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AGL plans its own “big battery” and renewables to replace Liddell

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AGL Energy is planning its very own big battery, considering a 250MW battery storage facility at the Liddell coal plant in the Hunter Valley as part of a suite of investments designed to replace the capacity and output of the ageing generator that is due to close in 2022.

The plan – yet to be finalised – was unveiled at the company’s annual general on Wednesday by CEO Andy Vesey, and came after chairman Jerry Maycock voiced his support for Vesey and outlined the reasons why trying to keep Liddell open for five more years was a bad idea.

AGL has come under huge pressure from the Coalition government and the conservative media to keep Liddell open, despite warning that it would become increasingly expensive to operate and increasingly unreliable. Maycock said it made sense to invest in new technologies.

AGL liddell graph.

 

 

Vesey’s outline of AGL’s line of thinking was centred around the 250MW of battery storage and 100MW of “demand response” – including tapping into the household batteries of consumers – which he said could provide 150MW of “firm capacity”.

“We will deploy both grid-scale batteries, as well as residential batteries combined with orchestration technology to enable customers to participate in and benefit financially from demand response,” he said.

Such a battery storage installation – it did not give any details of how many hours of storage – would be the biggest in Australia, although it seems certain that once the Tesla big battery is completed in South Australia then other major projects will follow.

AGL is also half way through its first virtual power plant – linking household storage via smart software to deliver a “virtual” power plant equivalent to 5MW of solar power. It appears to be thinking along the same lines to help replace Liddell.

Other firm capacity would come from an upgrade of the neighbouring Bayswater coal generator – due to close in 2035 – which could add 100MW, as well as investment in new gas capacity (750MW) to help meet the 1,000MW of reserve capacity shortfall identified by the Australian Energy Market Operator.

But most of the 8 terawatt hours that Liddell curently produces – much of it at night when the need is less – will be replaced by new renewable energy projects, because they are the cheapest options.

“We believe the bulk of the 8 terawatt hours of energy needed to match Liddell’s output can come from new renewables projects, as we believe this is the most cost-effective option,” Vesey said.

“That would include our Coopers Gap and Silverton projects already under construction, other projects from within our pipeline, and other companies’ projects as well.

“And, of course, the intermittency of wind and solar generation means additional firm, flexible, dispatchable capacity is also required.”

AGL new projects GraphVesey used this table above to illustrate the potential time-line of the various projects. Inerstintly, the battery storage installation is slated for completion around 2022 – meaning that it is likely to benefit from considerable cost falls between now and then. Analysts put these costs falls at potentially 50 per cent or more.

The two wind farms are already being built, and another 3,000MW of wind and solar could be built over the coming four or five years.

“Our plans will be flexible, enabling us to increase or decrease our own investment depending on the broader response of the market to price signals and policy certainty,” Vesey said.

“Before we present our final plans to the Federal Government and AEMO, we have more work to do on refining the technical scope of these plans.”

Its plans, however, are likely to meet with approval from AEMO boss Audrey Zibelman, who told a parliamentary inquiry last week that “the more economic new investment” to replace Liddell would likely be a “dispatchable resource, more of an intermediate or peaking.”

Zibelman said this would be a better option than new baseload, “because we wouldn’t expect it to be operating for that many hours”. And new baseload would take eight years or more to build.

AGL has told the government it will consider its options on Liddell and report back by December, but chairman Maycock made it clear what he thought of the government proposal  to keep it open for another 5 years.

He reiterated that it was always the NSW government’s plan to close Liddell in 2022, and AGL had given seven years notice – unlike other coal generators like Northern in South Australian and Hazelwood in Victoria.

Maycock also noted that Liddell was costing more money to maintain, and despite this would become less reliable.

“While it may be technically possible to extend the life of the power station, the costs of doing so in a way that ensures that the plant is even moderately reliable are certain to be substantial,” he said.

