AGL has agreed to the government’s request to take to its board proposals to extend the life of the coal-fired Liddell power plant or to sell it, following a meeting with the Prime Minister.
The meeting follows last week’s report from the Australian Energy Market Operator (AEMO) warning that there will be a substantial electricity shortfall over coming years.
The report saw the PM contact AGL chief executive Andy Vesey urging him to keep the power station open for at least five years past its expected closure date of 2022.
Yesterday, Mr Vesey spent 90 minutes Prime Minister Malcolm Turnbull, Energy Minister Josh Frydenberg and Deputy Prime Minister Barnaby Joyce.
In a statement following the meeting, Mr Vesey said AGL will put forward an alternative blueprint with actions it would take to avoid a power shortfall once Liddell retires in 2022.
“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,” Mr Vesey said.
“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.
“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 advanced notice of 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 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,” he said.
As Liddell approaches the end of its life in 2022, Mr Vesey said it would likely experience more unanticipated outages, which is why the company will spend a further $159 million to improve reliability at the plant.
The PM said the meeting with Mr Vesey was “constructive”.
“The important thing here is that we are doing everything we can to ensure that Australians have reliable and affordable power – that’s the critical objective,” he said.
“We can’t get into the situation where we have done before, where we have large amounts of baseload or dispatchable power going out of the system, and then you get a shortage of power, and then you get a rapid increase in prices.”