AGL CEO Damien Nicks says the renewable transition will be a huge challenge

Damien Nicks of the nation’s biggest power generator says its critical to provide secure, affordable energy while funding the renewables rollout.

AGL Energy CEO Damien Nicks. Picture: Britta Campion for The Australian

CEO SURVEY 2025: FULL COVERAGE

Economy

How would you rate the momentum of the Australian economy as we head into 2025? Official forecasts have Australia trimming interest rates from the first half of calendar 2025, is that consistent with your view? What are you seeing around inflation in your own business?

While we remain cautious about the broader economy, there continues to be strong activity in our industry, and we remain very positive about the outlook for AGL through the energy transition.

We continue to see the impacts of inflation in our supply chain with prices for materials and equipment elevated, however we anticipate these inflationary pressures and supply chain constrains to abate in time.

In the energy sector we continue to see strong demand for materials and for skilled labour which has increased the inflationary pressures on asset development, however our significant development pipeline enables us with the optionality to make the most efficient economic decisions as we execute on our plans to transition our portfolio. Additionally, labour and contracting costs continue to demonstrate inflationary pressures which we are working to offset across the business.

There are signs that inflation is easing and based on forecasts from leading economists as well as the RBA’s commentary, we anticipate a gradual easing of rates in 2025, with one to two cuts commencing from May 2025.

Outlook

What excites you heading into 2025? Are you likely to increase, hold steady, or trim your investment spend?

This transition is a huge undertaking and opportunity and will require significant investment from companies like AGL to maintain fleet, for new build and to increase the flexibility of our portfolio to help manage some of the changing peaks and troughs in the energy market.

Importantly, we are reinvesting into Australia’s energy transition. We have made significant investment commitments over the past 18 months, including FID on Liddell battery, the purchase of Terrain Solar and Firm Power and investments in our Retail Transformation program to support our customers also sharing in the transition opportunity

It’s critical we continue to provide reliable, secure, affordable energy to our 4.5 million customers while supporting the most vulnerable and deploying $8-10 billion of capital to fund our transition ambition of adding 12GW of additional capacity by the end of 2035.

We also need to ensure our existing assets can respond to the big changes we’re seeing in the energy market, such as the high uptake of roof top solar.

We’re investing in three key areas: 1. Growth in grid-scale batteries and renewables 2. Growing our Distributed Energy assets to improve load shifting and orchestrate rooftop solar and 3. Increasing existing thermal unit flexibility to be the most flexible in the market

Reform

As we move into an election year, in your mind, what’s the single biggest lever that can/should be used to lift Australia’s competitiveness or productivity? This could be across any area from labour market, tax reform, training or other areas to encourage investment.

Australia’s coal plants are coming to the end of their life over the next decade, creating a huge opportunity for the country if we have the right settings in place. Australia has an abundance of wind and solar resources with the largest penetration of rooftop solar in the world. Rooftop solar is now at times the largest generator in the NEM. One area that should be given more consideration is the effective orchestration of Consumer Energy Resources (CER) like rooftop solar, batteries, and electric vehicles.

With the right policy settings and incentives CER can unlock productivity benefits by reducing the amount of large-scale generation and firming that needs to be built, reducing the cost of the energy transition build out and the cost to consumers.

Geopolitics

Will a Donald Trump presidency have a potential impact on your business or sector (tariffs or streamlined regulation)? Does geopolitics drive a bigger part of your decision-making?

The US election result has just come through so there’s still a fair bit to play out. There is still a lot of uncertainty around which campaign policies will be acted on and when. Like everyone, we are looking at how it unfolds.

Australia’s energy transition is already progressing against ambitious targets as coal plants reach their end of life and need to be replaced over the next ten years.

AGL has a clear plan that we are executing. While we regularly evaluate progress against our strategy and broad policy and market developments, the US election outcome does not change our strategy or view on Australia’s energy transition over the next 10 years

There is always the possibility that a winding back of the Inflation Reduction Act may result in less global competition for some resources, skills and components but it’s far too early to say with certainty how these things will play out.

People

Has your organisation’s approach to flexible working – including working from home – evolved during the year. Is this likely to change further into 2025?

We know that flexible working arrangements are something that our employees value. Our approach has been consistent for the past two years and requires our office based employees to be in the office at least three days each week. We have no plans to increase these requirements.

We believe this approach effectively balances our employee’s desire for flexibility with our teams being able to connect, collaborate and learn.

Technology

Where is your organisation along the AI journey – is it in the developmental stage, or are you now using the technology at scale across your business? If so, are benefits matching the promise?

AGL is optimistic about the potential of AI and its potential applications for our business. As with all new technologies, the challenge is determining where the real value lies. AGL is taking a strategic approach to AI and its application within the business, but we want to be a leader and not just a “fast follower.”

One potentially impactful use-case is the use of AI for responding to customer queries or complaints. When a customer calls with an issue, our customer service representative has to gather a lot of background information to get a full understanding of the customer’s situation. Our agents gather information from a range of customer interactions as well as billing details, metre reading and account details. This analysis is currently undertaken manually and can be quite an extensive process. Generative AI can aggregate all the information and provide a summary report, saving time for the customer service agent and improving the customer experience.

As we’ve already seen in other sectors, such as finance, AGL’s trading team is utilising AI to refine our forecasting models. We’re already using machine learning in this space, but more advanced AI has the potential to further improve our modelling.

ENDS

Originally published as AGL CEO Damien Nicks says the renewable transition will be a huge challenge