AGL Energy, the big three gen-tailer that just months ago declared closing coal early a silly idea, is fast-tracking its exit from coal-fired generation, with new plans to close its last plant by mid-2035, a decade ahead of the previous schedule.
In an announcement to the ASX on Thursday, AGL’s newly overhauled management team and board said the company would bring forward the closure date of the troubled Loy Yang A Power Station in Victoria’s Latrobe Valley by up to 10 years to 2035.
On its other two remaining coal plants, Liddell and Bayswater in New South Wales, AGL says it remains on track to shut both of these in April 2023 and between 2030 and 2033, respectively.
“We have heard it from our customers, communities, governments, capital providers and shareholders – the time is now for AGL to show leadership in the energy transition,” said AGL’s incoming Interim CEO, Damien Nicks.
Nicks says its decision to accelerate the closure of Loy Yang A – the result of a major strategic review – represents a major step forward in Australia’s decarbonisation journey, and brings AGL into line with the Paris Agreement goals.
“The targeted earlier closure of Loy Yang A Power Station will avoid up to 200 million tonnes of greenhouse gases being emitted compared to the previous Loy Yang A Power Station closure date,” Nicks said.
For AGL, the move will get Australia’s biggest emitter on track to achieve net zero for operated Scope 1 and Scope 2 emissions by 2035, and set the course for net zero on scope 3 emissions by 2050.
Alongside the release of its Review of Strategic Direction, AGL has also published its inaugural Climate Transition Action Plan.
A new renewable direction for AGL
In her first update to shareholders as the new chair of AGL, Patricia McKenzie said she was “very proud” to announce a new direction for AGL – and “one of the most significant decarbonisation initiatives” the nation has seen.
McKenzie says AGL aims to progressively decarbonise its asset portfolio with new renewable and firming capacity, with an ambition to spend $20 billion to have up to 12GW in place before 2036 – funded via assets, offtakes and partnerships.
This includes an interim target to have up to 5GW of new renewables and firming in place by 2030.
Currently, AGL has 3.2 gigawatts of new renewables and firming capacity in the pipeline and under-construction, including the 250MW Torrens Island grid-scale battery, due for completion in mid-2023, the 50MW Broken Hill battery, the 500MW Liddell battery, the 200MW Loy Yang battery and the 250 megawatt Muswellbrook Pumped Hydro project.
AGL says the pipeline also includes wind farms – “the largest planned in Victoria” – and a plan to redevelop the companies fossil fuel sites in the Hunter, Torrens Island and the Latrobe Valley into industrial Energy Hubs.
What a difference a year makes
“A lot has changed in the past 12 months, for AGL and, for Australia,” said McKenzie on Thursday.
This is true, although for Australia it’s been more like the past five months, since the May federal election delivered a change of government and a strong message from the public on climate.
“Around the world, there has been sustained political and social momentum and in Australia, we have seen various state and federal government initiatives focused on climate change action, which for the first time in many years, has provided a clear market signal for investors,” McKenzie said.
“This strategic direction we’re sharing today, for the faster decarbonisation of our business, is what we consider to be in the best interests of the company having listened to our stakeholders – in particular, our shareholders, and it is what our community expects of us and it is – above all – the right thing to do.”
“I’m sick of them fucking it up”
But AGL didn’t exactly come in peace to this decision; it took failed takeover bids, a scuppered demerger, and a targeted and well moneyed shareholder campaign led by billionaire Mike Cannon-Brookes.
Cannon-Brookes has long asserted that the last of AGL’s coal generators must close by 2035 at the latest. And his point has been that if AGL didn’t make that call itself, then the market and investors would – and it wouldn’t be pretty.
Today, the company’s new coal closure dates are broadly consistent with the aims of Cannon-Brookes and his then investment partner Brookfield when they launched a bid for AGL back in March that was rejected by the company.
Since then, Cannon-Brookes – using the 11.3 per cent stake his family’s private investment vehicle, Grok Ventures, retains in AGL – has focused his energy on overhauling the gen-tailer’s board and management to a new team, without the coal blinkers. See Cannon-Brookes nominates ex Tesla boss and former ESB chair in AGL board play
A response from Grok
Grok Ventures says that while it welcomes the release of the strategic review, and in particular the commitment to accelerate coal plant closures and pivot to renewables, AGL’s new timeline doesn’t actually align with Paris targets.
“Today we are even more optimistic about the future of this great company in leading Australia’s energy transition,” Grok said in a statement on Thursday.
“There is a monumental amount of work ahead to become a leading green Gentailer.
“This is why yesterday Grok proposed an additional four independent NEDs to the Board.
Tough news for some
News that Loy Yang A will close in 2035, a decade ahead schedule, will be tough news for the workers at the plant and for the broader community in Victoria’s Latrobe Valley, long a coal power hub.
State energy minister Lily D’Ambrosio acknowledged this on Thursday morning, saying the Labor Andrews government would work with AGL to help locals retrain, reskill and find new work opportunities.
“We’ve invested almost $2 billion to create more than 4,000 extra jobs in the Latrobe Valley’s workforce since 2014 – and in the coming months and years, our focus will be on helping Loy Yang A workers, their families and the Latrobe Valley community navigate the transition,” D’Ambrosio said.
The Australian Greens spokesperson on industry, transition and regional development, Senator Penny Allman-Payne, says the sudden turnaround by AGL highlights the need for a National Energy Transition Authority.
“Decisions to rapidly bring forward the closure of coal fired power plants, however welcome, should not be announced via a company’s media release to the ASX. It should be a planned and coordinated process that allows local workers control,” Allman-Payne said.
AGL says that over the 12 years to the retirement date, it will consult with employees and work closely with them on opportunities for career transition, including retraining, transition to retirement, reskilling and alternative career pathways.
Finally, the penny has dropped: Industry and analyst response
“The Board of AGL has finally listened to its shareholders and accepted that this ageing, polluting coal-fired power station [Loy Yang A] is incompatible with the energy transition and a serious risk to company value,” said Harriet Kater, climate lead at the Australasian Centre for Corporate Responsibility (ACCR).
“It is hard to determine what caused the penny to drop in the AGL boardroom. Was it the embarrassing defeat of the demerger, a new federal government, the rejection of a proposed chair or the final acceptance that shareholder value was at grave risk if Loy Yang stayed online into the 2040s?” Kater said.
“It is hard to trust this announcement from AGL,” said Wendy Farmer, Gippsland Community Organiser for Friends of the Earth.
“We can’t keep leaving plans for coal closure to private companies.
“What communities need is certainty.That means a proper transition plan and support from all levels of government, and rapid development of renewable energy in Gippsland to bring on new power supply,” Farmer said.
“Coal is not a commercially viable industry any longer,” said Climate Councillor Greg Bourne. “This is a commercial and strategic decision made by AGL, and reflects the reality of the rapid move towards a 21st century power grid as well as 21st century economics.”