He also said “unbundling” the asset from Bayswater – which would be required if sold to a third party – would be challenging because it would require payment to AGL to make up for lost earnings to 2022,  and would require any buyer to make a “highly complex and risky set of assumptions about a wide range of obligations up to and/or beyond 2022. ”

These would include fuel and other operating costs, capital costs, subsequent closure and rehabilitation costs, as well as social costs.

“Nevertheless, the Government has requested that AGL management present to your Board the continuation of Liddell’s operations post 2022 for five years and/or the sale of the plant, which we will consider.

“In addition, AGL has committed to deliver a plan by early to mid-December of the actions it will take to avoid a market shortfall once the Liddell coal-fired power station closes in 2022, being the replacement of a significant portion of Liddell’s capacity with new technology.”

He said the company had been working on these plans since 2015, when  it originally announced the plant’s closure.

(This is a breaking story, it will be updated).

  

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  • riley222

    Logic rears its head. Let’s hope commonsense prevails over political pressures.

  • solarguy

    Finally some sanity in a world of madness. Sounds like a plan man!

  • MaxG

    The plan need to be carefully read… Isn’t the language marvellous?! “Economics of new projects will be strongly supported by adoption of approapriate market mechanisms to incentivise capacity investment.”

    • Ren Stimpy

      It’s either that or the same except with bayonets.

  • Bradley

    How does a 250 MW battery result in a firm capacity of only 50 MW?

  • Joe

    I remember reading that AGL’s VPP project in Adelaide, the one where Premier Jay and Joshie F. got together for THAT presser, has been ‘suspended’. So not sure about how committed they are with VPP’s. The region is turning into a renewable energy hub with all the new solar and wind builds and add those batteries. It seems pretty clear then that AGL is not going keep Liddell running as a Coaler past 2022. But why not play the ‘here it is for free game’ like when the NSW Government gave Liddell to AGL. AGL could say to Big Mal…you want Liddell running past 2022, well here it is, you can have it for free. The COALition will then have it’s way with its very own Coaler. Keeps the Abbott, the Bananabee, the Canavan, Ruperts newsrags all happy as larry.

    • Chris Fraser

      Noooo ! Turnbull will get stuck with the rehabilitation costs.

      • Peter Campbell

        Nooo! Turnbull’s successor will be stuck with passing the rehabilitation costs to the tax payer.

        • Joe

          Taxpayers…always coming to the rescue…to clean up The COALition’s messes.

          • nakedChimp

            what else is new?

    • So which one next? Which plant is the next most polluting?

      Imagine how good it would feel pushing the buttons that turn off the last coal fired power plant in Australia. I wish it could be me.

      • Carl Raymond S

        And as per yesterday’s story, we are heading for the point where new renewables are cheaper than existing coal. It could come sooner than the planned retirement date on the newest coal plant – a stranded asset.

    • Kevfromspace

      The VPP project is only suspended while AGL are looking for a new technology partner for the batteries.

  • Robert Westinghouse

    Good news. No thanks to the government who put us in this mess. Still cannot fathom why the LNP is so dumb, or corrupt….the truth will eventually come out. Gran is betting on the latter.

    • Max Bourke

      I’m with Gran!

      • Ron Horgan

        Gran for PM.

    • Joe

      Forget the ‘dumb’…they are just ‘corrupt’….political donations can have that effect.

  • Chris Fraser

    You badass AGL. Now … who volunteers to ring up Turnbull and give him the advice he needs ?

  • Chris Drongers

    First thought- a 250MW battery, even if it only runs for an hour at max, will destroy the economics of gaming generation pricing. And more so when bidding comes down to five minutes rather than half hour.
    Topping up the battery opportunistically from low cost wind and solar, combined with the high upfront cost of the battery will virtually guarantee that it would almost always bid into the market.
    Coal plants supplying variable daily rise and fall in demand could not compete. Only option would be to tie themselves to a smelter or mega-large industrial use with unvarying demand

    • Do I understand this correctly. Once the bidding is changed to five minute intervals you think this battery storage will be available quickly and often, if not always, to bid or intervene if there is any market manipulation by other generators? Is that ability the same for all similar projects? Does that mean it would put downwards pressure on prices?

