Energy landscape
Power station
transition and
closure
Material issue

Work closely with our people and other key stakeholders in the community and government to ensure an inclusive and sustainable transition.

FY18 targetFY18 performanceStatus

Compliance with AGL’s Rehabilitation Principles: 100%

Compliance with AGL Rehabilitation Principles: 100%

Target met
FY19 target

Establish a regional1 community engagement program to support the Liddell transition.

Publish AGL’s preferred options for diversification and development of the Liddell Power Station and surrounding site.

Providing reliable, affordable and environmentally sustainable energy to Australian households and businesses is of great importance to us and to our customers, shareholders and the broader community. This is reflected in our two strategic imperatives: prospering in a carbon-constrained future, and building customer advocacy.

Over recent years we have continued to demonstrate a considered and evidence-based approach to integrate climate and energy policy, which includes a strategic plan to decarbonise our operations in line with community expectations. A key aspect of achieving this, while maintaining reliability and affordability of energy, is the closure and replacement of ageing thermal power generation assets with reliable, low-carbon assets.

Beyond the imperative of decarbonising in line with climate policy and society expectations, thermal power generation assets require replacing after the end of their design life. Globally, less than one percent of coal-fired power stations are operated beyond fifty years. As the generation mix in the National Electricity Market changes, the type of generation required to support greater renewable energy output is shifting away from traditional technologies to more responsive, flexible and dispatchable generation. Read more in the Energy market evolution section.

Our approach to power station transition

We recognise that the eventual closure of large scale assets includes a responsibility to properly consider a wide range of potential impacts in the years preceding, throughout and following closure of an asset. We understand that transition is about more than just supplying energy. Our large thermal generation sites provide significant employment and economic value to the communities in which they operate through their extensive value chains. That’s why we recognise that a transition must be undertaken with full consideration of both direct and indirect social, environmental and economic impacts.

Transition must be supported by a framework that aims to minimise negative impacts while simultaneously maximising opportunities for net positive impacts from the transition for all stakeholders. Our approach to power station closure is guided by these aims as we develop and refine our transition framework. We operate a large and diverse generation fleet, spanning technologies, fuel sources, geographies and age ranges. As such, we are developing a transition framework that can effectively articulate our vision, help us to adhere to our overarching principles and guide processes across the range of transitions that we will undertake in the near and longer-term future.

Our framework focuses on effective governance and risk management, engagement, and best practice projects, underpinned by our three transition principles:

  • Transparency: We will provide stakeholders with information to enable better understanding of the issues related to rehabilitation of AGL sites.
  • Engagement: We will undertake ongoing engagement with stakeholders to ensure a diverse range of views are considered in rehabilitation plans and processes.
  • Accountability: We will publish relevant information at least annually to enable external assessment of rehabilitation activities.

In line with our principles, we believe the longer the planning timeframes and the more comprehensive the engagement with surrounding communities, the better the chance that outcomes can be delivered collaboratively and owned by all stakeholder groups. To learn more about our Transition Principles, refer to our 2017 Rehabilitation Report.

Liddell Power Station transition

The planned closure of the Liddell Power Station in 2022 provides the most recent and visible example of the need to balance a range of considerations where stakeholders may have differing views.

In 2015 we announced our intention to close Liddell Power Station, effectively providing the market with seven years’ notice, consistent with our Greenhouse Gas Policy commitment to not extend the operating life of our existing coal-fired power stations.

At that time, we also made a commitment to work with local business, industry, government, and our people to identify new opportunities, encourage economic diversification and strive for new employment opportunities in our local communities.

Although Liddell as we know it today will close, the site has significant value. We have highly skilled people, land, water, transport and energy infrastructure (including connection to high voltage transmission lines), making it a site with potential for a range of future developments.

That’s why we have started work on the Liddell Innovation Project – first announced in our 2017 Rehabilitation Report – with the mission to deliver the best possible use for the Liddell site post-2022. The Liddell Innovation Project demonstrates our commitment to evidence-based, best practice site repurposing and remediation, and to constructive engagement with local communities and other stakeholders.

The Liddell Innovation Project builds on work commenced by the Hunter Energy Transition Alliance, formed in 2015 to identify priority areas and investigate further job creation and economic diversification programs. We believe the Hunter Valley is the right place to model our industry’s transition, and if managed well, can be a template for other regions to follow.

