The facts on Liddell Power Station

AGL Blog Post updated: 21/5/18.

 

Why did AGL not sell?

 

  After careful consideration, AGL advised Chow Tai Fook and Alinta Energy that it will not proceed any further with the Offer, as it significantly undervalues AGL’s need for Liddell to supply our customers until 2022 and for repurposing post-2022 as part of our NSW Generation Plan.

 

You paid nothing for Liddell, so why are you refusing to sell for $250 million?

 

We acquired Liddell in 2014 as part of the Macquarie Generation business for $1.5 billion. Since then we have invested $120 million to help the plant to run safely and reliably and we are investing a further $150 million until 2022.Following the sudden closure of other coal plants including Northern and Hazelwood, the economics in the market have changed, as evidenced by the change in value of Vales Point Power Station.  
Increased blackout risk when Liddell closes in 2022?

 

  AEMO confirmed AGL’s replacement plan for Liddell “would deliver sufficient dispatchable resources to fill the identified 850 MW resource gap.”
Is AGL pushing up prices by closing Liddell?

 

  It’s not possible to ‘short the market’ or intentionally ‘push up prices’ by giving seven years’ notice of closure. The Finkel Review recommends at least three years’ notice of closure to signal investment opportunities for new generation. AGL gave seven years’ notice when it announced Liddell’s closure to enable sufficient capacity to be built.
Can we build a new HELE plant on the Liddell site?

 

  A ‘clean coal’ plant would cost more. We want to use the site of Liddell to implement our planned Upper Hunter Energy Integration Hub
Does Australia need more baseload?

 

  NSW has more baseload than it needs but NSW needs more peaking and intermediate supply for very hot days and when industrial and commercial users are active.
Can the operational life of Liddell be extended?

 

  It is a more expensive and less reliable option. Our people’s safety comes first. Globally only 1% of coal-fired power stations remain in operation for over 50 years.
Will AGL forcibly make Liddell employees redundant?

 

  AGL has committed to no forced redundancies due to the closure of Liddell and will offer retraining for the new job opportunities as Liddell is repurposed and the NSW Generation Plan is progressed.
Will AGL make use of the Liddell site post 2022?

 

  Details on how we plan to use the site are available in our NSW Generation Plan to transform Liddell into the Upper Hunter Energy Integration Hub.
Is AGL waiting until 2022 to replace Liddell?

 

AGL has already committed ahead of schedule to Stage 1 of its NSW Generation Plan and is engaging with commercial and industrial customers to underpin investment for Stage 2.

Will there be blackouts when Liddell closes?

The Australian Energy Market Operator (AEMO) identified a potential shortfall in capacity of 850MW after 2022 if no replacement capacity is built after Liddell’s closure, however AEMO confirmed AGL’s replacement plan for Liddellwould deliver sufficient dispatchable resources to fill the identified 850MW resource gap”.

You can read our statement on the AEMO report here and AEMO’s full letter regarding our replacement plan here.

Is AGL pushing up prices by closing Liddell?

AGL’s replacement plan delivers energy at lower cost than extending the life of Liddell would, with the replacement plan costing around $83 MWh and extension costing around $106 MWh.

Sudden retirements such as Alinta’s Northern station in South Australia and Engie’s Hazelwood station in Victoria, which both closed suddenly with less than 12 months’ notice, left the market unable to build new generation capacity before closure which drove up prices.

With the release of AGL’s Greenhouse Gas Policy in 2015, AGL provided seven years’ notice of the closure of Liddell to allow the market time to respond by building new generation.

Get the facts on Liddell Power Station in less than 40 seconds

Why won’t you build a new coal-fired power station?

On the economics alone, AGL would not build a new coal-fired power station. They are expensive to build and have to be generating energy most of the time to be economically viable. Because renewable energy is cheaper, the market buys renewable energy when it is available, and the more expensive energy generated by coal-fired stations is not needed at these times.

More responsive and flexible energy sources are better suited to a market in which there is cheap, variable energy. These sources include gas peaking plants and energy storage such as pumped hydro and batteries.

Secondly, AGL’s Greenhouse Gas Policy, released in 2015, is consistent with the Federal Government’s commitment under the Paris Agreement to limit warming to less than 2° C. Modern highly efficient coal-fired generation is still only around 7% more efficient than traditional coal-fired generation (World Coal Association) and so would not be consistent with our Greenhouse Gas Policy or the Paris Agreement.

Why won’t you keep Liddell open for longer?

Worldwide, only around 1% of coal-fired power stations remain in operation for over 50 years (EPRI, 2017).

We commissioned the same independent consultants that assessed the costs of extension for the NSW Government at the time we bought Macquarie Generation, (Liddell and Bayswater stations) to take another look at the cost of extending the life of Liddell until 2027. They found it would cost around $920 million.

We can’t cut corners on maintenance or refurbishment because workers’ safety comes first. As the plant ages, the number of points of potential failure increases, some of which in the longer term could cause serious injury or death, and we won’t take that risk.

Why do you need the Liddell site if you’re going to close it anyway?

Our Liddell replacement plans envisage the site as a renewable energy storage and integration hub.

AGL’s replacement plans have been assessed by independent consultants as being both significantly cheaper and more reliable than an extension of the existing Liddell infrastructure.

Why did AGL not sell Liddell?

Our position on a potential sale of Liddell has been consistent. While AGL has not initiated any sale process for Liddell, if we received a formal offer we would be duty bound to consider it.

