AGL to shut Torrens Island B gas power station decade earlier than planned because of renewables

About 100 highly-skilled jobs will be cut as AGL Energy closes its gas power station nearly a decade earlier than planned – as the state government gives it $20m.

Energy Minister Tom Koutsantonis has blamed the former Liberal government’s NSW interconnector project for the closure of SA’s largest thermal generator, with 100 jobs to be slashed by 2026.

The power giant announced the remaining three units at its 800 megawatt Torrens B facility - 18kms from Adelaide’s CBD - would close on June 30, 2026.

It made a decision last year to initially mothball one of the four gas power units, which closed in October 2021.

Mr Koutsantonis said “100 families would be having a discussion about where to find work in 2026” but pinned hopes on the Whyalla generator project to retain skilled workers from interstate.

“The interconnector is what has killed Torrens Island,” Mr Koutsantonis said.

“Interconnection-displaced generation and one thing that we’ve learnt over the past two years of the pandemic is that sovereign capability is everything.”

The minister said he was “confident” the state’s energy supply would not be affected by the AGL closure but said the state was losing its “most versatile generator” when it came to grid stability.

“Once the interconnector is built, how much capacity we’ll have to generate our own electricity here in South Australia post-2026 – that is the question,” Mr Koutsantonis.

AGL Energy on Thursday morning announced it had brought forward the closure of its Torrens Island B gas power station in SA by nearly a decade, blaming the construction of a new renewables-filled transmission line that will slash profits from the plant.

The power giant announced the remaining three units at its 800 megawatt Torrens B facility – 18km from Adelaide’s CBD – would close on June 30, 2026. It made a decision last year to initially mothball one of the four gas power units, which closed in October 2021.

AGL also revealed the state government would pay it almost $20m towards maintenance on one of the three remaining units that make up Torrens Island B, to ensure it stayed online until the new closure date.

“The government has committed some funds to conduct this major outage for AGL,” AGL’s chief operating officer Markus Brokhof told media on Thursday. “And that will enable us to run the three units until 2026.”

The new 2026 shutdown date compares with its expected closure of 2035 under current Australian Energy Market Operator forecasts and adds to the growing list of major power stations accelerating their exit from the grid amid a fast-moving switch to clean energy from coal.

AGL pointed to a under-construction power cable, Project Energy Connect, which will transmit renewables between NSW and South Australia and further damage earnings from the gas station once it starts up in mid-2026.

“This decision follows careful consideration and extensive consultation with stakeholders, including the South Australian Government,” AGL said in a statement.

WATCH THE REPLAY: Minister Tom Koutsantonis on AGL’s Torrens Island announcement

“This has been driven in part by the planned completion of the Project Energy Connect interconnector between South Australia and New South Wales in mid-2026, which will further impact gas-fired generation in South Australia and as a result the economic viability of the power station.”

Grattan Institute energy and climate change director Tony Wood said the closure of Torrens Island B posed reliability challenges for the SA electricity grid, but with the closure not scheduled for another four years there was ample time to plan.

“The first reaction is reliability, the second reaction on reflection is probably ‘what’s it going to cost to maintain reliability as this thing shuts down’,’’ Mr Wood said.

“We’ve got four years’ notice so I think there’s plenty of time to address the imperative which I think is, how are we planning to make sure that South Australia has the investment that’s going to maintain the reliability at a cost that remains affordable.’’

Mr Wood said as coal-fired power stations closed across the eastern states over the next decade and the energy grids of the by-then interconnected states of SA, Victoria and NSW started to look more similar in terms of their reliance on renewables such as wind and solar, there needed to be enough storage to cater for periods of low generation.

“Then you have the situation where South Australia and Victoria start to look more like each other – you do get periods of time, not across the entire year, but when the wind is low in both.’’

AGL will shut its old Torrens B gas power station by June 2026, 10 years earlier than planned.

Mr Wood said in the future, at some periods in winter when there is high demand for power, but shorter days and potentially low wind generation across both states, it will pose a problem if not addressed.

“We’ve looked at weather patterns over the past two decades and there are periods where you get weather patterns just as I’ve described, and if we were to jump into that tomorrow we’d have real problems.

“We’re not about to jump into that tomorrow, we’ve got time to plan the system so we can build the infrastructure, more transmission, more storage, and not just batteries, storage which can deal with longer periods of times of low wind and no solar, that’s what we have to plan and build otherwise we will have problems, but it’s not a forecast of a problem it’s a forecast of a challenge.’’

AGL said the closure decision was not expected to have a material impact on underlying profit in the 2023 financial year or over the longer term due to the challenged economic viability of the power station.

Transgrid’s EnergyConnect is seen as a critical link for NSW when old coal plants in the state retire by allowing cheap renewables to be imported from SA, avoiding big jumps in wholesale electricity prices.

But it will pile more pressure on sub-par generators such as Torrens – which started operations in 1976 – and are increasingly unable to compete with low solar and wind supplies during the day.

AGL laid out a plan in September to exit coal by the middle of 2035, bring forward the closure dates of both its big Bayswater and Loy Yang A coal plants – and has set an interim target of owning 5 gigawatts of renewable and firming assets by the end of the decade.

The power player last year cited “challenging” market conditions for the decision to initially mothball one of the units, saying declining forward prices in South Australia and the volume of new renewable energy coming into the market that AGL says makes keeping all four units running unviable.

Mike Cannon-Brookes, AGL’s largest shareholder, has staged a high-profile campaign through his privately owned Grok Ventures to refresh the board amid a broader effort to accelerate a transition to renewables.

The billionaire managed to install four new directors at its annual general meeting in November, and follows him previously derailing its demerger, sparking the exit of both its chief executive Graeme Hunt and former chairman Peter Botten.

AGL is building a 250MW big battery at Torrens to start operations in mid-2023 and also opened the 210MW Barker Inlet gas plant at the site in 2019.

Originally published as AGL to shut Torrens Island B gas power station decade earlier than planned because of renewables