AGL to press pause as NSW powers on
AGL Energy has blamed the NSW government’s controversial energy blueprint for a decision to delay its Newcastle gas plant.
AGL Energy has paused its Newcastle gas plant decision and is reviewing a giant battery investment at Liddell, amid uncertainty around the NSW government’s controversial energy blueprint, in a move that may also nix Scott Morrison’s hopes for 1000 megawatts of new power capacity to be committed in the state by April.
Big energy producers and users had already raised fears over a plan by the NSW government to underwrite investment in renewable and storage generation, saying the move would distort market signals and detract from a national approach already underway.
AGL said the state’s energy roadmap — which aims to attract $34bn in private investment spread through renewable energy zones — meant it would have to defer and review the two major NSW projects as it seeks to understand the implications of the policy. The power giant, Australia’s largest electricity generator, had been planning a final investment decision by early 2021 on its proposed 250MW Newcastle gas-fired power plant at Tomago.
“While a final investment decision wasn’t scheduled until the first quarter of next year, we had recently locked in an option on an equipment supply contract to accelerate the development once we were ready to go,” AGL chief financial officer Damien Nicks told the UBS Australasia conference on Tuesday.
“The recent announcement by the NSW government of their Energy Roadmap means that we will need to pause this acceleration and defer FID until we understand the detail that sits behind the announcement and the legislation. We will continue to progress the planning approval for Newcastle but need time beyond April 1, 2021, to understand the implications of the NSW policy announcement.”
A plan to convert its Liddell coal power station in NSW’s Hunter Valley into a giant battery park is also under review as it moves closer to shutting down the ageing plant in the 2022-23 summer.
“We have previously announced plans for battery storage at Liddell, which we were progressing but will also review this,” Mr Nicks said.
AGL’s investment freeze may now imperil a separate ambition by the federal government, which had given companies until April to commit building 1000MW of new power capacity to ensure there was a like-for-like replacement for Liddell.
If private investors fail to step up, Canberra will build its own gas plant through Snowy Hydro which it owns. Canberra made the move after accusing the private sector of only committing to a single 100MW expansion of dispatchable generation since April 2015 when AGL gave notice of plans to close its Liddell plant.
But that threat of intervention has also been slammed by the Australian Energy Council — which represents the “big three” of AGL, EnergyAustralia and Origin Energy — who warned such government moves or even discussions and “threats” of intervention act as an investment deterrent.
EnergyAustralia has questioned the continuation of the Prime Minister’s approach in the electricity sector, arguing its planned $400m Tallawarra gas plant in NSW had been delayed due to uncertainty over the federal government’s plan to underwrite generation.
AGL said it remains committed to a 850MW battery storage target by 2024, noting its plans to build a 250MW battery at South Australia’s Torrens Island to back up the state’s wind and solar supplies, the latest in a series of big storage investments as the power grid moves away from coal.
The NSW policy, backed by clean energy investors, aims to lower household power prices by $130 a year and incentivise investment in renewable energy zones by providing low-cost financing options, independently assessed to prevent cost overruns.
It plans to develop a separate entity, known as the Electricity Infrastructure Investment Safeguard, to provide investors with revenue certainty through long-term service agreements.
The Victorian government has also broken away from a national approach after changing the state’s electricity act, adding more transmission and storage generation, including a giant battery, to ensure it does not get caught short when coal plants close.