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AGL says batteries are coming, but coal is uninvestable

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VeseyAGL

AGL CEO Andrew Vesey at the company’s investor day briefing.

AGL says no private investor would invest in new coal plant, but says battery storage is coming and will be major game changer as costs fall – which may not be far away.

Several days after formally rejecting federal government requests that it invest hundreds of millions of dollars to keep the ageing and increasingly decrepit Liddell coal generator open, AGL held an “investor day” where it said no private money would support a new coal generator.

“We do not believe that any private capital will invest in new coal plants,” CEO Andrew Vesey told the assembled analysts. “Someone may say they want to, but that does not mean they will.”

AGL over the weekend unveiled plans to replace Liddell, which include 653MW of wind farms, currently under construction, 300MW of new solar farms, a 250MW gas peaking plant, and small amounts of demand management.

The later stages of the scheme – depending on what else happens in the market, and the make-up of energy policy – could see another 650MW of wind and solar, 250MW of battery storage, or pumped hydro, and possibly more gas peaking plants and more demand management.

The AGL plan made it clear to the government that the cheapest way to provide reliability, and reduce emissions, was to shift from coal to renewables, something the Coalition is finding hard to accept.

But Vesey’s comments were unequivocal, and appeared deliberately aimed at the lingering push from many in the conservative arena to build a new coal-fired generator. “The government may say it wants to … but it is becoming an increasingly risky proposition.”

Instead, AGL used the investor presentation to talk about the significant change that would take place in energy markets, driven by zero marginal cost generation such as solar and wind (and their falling capital costs), and the emergence of battery storage.

AGL noted that all current battery storage installations required the support of government funding (which is not quite true, but true enough of the Tesla big battery and the Wattle Point installation being built near AGL’s wind farm of the same name on South Australia’s Yorke Peninsula.)

AGL will operate the Wattle Point battery storage, mainly as a provider of grid services, with the ability to “island” or use local wind and solar supply to create a micro-grid, if there are major outages elsewhere.

Richard Wrightson, he is the head of wholesale markets at AGL, said the company had deliberately put battery storage at the “back end” of the plans to replace Liddell from 2022, because that is when they will become economic.

“They’re not quite there yet, but they are coming,” Wrightson said. He said the economics of battery storage would change, driven by the electric vehicle sector rather than the power industry. “That will change, and it will be a game changer,” he said.

agl NEM

Wrightson pointed to North Brown Hill wind farm north of Adelaide, often referred to as Hallett 4. Often, its output is contained because of network limits (see graph above, and the difference between potential generation in blue and actual generation in red.)

“That is wasted energy,” he said. Wind – with a value of zero at this time – could be stored and put back into the grid when prices rose. “That would make good arbitrage,” he said.

Of course, it’s not the only opportunity. Like the Wattle Point facility, it can provide frequency and other network services, and provide islanding services.

AGL also saw opportunities for its household batteries, and learning how to deliver a return on the capital invested in “behind the meter” applications to provide services to the grid, such as flattening demand and smoothing peaks.

AGL nem 2

For the moment, however, AGL saw the best opportunity in reciprocating dual fuel (gas and diesel) gas generators of the type that it is installing in South Australia, and it has planned for NSW.

These are fast reacting, are not wholly dependent on the ability to source gas in Australia’s “opaque” market, and are cost effective, and best placed to deal with the transition to 5-minute settlement periods.

AGL said it would continue to invest in “agile” assets until the layout of future policy became clear. It also reiterated it supported the proposed National Energy Guarantee, and was playing a prominent role in consultations on the policy’s design.

In the meantime, AGL also put the case for an LNG import facility in Victoria, saying it was possibly the best way to deal with a domestic gas market that lacked competition, was opaque, and where obtaining supply was difficult. It will make a final decision in 2019.  

  • Dee Vee

    Batteries are not baseload. Solar is not baseload, Wind is not baseload, pumped hydro is not baseload. Vesey is an idiot. If AGL wants to get out of coal, then just sell the existing plants, that were “gifted” to you by the government, to someone else who will be able to make them work at a profit, and produce baseload power at the same time.

