around the world for the “post coal” use of Liddell’s assets.

We just don’t see the development of a new coal-fired power station as economically rational, even before carbon costs.

AGL Macquarie chief executive Andy Vesey

“We are looking to stimulate global interest in the challenges of transition, tapping global innovation and putting forward a model that, if successful, can provide a benchmark for future transition activities,” AGL said.

“We are seeking to bring innovation from across the supply chain including technology, finance, logistics and science to identify options for the ‘post coal’ utilisation of Liddell’s assets.”

The company committed to returning the site to “as near to pre-development condition as practicable”, after Muswellbrook mayor Martin Rush in February told a Senate inquiry that AGL could close Liddell and walk away because the NSW Government had “washed its hands of the closure planning for Liddell” when it sold the power station in 2014.

The government had failed to respond to warnings from the council that new and modernised conditions were required because a 1965 Denman Shire Council approval of the power station meant that “from a planning point of view AGL can administer the closure as it sees fit”, Mr Rush said.

The Department of Planning confirmed it had “no role in regulating the current activities on site”, and referred questions about the station’s decommissioning requirements to Muswellbrook Council.

There is no aluminium smelter anywhere in the world that is powered by wind and solar.

Tomago Aluminium chief executive Matt Howell

AGL’s rehabilitation report outlined a schedule that includes removal of power generation infrastructure, remediation of disturbed land “but may leave in place appropriately remediated voids and land formations”.

During its presentation on Thursday AGL said the most economic option to replace the 1680MW Liddell station would not be coal or baseload gas, but a mix of energy from wind and solar, along with load shaping and firming capacity from sources including battery storage, pumped hydro, demand response mechanisms and gas peaking plants.

Mr Vesey said the 200MW Silverton wind farm near Broken Hill and 465MW Coopers Gap wind farm in Queensland would provide “clean, reliable energy” for the grid.

As the largest electricity generator in the National Electricity Market, AGL set “adapting to prosper in a carbon-constrained future” as a strategic imperative.

“We have provided a comprehensive framework for consideration of climate change related issues through our greenhouse gas policy. The policy rules out further investments in conventional coal fired power stations in Australia, and provides a pathway for decommissioning existing assets at the end of their operational lives,” AGL said.

But in an interview this week the chief executive of the state’s largest electricity user, Tomago Aluminium’s Matt Howell, said aluminium smelters needed baseload supply “and practically, that means thermal, either coal or gas”.

“And whilst we're not ideologically opposed to renewables, wind and solar - they certainly have their place in many applications - but there is no aluminium smelter anywhere in the world that is powered by wind and solar,” Mr Howell said.

Asked about the push for battery storage as the answer for baseload power, Mr Howell said the world’s largest battery, with capacity for 100 megawatt hours, would power the Tomaga smelter for less than eight minutes.


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