Liddell enables us to meet our supply obligations to our customers through to 2022. After that we intend to use the site and infrastructure as part of our plans for new, lower emissions and reliable electricity supply.

You paid nothing for Liddell, so why are you refusing to sell for $250 million?

We require Liddell until 2022 to deliver energy to our customers and intend to use the site infrastructure, grid connection and workforce post 2022 as part of our NSW Generation Plan.

We acquired Liddell in 2014 as part of the Macquarie Generation business for $1.5 billion. Since then we have invested $120 million to help the plant to run safely and reliably and we are investing a further $150 million until 2022.  Following the sudden closure of other coal plants including Northern and Hazelwood, the economics in the market have changed, as evidenced by the change in value of Vales Point Power Station.

If AGL says Liddell wasn’t worth anything when it bought it from the State Government with Bayswater, why are you saying it now is worth something?

When Macquarie Generation was put up for sale by the NSW Government, Liddell and Bayswater were offered as a package and the Government would not sell Liddell separately, so we purchased both stations, despite the well-known problems with reliability at Liddell.

AGL did not ascribe any value to Liddell site at the time of purchase, and if we had the market would have questioned this.

Instead, we spent over $120 million improving the reliability and safety at Liddell.  Safety has improved but reliability remains an issue. Since the sudden closure of Hazelwood, the economics of Liddell are better, however to keep it going until 2022, we plan to spend a further $150 million, before repurposing the Liddell site as a part of our plans to invest in a range of energy sources to replace Liddell.

Why not let people through the door to take a look at it if they’re thinking about making an offer?

The sale and acquisition of a power station is not as simple as inviting interested parties to ‘take a look’ (as you might do if selling a house).  In practice, it takes many months of detailed engineering, environmental, financial, commercial and legal ‘due diligence’ before someone makes a binding offer to acquire a power station.

Unless a company has made a strategic decision to sell an asset and run a sale process, it is not common practice for companies to allow anyone who says they are interested to conduct this due diligence, given the significant cost and business disruption that would be associated with it, as well as the uncertainty as to whether an acceptable offer would ultimately be made.

What will happen to the jobs at Liddell?

AGL has committed to no forced redundancies as a consequence of the closure of Liddell. We will continue to operate nearby Bayswater and will need people to work there as well as people to work on the decommissioning of Liddell. AGL will offer retraining for the new job opportunities as Liddell is repurposed and the NSW Generation Plan is progressed.

 

Reference links

15 Responses

  1. Paul Wilson

    I am not happy with this decision. As an AGL customer for many years I am very disappointed. I have already bought my own petrol generator in preparation of blackouts and when that occurs I will upgrade to a bigger diesel generator that will run the entire house.

    Reply
  2. Warren Mason

    Congratulations on standing your ground while our backward looking government tries to pressure you to selling. I hope you get the renewables going and show them you have the future or your company and the future of Australia and Australians as part of your plans.

    Reply
  3. Lyndin Hume

    This information site is very well written and crystal clear as to the future of Lidell power station.
    I would like to thank the AGL Company CO for his frankness in presenting this article – what is not so clear is the LNP kind of demanding that AGL sell this Lidell sight to A Chinese company. YES! the same Chinese company that was not allowed to buy into the poles and wires several years prior. This decision by the government was based on Australian National security reasons – but due to the LNP not keeping up with National Energy infrastructure it is alright for this company to buy this Lidell sight and total disregard to our Nations security – Good one Turnbull when will he ever learn.

    Reply
  4. Colin Chesterman AO

    Having divested fossil fuel shares, I have recently invested in AGL because of your realistic approach to transition and particularly Liddell. Keep it up.

    Reply
  5. Mercia Morton

    I applaud the AGL CEO’s climate change-responsible action in transforming Liddell to renewable energy production and not buckling to hypocritical government pressure.. Thank you on behalf of all our children!

    Reply
  6. penelope Teesdale

    I like so many other Australians are sick and tired of being ripped off by these companies, it is about time someone stopped this happening, where are our government, not for the Australian that is for sure.

    Reply
  7. Steve Cozens

    This is useful information, but does not directly address or answer the questions. Perhaps you could give a one sentence heradline answer and then supply the fine print information in support of the headline assertion.

    Reply
  8. David Henley

    I completely support AGL stance in the above plans. This makes the decision economic & not political which is how it should be. Congratulations, & do not be forced to sell it to another company if it does not suit your long term plans, as their plans may force yours out, which would not be to the LT benefit of Australia.

    Reply
  9. Felicity

    Keep up the good work re Liddel. Don’t let the government bully you and threaten you. Love your work.

    Reply
  10. Peter Mitchell

    Can you please explain where the current Base load power is coming from and what this will look like post 2022 when Liddell goes.
    Thanks

    Reply
  11. Darek

    What will happen when there is not sun or wind to create base load power? I have solar panels on the roof and solar hot water but I am still dependent on grid power but I don’t agree with closing Liddell and just voted with my feet changing my account to another provider. I don’t care if I pay a bit more.

    Reply
  12. Craig Austin

    Well done AGL for thinking of our future generations left on the planet we are rapidly burning through what seems to be an endless supply of resoucres with no chance of renewing .This planet needs a form of sustainable renewable sources of energy as its not rocket science the coal will eventually run out then what ?

    Reply

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