    Its pretty obvious AGL’s only agenda with power generation is pushing up profits.

    • Andy Saunders

      Umm, that’s the agenda of any corporate. And it’s usually good – ref Adam Smith circa 1776

      • Dee Vee

        Which is why they shouldn’t be in the position they are. They have proven they are not able to provide an essential service at a reasonable price, so the government needs to regulate or re-nationalise. The nonsense the government spouted about efficiency, and LOWERING prices has proven to be false.

        • Andy Saunders

          Unfortunately your argument is tarnished by the Qld example, which is of state-owned generators that price-gouge (until recently) worse than the privately-owned ones elsewhere.

          If your comment is something about reliability, that’s partly/mostly a function of the market operator, which is most definitely not a private-sector body.

          I agree that the government(s) need to regulate (better). Privatisation is just a political point of view rather than anything economic. There’s good reason to expect government-owned power-providers (generators or T&D) to be more price-gouging than private sector equivalents (they are much more prone to capture the regulator).

    • Alan S

      You do understand that the frequently misused word ‘baseload’ refers to electrical consumption and not to generation?

      • daroiD8ungais7

        Demand == Supply

        • nakedChimp

          It’s still the wrong word to describe a supply system that is inflexible.
          It’s ‘basesupply’ at best.

          But keep on touting newspeak.

        • Alan S

          What on earth does that mean? There’s a clue in the word ‘load’ which people with electrical experience would understand. Even politicians have stopped talking about baseload – whether or not they understood the term.

          • daroiD8ungais7

            BaseDemand == BaseSupply

          • Alan S

            Still BaseNonsense. If you can’t explain yourself coherently in electrical terminology, don’t bother.

          • Dee Vee

            Nice try to deflect the argument away from AGL’s failure to provide a secure supply, and instead chase methodologies that will end up increasing costs to consumer, increasing their profits, all the while spruiking lower prices.

            The government needs not only the NEG, but other guarantees, and HUGE penalties, if the energy suppliers fail to provide secure and reliable power.

            Maybe 1 million dollar penalties for every minutes of power loss, and a “flagfall of 20 million dollars for every event” – same as the suppliers “daily supply charge.

            Unfortunately leaving the fox in the hen house is a guarantee of failure by private enterprise, Instead of letting them run the show, the government should have gone to tender for the “cheapest” supply. None of this “peak” power and “spot price” rubbish.

          • PaulC

            Dee Vee, there are failings in the market I’ll completely agree. But the market (appropriately framed and regulated) remains the best mechanism to deliver cheap and reliable power balanced against emissions.

            It is these market failings which result in power being expensive. As for unreliability, that is a whole separate discussion which has more to do with customer expectations and network design on top of market failure – and is not the fault of suppliers who simply work with the rules they’re given.

            I think your arguments might gain more traction therefore if you argue for the outcome we all seek rather than prescribing means to achieve it. The means which you suggest are neither appropriate nor feasible and that’s why people disagree with them.

            So let’s agree that the system is broken, and let’s try to engage and sponsor the experts to fix it. The non-expert intervention of successive governments is after all what created this unholy mess. Continuing the latter and ignoring experts will not help.

          • daroiD8ungais7

            Are you familiar with the unit commitment problem? Well think about it a little bit harder and maybe you’ll see my point.

          • Ian

            You’d think so, with a word like load in Baseload, but most would refer to the generator type and more specifically the generator characteristics of coal . See Audrey Zibelman’s use of the word, and this article from ABC: http://www.abc.net.au/news/science/2017-10-12/renewable-energy-baseload-power/9033336.

            This article quoting Vesey and Wrightson does not even use the term baseload. They say investing in new coal is risky, they need agile assets. They say the gas market is opaque and want to hedge their bets with an LNG import facility and dual fuel generators.

            They like batteries but want others to do the pioneering work so that they can benefit from low battery prices in 2022

            They say wind and solar is already in development that will mostly replace Liddell and gas will fill in the gaps.

