“They’ve been able to deliver some solid results with a change of management and a new strategic plan while,at the same time,starting on the energy transition,” he said.
Under AGL’s new climate strategy,its Bayswater coal-fired power plant in NSW is now due to shut no later than 2033,while the retirement of Loy Yang A in Victoria’s Latrobe Valley has been brought forward by up to 10 years from 2045 to 2035. The company will also spend between $8 billion and $10 billion building 12 gigawatts of new renewable energy projects and “firming” assets – such as big batteries and pumped hydro – to support them when the wind isn’t blowing and the sun isn’t shining.
Despite the stronger climate commitments,AGL continues to face calls from Cannon-Brookes,its biggest shareholder,for even earlier coal closures. The board has said if the wider energy transition accelerated and there was an opportunity for AGL to exit coal more quickly,“we will certainly consider that”.
However,it comes as some power industry leaders and the Australian Energy Market Operator are becoming increasingly nervous about the lagging pace of the rollout of new generation and storage projects required to compensate for coal plants’ withdrawals. There are also concerns that the build-out of more than 10,000 kilometres of high-voltage transmission lines,which will be needed to link up new renewable energy zones and facilitate the flow of clean electrons from one part of the country to another,is happening too slowly amid funding issues and local community opposition.
Nicks on Thursday acknowledged that cost pressures and supply chain logjams posed significant hurdles for the necessary rebuild of the power grid,but expressed confidence they could be overcome. He said the challenge demanded greater co-ordination and planning between state and federal governments. “I think that would help,” he said. “But the right conversations are taking place right now,and the right questions are being asked.”
AGL’s strengthening financial outlook comes as the company and other major retailers,including Origin Energy and EnergyAustralia,have been allowed to increase consumer bills across Australia’s eastern states by hundreds of dollars a year following significant rises in the wholesale cost of energy.
Loading
Wholesale prices – what retailers pay for electricity before they sell it on to their customers – blew out to record levels across eastern Australia last year due to power-plant outages and coal mine flooding curtailing supply,while the war in Ukraine was driving up the cost of additional coal and gas needed to plug shortfalls.
Nicks said AGL recognised that many Australians were struggling with cost-of-living pressures,including rising energy bills.
“We are committed to supporting our customers during this difficult time and will spend at least $70 million over the next two years to help our customers manage cost-of-living pressures,” he said.
Sarah Xie,assistance vice president at Moody’s Investors Service,said the improved performance of AGL’s power stations in the second half of the financial year had offset the worse than expected first-half results,when a series of failures at coal plants had slashed AGL’s electricity supply amid a period of intense demand and forced it to buy expensive wholesale power from the grid to meet its customers’ needs.
The Business Briefing newsletter delivers major stories,exclusive coverage and expert opinion.Sign up to get it every weekday morning.