Closure deal on Australia’s dirtiest power station kills hopes of early 100pct renewables

Australia’s dirtiest power station – the 2.2GW Loy Yang A brown coal generator in Victoria – will continue to operate until 2035 under a new deal struck with the state government which effectively kills hopes that Australia could reach 100 per cent renewables before that date.

The 2035 closure date is consistent with AGL’s commitment announced nearly a year ago, when it brought forward the closure date by a decade under pressure from activist shareholder Mike Cannon-Brookes, and climate campaigners and scientists.

There was hope that this closure date could be brought forward. The deal with the Victoria government effectively kills this hope, and includes unspecified compensation from the state if – as widely expected – lay Yang A struggles to make money in a grid increasingly dominated by renewables, and rooftop solar.

There was no immediate comment from Cannon-Brookes or his private investment company Grok Ventures. Cannon-Brookes earlier this month described AGL as one of the most toxic companies on the planet because of its high emissions.

The confirmed closure date fits in with Victoria’s own target of reaching 95 per cent renewables by 2035 – although that doesn’t fit with the closure plans of the neighbouring Loy Yang B coal fired power station, owned by Alinta, which is still set for 2047.

But it does kill any prospect of Australia reaching 100 per cent renewables any time beforehand, or by 2030 as urged by The Greens and climate scientists.

Even the 82 per cent target adopted by the federal Labor government is looking hard to do, because of multiple project and transmission delays.

And that 82 per cent by 2030 target, scientists note, is only consistent with a sub 2°C effort, not the 1.5°C called for, particularly in the light of the surge in global temperature records and ice melts.

The announcement came on the same day that another of the big three utilities, EnergyAustralia, said it intended to keep Mt Piper coal fired power station in NSW open until 2040, although it foreshadowed a gradual ramping down and operating in “reserve” capacity in its later years.

The Victoria government deal with AGL follows a deal with EnergyAustralia over the future of Yallourn, another of the big three brown coal generators in the state.

That agreement was heralded as an “accelerated closure” but was seen in some circles as an effective propping up of the facility to prevent an even earlier closure of the ageing plant that is struggling to cope with the increased output of rooftop solar. The details of that deal have not been released.

Victoria energy minister Lily D’Ambrosio said the “Structured Transition Agreement” with AGL that will ensure a firm 12-year notice period for the workforce, community and energy market – “with confidence the power station will remain available until 2035.”

It said the “binding agreement” would “avoid uncertainty” in the market which could cause renewable investments to be delayed and result in higher prices. It was advised on the deal by legal firm Norton Rose Fulbright.

“The agreement balances the requirement to support a safe and reliable energy system while delivering investment certainty until Victoria has enough renewables and storage capacity to replace Loy Yang A,” the government statement said.

In a separate statement, AGL said the agreement would ensure that Loy Yang A operated “at certain agreed minimum operational and performance availability levels” until its closure date.

It would also avoid an unplanned closure of Loy Yang A before the scheduled closure date “through a risk sharing mechanism that will apply in the event of adverse market conditions transpiring before the scheduled closure date (if deemed necessary by the State including to maintain system reliability).”

The confirmation of the closure data was hinted at last week when AGL announced an extension to its power supply deal with the massive Alcoa smelter in Portland.

AGL has said it will build 12GW of new wind, solar and storage by 2035 to replace its closing coal assets – it shut down the ancient Liddell coal generator in April – while EnergyAustralia on Monday said it would build 3GW of new assets, and would also participate in a planned 5GW offshore wind project in Victoria.

Origin Energy has flagged 4GW of new wind, solar and storage by 2030 – it is planning to close Eraring, the country’s biggest coal generator in August, 2025.

The three utilities together service the bulk of Australia’s electricity customers, but their combined commitments don’t even come close to one half of the 48GW of new capacity identified by the market operator in its 30-year plan, which is now the federal government’s 82 pct renewable target for 2030.

The only major investor that comes close is prospective buyer of Origin Energy, Canada’s Brookfield, which has flagged plans to accelerate that by investment in 12GW of wind, solar and storage by 2030.

See also: The decarbonisation efforts of Australia’s big gentailers are a disgrace