          • Dee Vee

            Batteries are not baseload, that 100 megawatt one in SA is only good for 1 hour worth of supply for 30,000 homes. If there was another large scale power failure, its available capacity would last even less time. Basically batteries are only good to cover short term peaks in demand. Not for providing ongoing power for extended periods.

          • Alan S

            The purpose of the Jamestown battery was explained ad nauseum on this site and others and I’m not going to bother repeating it.

          • I’d like to think it was explained with great depth and insight, rather than ad nauseum.:)

          • Alan S

            Agreed I didn’t suffer nausea when reading your comprehensive article that explained the purpose clearly. I suppose I’ll have to make a bloody donation to atone.

          • Joe

            Ian and Allan…Dee Vee…The Trollee…he’s back again.

          • Ian

            Jeez, Dee Vee, you make Jim Carrey’s “dumb vs Dumber” look smart. Very few would think batteries in such small quantities would do that ongoing power over extended periods thing. It’s the agility in a generator that we are looking for. AGL says so themselves. Whenever you perseverate the word “ Baseload”or “coal” use this mantra “ wind and solar is here to stay” repeat this 10 times and then say “agility is good” . Try be agile yourself by perhaps shutting your eyes and standing on one leg . Then repeat the mantra cycle again. I guarantee you will soon be thinking like Vesey the CEO of one of the major energy companies.

            Instead of Baseloading your electricity usage, try think of ways we can use the amazing resources of wind and solar to achieve the never off and always enough reliability you seek without completely destroying our environment.

      • Dee Vee

        no need to a pedant with green blinkers on, you well know what I mean, we need power generation that is not dependent on wind or sun or has a short limited “storage” capacity. We need “baseload power generation” that can continue on “forever” with no regard to fleeting environmental states, such as sunlight or wind, which may or may not exists when they are required to provide a stable and reliable and uninterruptible power supply.

        • Joe

          Ahhh dee Dee…Coalers & Gasers aren’t reliable, stable or uninterruptible either. Maintenance and heatwaves sees them offline, Last February is just a taste of the ‘short term’ future of your precious Coalers.

      • Steve_Ohr

        Baseload is now an outmoded concept. The thing you’re not getting is that a new model for the grid has emerged:

        “Southern Power looks to bring ‘baseload renewables’ in US”
        http://www.rechargenews.com/transition/1296118/southern-power-looks-to-bring-baseload-renewables-in-us
        ====
        “Why utilities are more confident than ever about renewable energy growth”
        http://www.utilitydive.com/news/why-utilities-are-more-confident-than-ever-about-renewable-energy-growth/440492/
        =====
        “NextEra shrugs off concerns about grid reliability and PV case”
        http://www.rechargenews.com/transition/1315697/nextera-shrugs-off-concerns-about-grid-reliability-and-pv-case

    • Peter F

      After Liddell closes there will be 23 GW of coal, 3GW of CC gas, 1.7GW of gas fired steam plant i.e. 27.7GW of baseload capacity + 8 GW of hydro. Base Load in the NEM is 18 GW. a 15% reserve means that you need 21 GW of baseload capacity. Allowing for only 90% availability 23 GW. i.e. until we close another 5GW of coal and gas plants we still have too much baseload generation.
      What we need ,which the NEG won’t give us, is more competition from more companies with fast acting despatchable power.

      What the baseload generators need is more storage and more demand response so they can effectively increase the apparent base load and thereby increase their capacity factors.

      The problem for coal and gas plants is that storage is source agnostic and baseload coal and gas are competing with almost zero marginal cost wind
      and solar to recharge the storage or even heat the hot water/make ice

    • Joe

      …”make them work at a profit”….I think that idea is pretty well busted these days. Vessey says no new private investors in this game anymore. And the only reason that the old Coalers are still hanging on is because they get the big public subsidies. They pay nothing for the human health impacts or the damage to the environment that come with FF usage. The sooner they cop an ‘Emissions Tariff’ to reflect the true cost / real price of using FF the better. Lets have no more of this rubbish talk about cheap FF.

