AGL Energy to mothball one of four Torrens B units in South Australia
AGL Energy has signalled fresh moves to slim down the portfolio of its Accel generation arm ahead of the spin-out of the assets.
AGL Energy has signalled fresh moves to slim down the portfolio of its Accel generation arm ahead of the spin-out of the assets, announcing it will mothball one of the four gas power units at its Torrens B power station in South Australia in October.
AGL cited “challenging” market conditions for the decision, 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.
None of AGL’s 400 jobs in South Australia will be lost, the company said, with plans to keep the 200MW unit on ice for at least six months.
AGL has already closed three units at its Torrens A plant, with the remaining unit to leave the market in September.
But AGL chief operating officer Markus Brokhof said the latest decision was made after “careful consideration” of whether the unit’s closure would risk the stability of supply into the local grid.
“We will continue to provide South Australians with access to reliable and affordable electricity. We have assessed all publicly available information and are confident there is sufficient capacity available to AEMO to ensure system strength,” he said in a statement.
AGL said on June 30 it would move ahead of the historic split of its main retail business into a new company, AGL Australia, with its coal plants and wind portfolio to be housed in Accel Energy.
The decision came despite market and analyst concerns that Accel would struggle for market traction with institutional investors keen to improve the environmental credentials in their portfolio, given its heavy reliance on fossil fuel baseload generation.
Analysts say Accel, which will include the Loy Yang A and Bayswater coal stations as well as Torrens, faces a structural loss of earnings from falling wholesale electricity prices and cheap renewable generators enter the market – as well as potential competition from the federal government’s decision to underwrite new generation.
The outlook for AGL was revised down to negative from stable by rating agency Moody’s last week, on concerns its new profile as Accel would undergo a “structural weakening” given the loss of business diversity and rising carbon risks connected to its coal plants and volatile power prices.
Mr Brokhof said Torrens Island remained an important site for the company, as it looks to transform the Accel portfolio into one more reliant on renewable energy.
“Torrens Island continues to be an important site for our future generation plans, including its development as a low-carbon industrial energy hub of the future. Construction of our 250MW grid-scale battery is planned to begin later this year, making it the first of AGL’s planned 850MW of batteries to get underway,” he said.
“This new grid scale battery along with the Barker Inlet power station that commenced operations in 2019 demonstrates our commitment to playing a leadership role in the state’s energy transition.”
AGL shares closed up 0.5 per cent at $8.15.