Energy giant AGL has delivered an initial sharp rebuff to Malcolm Turnbull’s plea to extend the life of the Liddell coal-fired power station by at least five years.
But Turnbull is said to be determined to keep Liddell open and is exploring all options, saying on Tuesday night that while AGL wanted to get out of coal, it would be prepared to sell the power plant.
The Prime Minister on Tuesday rang AGL chief Andy Vesey to discuss lengthening Liddell’s life, after the Australian Energy Market Operator (AEMO) warned urgent action is needed to ensure Australia has adequate reliable power during the transition to cleaner energy.
The Liddell plant, located in New South Wales’s Hunter region, is set to close in 2022, and AGL has had a long-running advertising campaign saying things need to change and “we are getting out of coal starting 2022 and ending 2050”.
Turnbull told parliament in question time that he and Energy Minister Josh Frydenberg “are already in discussions” with AGL “about how we can ensure that the power station stays in operation for at least another five years after 2022.”
Vesey fired off tweets reiterating the company’s intentions. Responding to a Tony Abbott tweet that had said “good that AGL is no longer getting out of coal!” Vesey tweeted “We’re getting out of coal. We committed to the closure of the Liddell power station in 2022, the end of its operating life.”
In another tweet, Vesey said “keeping old coal plants open won’t deliver the reliable, affordable energy our customers need”.
After the tweets Turnbull rang Vesey again. Later the Prime Minister told reporters: “I’ve spoken to him several times about this matter. He says AGL wants to get out of coal, but he has said that he is prepared to sell to a responsible party and that’s what we’re talking about.”
“Mr Vesey has obligations to his shareholders, my commitment is to all Australians - families, businesses big and small - to deliver affordable and reliable electricity.” he said.
Turnbull appeared to rule out the government buying the station, saying “I think it’s better that the private sector owns generators like that”.
He said there were “obviously other options but one option clearly, that I responsibly as Prime Minister have to explore, is keeping Liddell going”.
Tony Wood, energy program director at the Grattan Institute said on Tuesday night that a sale of Liddell would be possible if the price was right and there was a commercially viable market for the power.
The AEMO report says the National Energy Market (NEM) “is not delivering enough investment in flexible dispatchable resources to maintain the defined target level of supply reliability, as the transition from traditional generation to variable energy resources proceeds.”
It stresses immediacy, saying “short-term measures will be necessary until a long-term solution is agreed and becomes fully effective”.
The problem posed by the planned Liddell closure is a recurring theme in the AEMO report, which is also cool on new power plants “with uncertain long-term business viability”. Liddell, commissioned in the early 1970s, has a total capacity of 2000 megawatts.
AEMO says that consideration should be given “to the possible extension of the capability of some existing resources … This could take the form of life-extension or investment to increase the flexibility of current dispatchable resources, and thereby improving their business viability and extending their life in the market”.
The report recommends:
… Before the coming summer: a strategic reserve of about 1000 megawatts (MW) of flexible dispatchable energy resources is needed to maintain reliable supply in South Australia and Victoria. AEMO is already acting to deliver this.
… Up to 2020-22: progressively decreasing levels of strategic reserve will be required over the summers - and new mechanisms to deliver these must be put in place in time for 2018-19.
… Before the scheduled 2022 Liddell retirement about 1000 MW of new investment is expected to be needed to preserve supply reliability in NSW and Victoria. Mechanisms should be established in the NEM design to deal with these and similar needs for the long term.
The government, which has before it the proposed clean energy target policy recommended by the Finkel report, in June commissioned the AEMO to assess the risks to reliability and affordability posed by the closure of the Hazelwood power station and similar closures to come.
Apart from the Vesey tweets, a spokesperson for AGL reiterated AGL’s position on closing Liddell. “AGL has committed to the closure of the Liddell power station in 2022, which is the end of its operating life.
"AGL has provided this advance notice to avoid the volatility created by the sudden exit of other coal-fired power stations. AGL is actively assessing what capacity will be needed post 2022 and we, along with other market participants, will consider AEMO’s report in light of these plans,” the spokesperson said.
Frydenberg said that “building on our actions to date including putting in place new restrictions on the export of gas and opening up discussions with AGL over Liddell, the Turnbull Government will leave no stone unturned to ensure affordable and reliable power for all Australians.”
Labor’s climate change spokesman Mark Butler, referencing a Vesey tweet, said Turnbull’s “claim of a five-year extension didn’t last five minutes.”
Butler said the government’s policy inaction was driving up electricity prices and a clean energy target “is the solution to crippling policy paralysis.
"Yet the Government refuses to act, citing any and all excuse to delay, when everyone knows it is internal Coalition division and the weakness of the Prime Minister that are really to blame,” Butler said.
Authors: Michelle Grattan, Professorial Fellow, University of Canberra