    • Chris Drongers

      Would that include getting coal at less than international parity price and a cheap gov loan to fix enough of Liddell to prevent it blowing a pipe? Without one or both of these it would appear that power from Liddell would be more expensive than AGL’s proposal

      • Dee Vee

        When the government owned them it cost 1-2c per kw/h. Today’s standard wholesaling pricing is between 8c and 20c with “spot” pricing its stupid amounts. Stop subsidising renewables, and re-nationalise the power generation industry. Its the only way the people will have cheap and reliable power again.

        • PaulC

          How about if we stop subsidising legacy fuels?! They get plenty of hidden support when the government hands out leases, offers subsidised infrastructure and cheap inputs (including where assets have been sold on the cheap lowering their cost of capital). And that’s ignoring emissions impacts which are a further external cost.

          Making the fossil fuel players internalise their costs (removing all those subsidies) has been deemed too hard politically, and thats why subsidies are needed for alternatives. Imperfect? Hell, yes but that’s reality.

          So let’s not claim that alternatives are subsidised in isolation. We’re all paying a lot to subsidise profits of suppliers irrespective of source.

        • Robert Comerford

          The fossil fuel industries have the greatest of all subsidies, they do not pay for the harm they generate. The fossil fuel industry has so many subsidies both hidden and out in the open.
          If the poorly educated, self centred Australian voters had stuck with the carbon pollution price we would be in a far better position now.
          Coal will never again be the cheap power it once was and it is not reliable.
          I do agree however that privatising essential services means the consumer ends up paying more in the long run than they should have under government ownership.

        • Andy Saunders

          Dee, you do realise that the levelised cost of renewables is well below that of coal power, right? See Mexico, Saudi Arabia for recent examples, or even some local ones. In fact it is approaching the marginal cost of operating old coal plant.

          As for nationalisation, see my point above (likely to actually make prices worse).

          As for reliability, have you seen what happens to some of the large genset trips from the coal plant in the last year or two? Much more failure-prone than renewables, and goes dow in large lumps (300-600MW at a time) – much harder to cope with.

          • Chris Drongers

            LCOE of PV and wind is greatly affected by costs of labour, banking service and regulation. Automation has hardly begun to affect labour costs but if Coors robot beer trucks can drive from Los Angeles to San Diego then imagine what robots could do installing tens of thousands of the same sized PV panels on the same sized racking in a controlled workplace environment!!!
            Banking costs (fees, interest) are largely an output of habit, the more renewables are banked the easier, quicker, cheaper the next one becomes.
            And as much as I would love regulation to be technically based in Australia, the delayed response to storage, demand response, planning for renewables intermittency all point to regulation being run to keep incumbents happy rather than serve the consuming public and business. It is embarrassing.

    • MikeH

      Dream on.

      54% of European coal plants are running at a loss and all of them will be by 2030.

      https://www.reuters.com/article/us-europe-coal/nearly-all-european-coal-fired-power-plants-will-be-loss-making-by-2030-research-idUSKBN1E201Q

      Coal fantasies are so last century.

    • Ken Dyer

      If you had taken the time to research the Liddell power station, instead of ranting on about the myth of baseload, you would have found out that the Liddell power station is basically a crock of shit. It operates barely at 40% capacity because it is just about stuffed. Its main customer is Tomago Smelter, and AGL have an agreement with them to supply power, except when the draw is too much. Then Tomago has to partly shut down. Tomago uses about 10% of all power generated in NSW, and despite them pulling all stops out to reduce their use of power, they still have to rely on AGL and Liddell.
      AGL has made a decision to close Liddell and replace it with renewable energy, because it is cheaper than having to totally rebuild Liddell. This can only be good for the Tomago Smelter who are hanging on by the skin of their teeth to keep their production going.
      Have a look in your mirror before you start calling people idiots.

      • Dee Vee

        so AGL should have no issue selling it to someone who wants to use it then eh?

        AGL are only refusing to sell it because they are scared of competition, and they know coal fired generation is the cheapest available, and will limit their ability to hike up spot prices like they have done in the past.

