AGL buckles in political heat, agrees to delay closure of Liddell

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AGL to delay Liddell closure to support “critical” summer demand, performing an about-face on previous claims the ageing coal plant was unreliable – especially in summer.

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AGL Energy has buckled in its resolve to shut the ageing and highly polluting Liddell coal-fired power generator on its scheduled use-by date of 2022, announcing on Friday that it will delay the closure of the New South Wales plant to April 2023.

In a statement to the ASX, AGL said that it had extended the life the 2,000MW coal-fired Liddell Power Station – along with that of the Torrens A power station in South Australia – to “help the national energy market cope with the critical summer months.”

“AGL has previously indicated that Liddell would close in 2022, which after 50 years of operation will have reached the end of its technical life,” AGL said in a statement to the ASX.

“AGL has today informed AEMO that the first unit at Liddell will close in April 2022. However, following an independent engineering assessment, AGL has determined that the remaining three units will close in April 2023, supporting system reliability throughout the 2022-23 summer months,”.

The decision is a marked departure from the company’s previous and long-held line, that the plant would shut on the scheduled 2022 date  – and replaced with renewable energy, gas and storage – because it was old, increasingly unreliable, and expensive to run. This is a sentiment that has been echoed by AEMO, which has previously raised the concern that ageing coal and gas generators are becoming less reliable and increasing the risk of outages

Just two years ago, as we reported here, AGL made a nonsense of the idea – relentlessly espoused by the federal Coalition – that extending Liddell would increase energy security, least of all in the hot summer months, when old coal clunkers are known to buckle in the heat.

The closure of the Liddell Power Station has been the subject of immense attention, including the prospect of the Federal Government intervening to force the sale of the power station to a third-party to keep it operating.

AGL received a bid from Alinta Energy to acquire the power station, following pressure from then prime minister Malcolm Turnbull and energy minister Josh Frydenberg. However, the bid was never considered a genuine offer to acquire the power station.

Following the bid, AGL said that it had sought expert advice about reliability and safety implications of keeping Liddell operation beyond 2022, and at the time reaffirmed its decision to close the plant.

The company pointed out that Liddell was “unreliable” and had failed to deliver even half of its capacity during a heatwave in the summer of 2017.

“Since AGL acquired Liddell from the NSW Government in 2015, AGL has invested $123 million in the plant to improve reliability,” it said in its statement.

“Despite this investment, during the February 2017 heatwave, two units from Liddell were out of the market due to unforeseeable boiler tube leaks. As a result, there was not enough energy in the system and NSW experienced blackouts in parts of the State.”

The company had also stressed that the third party expert advice it sought about the reliability and safety of keeping Liddell open longer than its planned closure in 2022 had reaffirmed its decision to close it at that time, and replace it with a mix of gas, renewables and storage.

The announcement has been met by criticism from The Australia Institute, which has been tracking the growing unreliability of Australia’s ageing coal fleet, saying that the extension of Liddell’s operating life was not what is needed to address system reliability.

“The Liddell power station is the most unreliable source of electricity in NSW. It beggars belief that AGL will keep it open for another Summer of extreme unreliability,” the Australia Institute’s climate and energy program director Richie Merzian said.

“Just like the Government efforts to prolong the retirement age of Australians, AGL has been pressured to keep one of its oldest and most unreliable power plants operational for another year. All this does is put NSW electricity users at risk of another Summer unreliable energy.”

Indeed, the Australian Energy Market Operator itself noted as much in August 2018, warning that ageing coal and gas generators were becoming less reliable and increasing the risk of outages, particularly in summer.

Earlier that same year, in March, AEMO also endorsed AGL Energy’s plans to replace Liddell with the above mix, describing them as more than enough to meet the potential shortfall created by the closure.

Two years later, however, AGL has provided formal notification to AEMO of its proposed timelines for the closure of both power stations, with the new scheduling seeing power stations retired later than AGL has indicated previously.

AGL will also delay the closure of the Torrens A power station, which was expected to commence in 2019, with the mothballing of two of the power station’s four units.

The 1,280MW gas-fired Torrens A power station is more than 50-years old, and its retirement has been flagged for some time.

AGL will instead close the first two units in September 2020, with the third and fourth following in 2021 and 2022 respectively.

“To help mitigate generation impacts across the system following the outage of Unit 2 at Loy Yang A and to ensure that the Barker Inlet Power Station is operationally stable prior to mothballing these units, AGL is seeking permission from the State Government to continue to operate over the upcoming summer.”

For its part, the federal government welcomed the news about Liddell and Torrens. But it also made clear that the stay of execution afforded to both of the ageing fossil fuel plants was not long enough for its liking.

“The government’s position on Liddell is well-known and has not changed,” federal energy minister Angus Taylor told AAP on Friday.

“We remain in constructive dialogue with AGL about this, and this is a good short-term announcement.

“But there is more to be done. We want to see existing coal and gas generation stay in the market, running at full tilt.”
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