      • Tom

        I’m a bit suspicious of instant success too. It makes me think of Wivenhoe power station – 500MW of pumped hydro capacity, underutilises because it is owned by a major coal generation player. Why would AGL push its own prices down?

      • Chris Drongers

        I understand the concern that markets could still be gamed, this time using the battery. Could well do if oligopolies control a small number of batteries. However if a number of battery aggregators/demand managers without their own generators enter the market the only way these make money would be to enter the market frequently, by under bidding others.

        Your concerns should I agree point the market regulators to tightening rules to prevent market gaming.

      • Chris Drongers

        How else can the capital costs of a battery be justified?

  • Stan Hlegeris

    Not again! An important article rendered meaningless by unit failure.

    What on earth is a “250MW” battery? As written that suggests it can deliver 250MW instantaneous POWER. If so, we know almost nothing unless you tell us how long it can deliver power at that level.

    Or maybe you meant to tell us about how much ENERGY it can store. Maybe you meant that it stores 250MWh. In that case, you also have to tell us how much POWER it can deliver. Is it 100MW for 2.5 hours? 1000MW for 15 minutes?

    I see you noted that AGL didn’t specify how many hours of storage. With all due respect, don’t you think it’s either your job to ASK or to point out right up front that the info released by AGL is so incomplete as to have almost no meaning?

    I love your work but we have to demand precision in these things.

    • David Mitchell

      A 250MW battery is the same as a 250MW gas turbine, a 250MW solar farm, a 250MW CST plant, a 250MW wind farm and a 250MW hydro plant. They all deliver 250MW instantaneously, but under different circumstances and duration’s.

      Battery – for short periods (< 60 minutes), Gas turbine – as long as you like. Solar farm – while the sun is shining and the middle of the day. CST plant – evening peak because I have molten salt storage. Wind farm – when the wind is blowing at capacity. Hydro – as long as I have water.

      You are thinking of a battery as a storage device. We are thinking of it as a particular type of power plant.
      .

    • Not again! The 250MW figure comes from AGL. We can’t make up the MWh number for them. The installation is 5 years away – they haven’t decided on the technology or its uses, so it would be pointless for them to say how much storage. As we’ve said before, it is the same thing in the first stage of any installation, tender process. Happens across the world, please get over it.

      • Remember, the South Australian government tender was very vague, and in the end the amount of storage 100MW/129MWh was driven by the decision to park some of its capability with FCAS, and the other bit with load shifting. For AGL to make a call on that now – 5 years out from installation and defined need – would be ridiculous, whatever the battery pedants say.

        • Stan Hlegeris

          Giles–I accept all of your points. And I get that this is all about load balancing rather than bulk energy storage. But you point out that AGL hasn’t decided if it needs this power capacity for 5 seconds at a time or for several hours, so how can they have seriously settled on 250MW or any other size?

          I know it’s unusual for AGL to be on the right side of this sort of issue, but just because it’s playing an unaccustomed positive role we shouldn’t let them get away with fuzzy announcements.

          • Ken Dyer

            Stan, when AGL bought Liddell in 2014 for $0, it was rated at a maximum 420MW due to its age and unreliability. Today, at least 2 of its generators are almost permanently out of action, and the others are just about junk. It is unreliable as evidenced that it could not provide power the last time a heat wave in NSW caused blackouts.

            So, when you put that in context, a 250MW battery can supply reliable instant power as and when needed, unlike Liddell. AGL, whether they supply instant and reliable power for 5 minutes or 5 seconds, have obviously done their sums and found that 250MW is economically viable for them, and will return a profit.

            It also provides a method to migrate from Liddell, and probably before 2022, whose reduced capacity(when it runs) and high cost can be used in the short term to keep the battery charged up, then retired as solar and wind come on stream.

            All up, an eminently sensible and well thought out sustainable migration plan that is not a waste of money, unlike the Turnbull troglodyte COALition government’s profligate sellout to the coal industry.

