The facts on Liddell Power Station

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.

 

Will you consider selling 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.

 

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. Some of our people may be interested in retraining or early retirement.

 

Reference links

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