We recognise that the transition is not just about replacing the energy but that economic and social transition is equally important. Because of this we are including in our plans a process to see what innovative and sustainable opportunities for investment may be possible at the site (and surrounding areas) that will enhance the resilience and diversification of the region and local economy.

A two-phase tender process will seek innovative and complementary ideas from diverse organisations for the optimal use of the Liddell Power Station and the surrounding site. We are focused on exploring opportunities that will deliver social and commercial value for the Liddell site, our people and local community following the cessation of coal-fired power generation at Liddell.

We have developed a set of sustainability criteria that will guide our tender and assessment process, which will be finalised through consultation with our community and regional stakeholders.

We have commenced engagement across our stakeholders including employees, business and finance, local communities, educational institutions and industry to elicit a range of ideas and proposals for the site that are consistent with our commitment to a decarbonised energy future and complements investments identified in the NSW Generation Plan. In the second half of 2018 we will hold an Innovation Open Day providing the opportunity for investors and innovators to engage with community representatives, policy makers and AGL employees.

NSW Generation Plan

In December 2017, we outlined our plans for replacing the energy and capacity lost from the market when Liddell closes in our 'NSW Generation Plan'. The NSW Generation Plan proposed a mix of high-efficiency gas-fired peaking generation plant, renewables, battery storage and demand response, coupled with an efficiency upgrade at Bayswater Power Station and the conversion of a generating unit at Liddell into synchronous condensers to enhance electricity system stability. We are also looking into the feasibility of a pumped hydro project in the Hunter region, in conjunction with the New South Wales Government and other key stakeholders. If fully implemented, our proposed plan to replace Liddell is anticipated to reduce our annual carbon footprint by approximately 17%.

In FY18 we commenced efficiency improvements at Bayswater Power Station that will increase generation capacity without using additional fuel. We also signed an agreement for AGL to offtake 300 MW of solar capacity from Maoneng Australia’s Sunraysia solar project, and commenced ordering equipment to convert generators at Liddell Power Station to synchronous condensers.

An assessment of AGL’s NSW Generation Plan found the replacement generation would be more affordable at $83/MWh, compared with the cost of extending the operating life of Liddell by five years beyond December 2022, which was calculated to cost $106/MWh. The plan was also found to deliver reliable, dispatchable power for longer, due to a longer asset life of 15-30 years, compared with extending Liddell for an additional five years. Independent analysis found an extension until 2027 would cost approximately $920 million. Read more about the future of electricity generation in this paper, written by AGL’s Chief Economist.

In March 2018, the Australian Energy Market Operator (AEMO) confirmed that, if fully implemented, the NSW Generation Plan would meet any potential shortfall in energy provided to the grid.

Timetable of closure of thermal assets

With an extensive thermal generation portfolio, we recognise the importance of a strategic and consistent approach to asset closure and transition.

While the cessation of coal-fired generation from Liddell in 2022 represents the most topical and immediate example of our strategic decarbonisation, we are working on plans for transitioning our other thermal generation assets. This includes the progressive mothballing of Torrens Island A Power Station in South Australia and its replacement by the Barker Inlet Power Station, and the progressive decommissioning and rehabilitation of the Camden Gas Project (to enable closure by 2023).

Following these nearer term processes, we will consider the longer-term closures of the Bayswater Power Station by 2035 and Loy Yang A Power Station and the Loy Yang Mine by 2048.

The complexity of closing such a diverse portfolio of assets over coming decades highlights the need for our approach to transition to be flexible yet consistent with our principles, to provide optimum transition outcomes, including affordable and reliable energy for all electricity users.

Future actions

As part of our commitment to transition, we have introduced a Transition Manager at our AGL Loy Yang, AGL Macquarie and AGL Torrens power stations, and at the Camden Gas Project, whose role is to plan for, manage and execute transition activities aligned with the AGL Rehabilitation Framework.

Part of this is to continue to update our stakeholders on the activities undertaken to develop an effective transition.

Throughout 2019 we plan to:

  • publish our transition framework at www.agl.com.au/transition
  • finalise our approach to the evolution of Liddell and confirm the preferred future operating model, and
  • provide more information regarding the transition of the Torrens A Power Station.

Related information

  1. 1. The region referred to is the Hunter Valley region of NSW, geographically bounded by Newcastle in the east to Scone in the west.