        AGL are nothing more than a “greed is good” corporate, and should not be in the supply chain for a basic utility like electricity (or gas)

        • Rod

          Maybe Tomago should make on offer to buy it you think?

          • Joe

            Delta Energy had a look at buying Liddell and said Noooooooo. You are spot on with putting the question to Tomago!

          • Rod

            BHP also had a chance to buy Pt Augusta with a similar response.
            If big users had to pay the actual (unsubsidised) price for energy they would quickly go out of business.

          • Joe

            Try telling The COALition and Rupe’s stable of opinionators sabout ‘Coal Subsidies’….they won’t have a bar of it! It is only RE that gets….massive subsidies….. that make energy so unaffordable that people could die in their homes.

          • Rod

            This is more subsidised (by retail customers) cost of electricity to BIG energy users. No way could a smelter be paying 33c/kWh. Their buying power lets them access cheap power. Much cheaper than running their own fossil fueled power plant.

        • PaulC

          AGL won’t sell because the infrastruture is shared with Bayswater which they plan to keep.

          As I recall, one reason AGL bought these assets was as a hedge against policy uncertainty (ETS, carbon tax, direct action, etc.). They surely got that decision right!

          The market tells a consistent story. Coal is no longer cheapest for most generation, nor appropriate for the dynamic peaks and troughs of demand. That’s why nobody wants to build new coal burners because over 50 years the economics don’t stack up. Alternatives get cheaper year by year while fossil fuels plateau or even get more expensive.

        • PaulC

          AGL won’t sell because the infrastruture is shared with Bayswater which they plan to keep.

          As I recall, one reason AGL bought these assets was as a hedge against policy uncertainty (ETS, carbon tax, direct action, etc.). They surely got that decision right! And sadly nothing has changed to invalidate it.

          The market tells a consistent story. Coal is no longer cheapest for most generation, nor appropriate for the dynamic peaks and troughs of demand. That’s why nobody wants to build new coal burners because over 50 years the economics and risks don’t stack up. Alternatives get cheaper year by year while fossil fuel costs plateau or get more expensive.

        • Ken Dyer

          It would cost you $3.6 billion to bring Liddell up to scratch – simply it is not economic, as this article suggests. Who would want to buy it? It is very old and worn out. Why do tou think the NSW Government gave it away in the first place?

          http://www.news.com.au/finance/business/other-industries/report-suggests-its-cheaper-to-close-liddell-coalfired-power-station/news-story/f7985a74016d3f6fee40f9c8318ed19e

          Why do you think Adani is trying to sell its Mundra coal fired power station in India for 2 cents? It is almost brand new and cannot be run profitably.

          Coal fired power generation is not the cheapest available, wind power is:

          https://d3n8a8pro7vhmx.cloudfront.net/vicwind/pages/1463/attachments/original/1512994579/2017_Wind_Power_In_Australia__ISF_Report.pdf?1512994579

        • Joe

          Dee Dee where have you been hiding the last month or so. Delta Energy had a look see at the question of buying Liddelll and they said nah, not having that. Tomago is only running because of the cosy deal with Liddell. Liddell is an ageing crock of shite that no one wants to touch. If Tomago reckon Liddell is so good then let them buy it but I guess everyone knows the answer to that as well….nah, not having that.

    • John Saint-Smith

      Your silence is golden. It says more than your original contribution.

      • Joe

        Dee Vee ,,,The Trollee… has run out of puff, just like his Coalers in today’s (15/12 ) Renew Economy piece by Giles.

    • rob

      Is your name either MALCOLM or TONY perchance?

      • Joe

        His name is….Trollee.

        • rob

          or DeeVeeiant

    • Brunel

      If only Kodak sold their film factory to someone who knows more about film than Kodak does!

      54% of the coal power stations in Europe are unprofitable.

      Hydro is baseload in NZ, Norway, Tasmania, Iceland.

      Batteries are baseload.

      • Dee Vee

        and we saw all the shortages and restrictions that were placed on Tassie’s power when the interconnector to the mainland was taken out of service for maintenance. And we saw the massive disruption in SA when the same thing happened with non baseload “green” power failed .