    • Ian

      Stan, if you were a Barramundi you would make a good catch! Use the words MW for a battery and you are sure to spike someone’s ire! Giles has before told us why he uses this unit of measure for battery capacity. He is just reporting on the announcement of the company proposing this. Why would they do this when they are in the electricity business? That is the interesting question. Is it because they don’t know the difference between a MW or a MWH? Or, perhaps, they haven’t decided yet how much capacity they need to back up that MW figure, as Giles suggests. Or, could it be that they are deliberately holding back on a Storage Capacity figure to hedge their bets later on. They have 5 years to implement their plan and who knows what the energy scene will be like in that time. Do they know how much renewables can be integrated into the grid (sans storage) to provide reliable never-off power? With the huge uptake in distributed solar by homes and businesses, do they know how big their market will be in 5 years? Will that parasite of an industrial consumer, Tomago Aluminium refinery, still be solvent in that time frame? Will the uptake of EV provide both a new customer base for their product and a storage medium for grid stability? The government making demands on them when the energy future is so uncertain is unfair. Whatever the decide now will probably be like Bloomberg’s future projections – seems reasonable but probably wrong.

      • Stan Hlegeris

        Ian–I’ll take the Barramundi thing is a compliment.

        How many people know the difference between 1MW and 1MWh? Less than 1%, I’d estimate, maybe WAY less. The sort of people who read this newsletter are the ones who do know, and that means we carry the obligation to keep the AGLs of the world honest.

        The only true story so far is that AGL has successfully side-tracked the discussion by using the magic word “battery” without committing to anything specific.

        • Ian

          Too right, but why not. The ageless story of Ali Baba opening the cave using the magic words “open sesame” is repeated in this electricity debate: say the words “battery storage” and you’re through!

  • Ken Hungerford

    When are suppliers, commentators and others going to stop the misleading quoting of MW. 250 MW, in its own right a drop in the ocean, does not tell us how many hours of operation can be sustained for a given MW demand. If it is, for example, 250 MWh then it is next to useless. Let’s get real about what is needed and stop distorting the facts of what are needed.

    • Jon

      250MW max output with a 250MWh is far from useless.
      It lets you fill multiple small shortfalls in say wind output directly from the battery or lets you fill a bigger shortfall for a much shorter period of time while you bring a peaking gas plant online and stabilised.
      Much the way I see the Tesla Neoen battery being used in S.A. to get rid of the rule of needing so many gas turbines running when wind power is high.
      It’s not so much for power into the grid over sustained periods but an enabler to use peaking plants for peak demand rather than having to have them on and stabilised all the time.

  • Ian

    AGL have come up with a fantastic plan: match government BS with their own BS. 5 years is a long time in the energy world, who knows, batteries could be as cheap as solar panels or wind turbines or they could turn out to be another ‘just round the corner’ technology as far as availability is concerned. Make up a feasible plan, throw in some gas and some already being developed renewable projects, add some super-cooperative experiments with homeowners, use the word ‘demand management’ and chuck in a massive 250MW battery -which trumps the big battery in South Australia – for some impressivity, and hey presto, under a cloak of BS you can do nothing new until the frigging Liddell plant falls apart.

  • Joe

    Well, there he was again our very own ‘Kiwi of the Year’ on the ABC’s 7.30 program last night (27/09 ). More words of wisdom from the Bananabee about AGL and Liddell. But to understand his ramshackle ramble-a-thonery you needed to know all about cars….specifically ‘The Bayswater Car’, ‘The Liddell Car’ and the mighty ‘FJ Holden’.
    I am just left speechless every time the Bananabee is interviewed these days. If he isn’t worried about being caught short in a lift during a blackout then now it is all about what is the best car. But seriously, I love it how The COALition think they know better than AGL when it comes to the operation of Liddell. Put it onto the market says our Bananbee, it’s all about competition. But he didn’t mention that Delta Energy had a look at Liddell and said…nah. AGL and Delta know the score and that is Liddell is a clapped out clunker. We saw it on the TV when the media did a tour recently. When will The COALition face reality. AGL gets it, RE plus storage is the way forward.