Liddell power station closed and future uncertain

When AGL Energy contacted the Turnbull government about the future of its Liddell power station in 2017, it drew up an extensive scheme listing how it would replace the coal plant with equivalent generating capacity.

The Generation Plan proposed a mix of renewable energy, peak gas plants and battery storage, some of which would be on or near the Liddell site in New South Wales’ Hunter Valley. Its sister coal-fired power station, Bayswater, would also get an upgrade.

AGL’s chief executive at the time, Andy Vesey, estimated that the total capital investment would be nearly $1.4bn, with the new assets operating for up to 30 years. By contrast, extending Liddell’s life beyond its planned closure in 2022 would cost $920m and add just five years to a nearly 50-year-old plant.

As events unfolded, the then prime minister, Malcolm Turnbull, and Vesey took office on the same day, 24 August 2018. “They lost their PM over energy and we lost a CEO,” says AGL insider.

With Liddell finally closing on April 28, business leaders and local officials are hopeful other generation projects and manufacturing will eventually fill the site even if many of AGL’s proposed ventures have not progressed.

“At first there was a level of ‘this is going to disrupt the system’,” says Danny Eather, president of Business Singleton, which represents about 180 local businesses. “Liddell is really beyond its lifespan as a facility, and I think it’s generally accepted within the community that this is what was going to happen.”

Mike Kelly, president of the Muswellbrook Chamber of Commerce and Industry, further up the Hunter Valley, says it is not yet clear what will replace Liddell.

“Despite the early notice [of Liddell’s demise]driven by government policy, there is still a lot of uncertainty and cynicism,” says Kelly.

“You wouldn’t turn off the town’s water supply to your house if you were going to put in big tanks next year,” he says. “And you wouldn’t turn off the main grid supply if you’re going to put solar panels and wind turbines on your property in the next year or two or five years.”

The authorities, however, are confident that Liddell’s shutdown will not affect the power grid. The Australian Energy Market Operator predicts the state will maintain a “reliable power supply”, says Penny Sharpe, the state’s new energy minister.

“Liddell is over 50 years old now. It has been unreliable for many years, and is not performing at its rated capacity,” says Sharpe. “In 2022, Liddell supplied about 1,260 megawatts, a fraction of its rated capacity of 2,000MW, and generated only about 7,000 gigawatt-hours during the year.”

Vesey’s successor at AGL, Brett Redman, was much more cautious about the rush to invest in new renewables. Plans for a peaking gas plant near Goulburn and one in the lower Hunter have all been scrapped, while investments in new batteries and hydro pumping plants at or near Liddell have taken longer than expected, insiders say.

Management wanted “no additional risk” to coal generation, says one. “What was happening behind the scenes was that the business was bleeding cash.”

The Turnbull and Morrison governments also interfered in the market, notably the massive Snowy Hydro Snowy 2.0 hydro pumping project and then its Kurri Kurri gas plant in NSW. These threw the entire Generation Plan “out the window”, they say.

Markus Brokhof, AGL’s chief operating officer, wants to see people move on from the previous plan. “Forget this, it’s history,” he said during a recent visit to Liddell.

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Brokhof is proud that Bayswater has managed to absorb 100 of Liddell’s 140 staff, meaning AGL has kept its promise of no compulsory redundancies. The rest will quit or leave the industry.

Bayswater’s crew will increase from 460 to 560, and contractors and subcontractors will be cut to make room for the new people.

AGL aims to make a final investment decision on a 500MW battery for Liddell “probably in the second half of this year”, says Brokhof. A second battery of the same size could be a future option for a site near the Tomago aluminum smelter, AGL’s largest customer, also in the Hunter region.

A 250MW hydro-pumping project about 11km from Liddell that would use a deep coal seam created by Japan’s Idemitsu Corporation is still at the feasibility study stage. “We are investigating twice that [size],” says Brokhof.

Another option for a post-Liddell future is hydrogen production. Last year AGL expanded a feasibility study involving Fortescue Future Industries with Andrew Forrest and other partners to develop a green hydrogen and ammonia production facility.

Another aim of AGLs is to attract other manufacturers to a location well served by high voltage transmission, roads and railways. It could even involve agriculture, says Brokhof.

A mining engineer by training, Brokhof is from Dusseldorf, part of Germany’s Ruhr region which has been transitioning away from the heavy mining industry for many years.

“There are thousands of templates” for how to help communities adapt, he said, walking by Lake Liddell. “Australia is not an island. It’s a bit annoying.”

Another insider says locals should expect news of a “big deal” later this year about other companies willing to invest.

The Liddell-Bayswater AGL site, bought by the state government for $1.5bn in 2014, covers 10,000 hectares and also about 40% of the high security water rights in the Hunter. The water licences, linked to the power stations, are one of the largest in Australia and almost equal to the total water available for farms and mines in the valley.

However, the area’s transition from fossil fuels may need to be accelerated, particularly if the Bayswater closure is brought forward and the mines begin to close. “The latest is 2033,” says Brokhof, referring to the timing of the shutdown of the 2,640MW plant.

However, the end of a relatively low-cost coal contract in 2028 could challenge Bayswater’s economics before then. The result could be reduced operations, such as keeping one or more of the four units, people familiar with the plant say.

Steve Reynolds, the mayor of Muswellbrook, is concerned that the community will not be ready for what is to come.

“We’re in for a turbulent time, there’s no doubt about it, with the transformation that’s going to happen across this region,” says Reynolds.

“We really need that person from the state government, in particular, who will be helping us because there are so many different departments that are under the umbrella of the Minister of the Environment, the mining regulator. [and so on],” he says. “If we miss this boat, future generations will pay for their failures.”

Michele O’Neil, president of the Australian Council of Trade Unions, says a national energy transition authority is needed to improve coordination.

“This is something we should have done at least ten years ago and we have left many communities without the support they needed,” she says.

Such a body could help diversify the economy “and create good, secure, long-term jobs long before closing”, says Ó Néill. “It cannot be left under the market”.

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