AGL’s plan to replace Liddell is cheaper and cleaner than keeping it open


span>Kriti Nagrath, University of Technology Sydney

The Commonwealth government called last week for AGL Energy to consider selling its Liddell power station to rival Alinta.

Federal Energy Minister Josh Frydenberg has raised concerns that the scheduled 2022 shutdown of Liddell will affect New South Wales’ energy reliability. It’s suggested the sale would provide a way to keep the ageing power station open past the end of its normal 50-year operating life.

However, AGL responded to government concerns in December 2017 by releasing a replacement plan. Liddell’s theoretical maximum output is 1,800 megawatts (MW), but the firm capacity – the power that can be relied upon at peak time – is 1,000 MW. AGL is confident this can be replaced by a mix of improved efficiency, renewables and demand response.

AGL’s proposal unpacked

Late last year, in response to the Commonwealth government’s pressure, AGL updated its Liddell replacement plan. The updated plan includes generator efficiency upgrades, new natural gas and renewable energy generation capacity, and demand response.

This plan builds on the planned 2022 closure of the Liddell station. Phased investments in new, low-emissions generation and upgrades to existing generation will replace the 1,000 MW of coal-fired power by:

  • increasing the capacity of AGL’s nearby Bayswater coal-fired power station by 100MW
  • installing 750MW of high-efficiency gas power (at potential sites in Newcastle and/or elsewhere in NSW)
  • adding 1,600MW of new renewable generation capacity (wind and solar farms)
  • providing 100MW of firm capacity from demand response and 250MW from battery storage.

The replacement portfolio is split into three stages. The first aims for 550MW of new generation: 300MW from two solar power plants, to be built by third-party developers, and 250MW from a new gas peaking power station located at Newcastle (or other suitable sites in NSW).

Further, AGL has already approved 650MW of wind projects. The Bayswater efficiency upgrade will add 100MW to the capacity without burning any additional coal.

This, along with the 20MW of demand response, will provide the “firm capacity” required to meet existing customer needs, in line with the federal National Energy Guarantee. The “firm capacity factor” is the proportion of the installed capacity (the theoretical maximum) that can be relied upon to be available at peak time.

The next two stages will progressively add new capacity from renewables, battery storage and demand response to meet the energy needs of AGL’s potential uncontracted customers. Stage 2 and Stage 3 feasibility is expected to start by 2020 and 2021 respectively, for a 2022 delivery.

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AGL is relying on the market

AGL’s Liddell replacement plan is designed to provide an equivalent amount of energy and dispatchable power at a similar level of reliability.

The plan’s total investment of A$1.36 billion is more than the A$920 million estimate of the 2027 Liddell extension plan, but once operating and fuel costs are included the average cost of replacement generation is more affordable at A$83 per megawatt hour (MWh), compared with extending the life of Liddell at A$106 per MWh.

Levelised cost of energy based on information sourced by AGL including: the capital cost of the Liddell life extension works as advised by Worley Parsons (Advisian). AGL’s discount rate in line with their commercial target returns. Westpac Banking Corporation’s forecast of the Newcastle coal price discounted based on the lower calorific value required for power station coal. A carbon emissions cost has been included as per AEMO’s ‘moderate’ 2015 scenario.
AGL’s NSW Generation Plan

Though the replacement plan has an installed capacity of 2,900MW, it accounts for a firm capacity of 1,000MW.

The Australian Energy Market Operator has endorsed AGL’s Liddell replacement plan. It said the plan provides more than enough energy and capacity to meet the potential shortfall created by the closure if AGL completes all three stages by the 2022 deadline.

Some of this plan is already under way, as the AGL board has approved the upgrades at Bayswater and Liddell and the new solar and wind power plants. However, the next two stages are dependent on market signals and investments other companies make in new resources.

If stages 2 and 3 of AGL’s plan are not undertaken in time and other market players do not invest, there could be a reliability gap that results in supply interruptions. While this is unlikely to occur, this is exactly the type of problem that the government’s National Energy Guarantee is supposed to fix. The guarantee envisions that retailers carry the responsibility of meeting the required amount for dispatchable energy. Failure to do so would invite financial penalties, with the energy market operator stepping in as the procurer of last resort.

However, AGL has proposed an adequate plan to meet the gap that the Liddell closure would create. It’s ultimately improbable that regulator intervention will be needed.

That said, AGL’s plan is not necessarily the best plan. There are other lower-emission options that are more cost-effective.

The ConversationA study by the Institute for Sustainable Futures (which I have contributed to) proposes a third “clean energy package”, including renewable energy, energy efficiency, energy storage, demand response and flexible pricing. Rather than selling Liddell, if the Commonwealth is looking for low-cost and reliable solutions, this is the approach it should be pursuing.

Kriti Nagrath, Senior Research Consultant, University of Technology Sydney

This article was originally published on The Conversation. Read the original article.

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AGL rejects Turnbull call to keep operating Liddell coal-fired power station



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Malcolm Turnbull told parliament on Tuesday he and Josh Frydenberg are in discussions with AGL about keeping Liddell operating beyond 2022.
Lukas Coch/AAP

Michelle Grattan, University of Canberra

Energy giant AGL has delivered an initial sharp rebuff to Malcolm Turnbull’s plea to extend the life of the Liddell coal-fired power station by at least five years.

But Turnbull is said to be determined to keep Liddell open and is exploring all options, saying on Tuesday night that while AGL wanted to get out of coal, it would be prepared to sell the power plant.

