Australia

Why Australia’s biggest carbon emitter AGL is accelerating its exit from coal

Australia’s largest electricity generator AGL Energy will go “net zero” .
Australia’s biggest carbon emitter on Thursday announced a plan to shut down all coal-fired generation by the end of fiscal year 2035, with annual greenhouse gas emissions to reduce from 40 million tonnes to net zero.
AGL chair Patricia McKenzie said the company will have “net zero” emissions from operations following the closure of all AGL’s coal-fired power stations, including Liddell and , and the Loy Yang power station that provides almost a third of Victoria’s power.
“This represents one of the most significant decarbonisation initiatives in Australia,” she said.

[The financial implications of bringing forward the closure of Loy Yang by a decade include an impairment charge of $700 million.]

Why has AGL made this decision?

Billionaire shareholder scuppered the energy giant’s planned demerger, which would have created an energy retailer and hived off aging coal-fired operations that would have operated for longer.
Seeking more urgent change, his Grok Ventures investment firm has put forward four independents for election to the board – former energy regulator Kerry Schott, sustainability expert Christine Holman, Tesla’s Mark Twidell, and experienced board chair John Pollears.
Incoming interim CEO Damien Nicks said the closures represent a major step forward in decarbonising Australia’s economy.

AGL plans to invest up to $20 billion by 2036 in new renewable and energy storage assets, funded by assets on the balance sheet, offtake agreements [where buyers agree to purchase future output] and partnerships.

This includes a target to have up to five gigawatts of new renewables in place this decade, up from a planned 3.2GW pipeline of projects.
Mr Nicks said the “ambitious” strategy would provide clear long-term value for AGL and its shareholders.

Shares in AGL rose 19 cents or 2.9 per cent to $6.79 in early trade following the announcement.

Energy Minister Tanya Plibersek said AGL’s move is part of a transition towards renewable energy that is happening around the world.
“The reason this transition is happening is because the cheapest form of energy in Australia and globally now is renewable energy,” she told reporters in Melbourne.
“The transition Australia will be making will require extraordinary investment in things like transmission lines, storage, as we move to cleaner, cheaper premium but we’re up for that as the federal government.

“We need to use the coming years to invest in transmission storage upgrades.”

Former resources minister Keith Pitt lashed out at AGL’s decision.
“This is what happens when you get activist shareholders. I mean, they’re going to close it and replace it with nothing,” the Nationals MP told Sky News on Thursday.

“(The generators) are critical to the country and the economy, that have worked successfully for many, many years at very affordable prices and yet they’re getting thrown down the river.”

Greens, environment groups want more ambitious action

Greens industry spokeswoman Penny Allman-Payne welcomed news of the closure.
But she said a coordinated plan was needed to make the transition to renewables.

“Without a national body to plan and coordinate our shift to renewable energy, the workers and communities who have for generations relied on the jobs and investment the coal industry has provided will be left behind,” she said.

“We know from similar energy transition bodies in Europe that if you plan the transition, workers can move into new well-paid jobs, be redeployed through industry-wide pooling, or benefit from early retirement.”
The Greens have called for a national energy transition authority.

Advocacy group Environment Victoria agreed while 2035 was “an improvement” it said it was “still not credible” as it falls short of a plan aligned to the Paris climate targets that AGL shareholders demanded last year.

David Ritter, CEO of Greenpeace Australia Pacific, said AGL has been a “corporate muppet-show ignoring obvious trends in the sector”.
The clean energy transition in Australia requires closing Loy Yang in 2030, shutting the Bayswater coal-burning power station by the same date, and helping households switch off toxic gas, he said.
AGL said the current economic environment “remains challenging” for its gas-fired Torrens Island power station, which is more than 50 years old and is South Australia’s largest plant.

An update on Torrens is due by the end of the year after talks with the government, the company said.

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