        • Guy Stewart

          You mean when the gas generator didn’t fire up?

        • Ken Dyer

          Was that before or after the transmission towers were blown over?

          • Joe

            Ken, don’t you realise that only RE uses the transmission lines that get knocked over by a Tornado. FF uses the ‘other set’ of transmission line that is ‘Tornado Proof’.

          • Ken Dyer

            Damn Joe, I didn’t realise that. Obviously Fryedhead was onto something ;~)

            By the way, very interesting report here

            http://www.windalliance.org.au/

    • Phil

      Or go 100% off grid in which case batteries then are the baseload.

      I only do 12 hours of genset runtime per annum with my off grid system.

      • Ian

        Electrical circuits are very scalable, what can be modelled at the milliwatt level can be done at the Gigawatt level, so your off grid setup can be a model for a much larger mini grid or statewide grid.

        Do you have some numbers?
        1. Approximate location like ‘country Victoria’ or ‘Byron Bay hinterland’
        2. Solar array size in KW
        3. Battery size in KWH
        4.worst case daytime consumption in KWH
        5.worst case nightime consumption in KWH
        6. Gen set size in KW, number of times run in the year and approx run time for each episode.

        This could be a very useful exercise . Imagine multiplying your experience by 700 000 and that could be SA’s experience -qid

  • Steve

    Of course base load is power generation which is always either too much to too little. Too expensive to compete against zero marginal cost production.

    Dispatchable power, on the other hand, is power when needed. Pretty valuable don’t you think.

    • Carl Raymond S

      I was with Vesey right up to the point where they will invest in dual fuel, gas/diesel generators. No new coal is good. No new fossils is better. Yeah, I get that it’s hard. Think like Musk – do it even though it’s hard.

  • willholmau

    All arguments about coal vs. renewable aside , I think I have a simple answer to AGL’s Liddell plant. AGL put the plant on the market for plant value + 10% in 2022. If no private company takes up the offer then we can finally say “Coal generation is finished in Australia”. This will perhaps give both camps the answer they were looking for. And Alan S, since when should a person need a degree in electrics just to have a say on a public forum? Typical leftie bully.

    • Ren Stimpy

      The cost to keep it running beyond 2022 is almost a billion dollars. Whoever would want to buy it can you put them in contact with me, because I have a chain of Shit Sandwich shops they’ll want to invest in too.

    • Ren Stimpy

      ‘electrics’?

      ‘a degree in electrics’?

      • willholmau

        A degree in electrics or a degree in shit sandwiches, whats the difference? You seem to know it all.

        • Ren Stimpy

          I have a degree in pointless snark.

  • Excellent idea – here in the US and Europe, they cannot give Coal plants away – they cost too much to maintain and more than 1/2 of them are currently unprofitable……they served their purpose, but their time has passed.

  • Chris Harries

    Battery technology is usually put alongside renewables. But when we think about it, if battery (or other storage) technology had been developed thirty years ago then they could have ameliorated power peaks and would have enabled even coal-fired power stations to be operated much more efficiently. What storage technologies mean for groups like AGL is that (even disregarding renewables) they can be used to get maximum advantage from all existing generation infrastructure and obviate the need for overcapacity that in the past had been built to cope with peaks.

    • MikeH

      Japan has a massive 26GW of pumped hydro with variable speed pumps to allow the PHES to supply FCAS. It was built so their nuclear plants didn’t have to ramp down overnight. The RE industry wants the rules changed so that wind and solar can use it now that many of their nuclear plants have closed.

      http://ieeexplore.ieee.org/stamp/stamp.jsp?arnumber=7065400

  • onesecond

    AGL would burn their own grandmother alive to make a profit. So certainly no green hippies that tell the coalition to stuff their coal where the sun never shines.

  • RobertO

    Hi All, one thing that is missing is the information on what the Gentailers are pay for Solar or Wind, or any generation. Yes coal may be costing them but they will not tell anybody about the costs. How much profit are they making? Vesey is on some $7 million (or more now) a year.