AGL to Close Australia’s Giant Polluting Coal Plants Earlier

(Bloomberg) -- AGL Energy Ltd. plans to shutter Australia’s two biggest polluters a few years earlier, as the aging coal plants struggle to compete against rising renewable generation. 

The Bayswater facility in New South Wales will close by 2033, two years earlier than previously planned, while Loy Yang A in Victoria will now halt by 2045 instead of 2048, the Sydney-based company said Thursday. The two facilities are huge polluters, spewing out almost 31 million tons of carbon dioxide in 2019-2020, or almost 10% of all Australia’s reported emissions.

AGL’s value almost halved last year after it was hit by a double whammy of plunging costs for renewable generation that damped power prices and made its coal plants less profitable, and waning investor appetite for polluting assets. The company faced down a shareholder resolution in 2020 calling for it to bring forward closures that was supported by investors including BlackRock Inc., but will consider closing the facilities as soon as 2030 and 2040.  

“Those earlier dates may be possible if the broader market develops in the way that it possibly could,” Graeme Hunt, AGL’s chief executive officer, said in a phone interview. “We will be looking at this annually.”

In the meantime the two giant plants are still needed to ensure reliable power supplies, he said.   

“We need to continue to balance the need for this capacity in the system to support reliability and affordability of energy until they are not needed -- and that’s some distance out,” Hunt said. “When people look at that they will understand that we have made significant steps here.”

‘Token Effort’

The company missed an opportunity in not setting a bolder timetable with the “token effort,” Glenn Walker, senior campaigner at Greenpeace Australia Pacific, said in a statement. 

“Coal is the biggest threat to a safer climate future, and a terrible financial investment, as AGL’s plunging share price and reputation demonstrates,” he said. “In delaying Loy Yang A and Bayswater’s inevitable closure, AGL is putting worker and investor security, as well as the climate, at serious risk.”

Bayswater and Loy Yang A will be spun off along with other generation units into a company called Accel Energy. Accel plans to reach net-zero emissions from its generation fleet by 2047, while the remaining AGL Australia retail business seeks to be fully carbon neutral by 2040, in new targets announced Thursday. 

The coal sites will be re-purposed as low-carbon industrial energy hubs, incorporating lithium-ion battery arrays and hydrogen production plants. AGL will also underwrite 3 gigawatts of new renewable and flexible generation capacity by 2030 to assist in the transition. 

READ: Old Coal Plants in Australia Are Becoming Clean Energy Hubs

The plants have provided regional jobs and reliable power for decades, Energy Minister Angus Taylor said in a statement. His government has been a staunch supporter of fossil fuels, even with climate change seen as a key issue in elections due by May.

“While this announcement is a commercial decision and AGL has complied with the minimum 3.5-year notice period, the exit of such a considerable amount of reliable generation is a concern for the continued reliability and affordability of the system,” he said. “Delivery of new, timely, replacement dispatchable capacity will be critical in keeping prices low and the lights on.”

AGL rose as much as 3.9% following the announcement of the closures and an outlook for more positive estimated earnings this year, before falling as much as 1.8%. 

(Updates with comments by CEO from fourth paragraph)

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