Turnbull on Tuesday rang AGL chief Andy Vesey to discuss lengthening Liddell’s life, after the Australian Energy Market Operator (AEMO) warned urgent action is needed to ensure Australia has adequate reliable power during the transition to cleaner energy.

The Liddell plant, located in New South Wales’ Hunter region, is set to close in 2022, and AGL has had a long-running advertising campaign saying things need to change and “we are getting out of coal starting 2022 and ending 2050”.

Turnbull told parliament in Question Time that he and Energy Minister Josh Frydenberg “are already in discussions” with AGL “about how we can ensure that the power station stays in operation for at least another five years after 2022”.

Vesey fired off tweets reiterating the company’s intentions. Responding to a Tony Abbott tweet that had said “good that AGL is no longer getting out of coal!”, Vesey tweeted: “We’re getting out of coal. We committed to the closure of the Liddell power station in 2022, the end of its operating life”.

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In another tweet, Vesey said “keeping old coal plants open won’t deliver the reliable, affordable energy our customers need”.

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After the tweets Turnbull rang Vesey again. Later Turnbull told reporters: “I’ve spoken to him several times about this matter. He says AGL wants to get out of coal, but he has said that he is prepared to sell to a responsible party and that’s what we’re talking about.”

“Mr Vesey has obligations to his shareholders, my commitment is to all Australians – families, businesses big and small – to deliver affordable and reliable electricity,” he said.

Turnbull appeared to rule out the government buying the station, saying “I think it’s better that the private sector owns generators like that”.

He said there were “obviously other options but one option clearly, that I responsibly as prime minister have to explore, is keeping Liddell going”.

Tony Wood, energy program director at the Grattan Institute, said on Tuesday night that a sale of Liddell would be possible if the price was right and there was a commercially viable market for the power.

The AEMO report says the National Energy Market (NEM) “is not delivering enough investment in flexible dispatchable resources to maintain the defined target level of supply reliability, as the transition from traditional generation to variable energy resources proceeds”.

It stresses immediacy, saying “short-term measures will be necessary until a long-term solution is agreed and becomes fully effective”.

The problem posed by the planned Liddell closure is a recurring theme in the AEMO report, which is also cool on new power plants “with uncertain long-term business viability”. Liddell, commissioned in the early 1970s, has a total capacity of 2,000 megawatts.

AEMO says that consideration should be given “to the possible extension of the capability of some existing resources … This could take the form of life-extension or investment to increase the flexibility of current dispatchable resources, and thereby improving their business viability and extending their life in the market.”

The report recommends:

  • before the coming summer: a strategic reserve of about 1,000 megawatts of flexible dispatchable energy resources is needed to maintain reliable supply in South Australia and Victoria. AEMO is already acting to deliver this.

  • up to 2020-22: progressively decreasing levels of strategic reserve will be required over the summers – and new mechanisms to deliver these must be put in place in time for 2018-19.

  • before the scheduled 2022 Liddell retirement about 1,000 megawatts of new investment is expected to be needed to preserve supply reliability in NSW and Victoria. Mechanisms should be established in the NEM design to deal with these and similar needs for the long term.

The government, which has before it the proposed clean energy target policy recommended by the Finkel report, in June commissioned the AEMO to assess the risks to reliability and affordability posed by the closure of the Hazelwood power station and similar closures to come.

Apart from the Vesey tweets, a spokesperson for AGL reiterated AGL’s position on closing Liddell. “AGL has committed to the closure of the Liddell power station in 2022, which is the end of its operating life.

“AGL has provided this advance notice to avoid the volatility created by the sudden exit of other coal-fired power stations. AGL is actively assessing what capacity will be needed post 2022 and we, along with other market participants, will consider AEMO’s report in light of these plans,” the spokesperson said.

Frydenberg said that “building on our actions to date including putting in place new restrictions on the export of gas and opening up discussions with AGL over Liddell, the Turnbull government will leave no stone unturned to ensure affordable and reliable power for all Australians”.

Labor’s climate change spokesman Mark Butler, referencing a Vesey tweet, said Turnbull’s “claim of a five-year extension didn’t last five minutes”.

Butler said the government’s policy inaction was driving up electricity prices and a clean energy target “is the solution to crippling policy paralysis.

The Conversation“Yet the government refuses to act, citing any and all excuse to delay, when everyone knows it is internal Coalition division and the weakness of the prime minister that are really to blame,” Butler said.

Michelle Grattan, Professorial Fellow, University of Canberra

This article was originally published on The Conversation. Read the original article.

ELECTRIC CARS COMING SOONER RATHER THAN LATER


In great news for the environment and consumers it seems that ‘green cars’ will be arriving in Australia sooner rather than later, with infrastructure for electric cars to be set up in Brisbane, Sydney and Melbourne within four years. The project is a joint venture between AGL, Macquarie Capital and Better Place.

The project aims to set up recharge stations for electric cars at workplaces, homes and shopping centres. It is thought that some 250 000 recharge stations will be built in the project. Such projects have already been set up in Israel and Denmark.

Macquarie Capital is to raise $1 billion to build the recharging network, with AGL to supply renewable energy for the project. Better Place will actually build the network.

Should the project go ahead and the infrastructure be built, motorists will be able to dump petrol and diesel vehicles and move to electric ones. This will of course be a great relief from rising fuel costs and help protect the environment from further greenhouse gas emissions.