When AGL Energy was in a tangle with the Turnbull government over the future of its Liddell power station in 2017, it drew up an extensive scheme listing how it would replace the coal-fired plant with equivalent generation capacity.
The Generation Plan proposed a mix of renewable energy, gas-peaking plants and battery storage, some of which would be on or near Liddell’s site in the New South Wales Hunter Valley. Its sister coal-fired power station, Bayswater, would also get an upgrade.
AGL’s then chief executive, Andy Vesey, estimated the capital investment would total almost $1.4bn, with the new assets operating for as long as 30 years. By contrast, extending Liddell’s life beyond its planned 2022 closure would cost $920m and only add five years to a plant then almost 50 years old.
As events transpired, the then prime minister, Malcolm Turnbull, and Vesey both got rolled on the same day, 24 August 2018. “They lost their PM over energy and we lost a CEO,” one AGL insider says.
With Liddell finally shutting on 28 April, business leaders and local officials are hopeful alternative generation projects and manufacturing will eventually fill the site even if few of AGL’s proposed ventures have progressed.
“There was initially a level of ‘this is going to be a bit of a shock to 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 there’s a general acceptance within the community that this is what had to happen.”
Mike Kelly, president of the Muswellbrook Chamber of Commerce and Industry, further up the Hunter Valley, says it’s still unclear 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,” Kelly says.
“You wouldn’t turn off the town water supply to your house if you were planning to put in big tanks next year,” he says. “And you wouldn’t turn off the grid main supply if you’re planning to put solar panels and wind turbines on your property in the next year or two or five.”
Authorities, though, are confident Liddell’s shutdown won’t disrupt the power grid. The Australian Energy Market Operator forecasts the state “will maintain a reliable power supply”, says Penny Sharpe, the state’s new energy minister.
“Liddell is now more than 50 years old. It’s been unreliable for many years, and not operating at its rated capacity,” Sharpe says. “In 2022, Liddell made around 1,260 megawatts available, a fraction of its 2,000MW rated capacity, and generated only around 7,000 gigawatt-hours across the year.”
Vesey’s successor at AGL, Brett Redman, became much more cautious about the rush to invest in new renewables. Plans for a gas-peaker plant near Goulburn and one in the lower Hunter were scrapped altogether, while investments in new batteries and pumped hydro plants at Liddell or nearby have taken longer than expected, insiders say.
Management wanted “no additional risk” for coal generation, one of them says. “What was happening in the background was that the business was haemorrhaging cash.”
Also disrupting AGL’s intentions were interventions in the market by the Turnbull and then Morrison governments, not least Snowy Hydro’s giant Snowy 2.0 pumped hydro project and then its Kurri Kurri gas plant in NSW. These threw the whole Generation Plan “out of the window”, they say.
Markus Brokhof, AGL’s chief operating officer, is keen to see people move on from that earlier plan. “Forget about this, it is history,” he said during a recent visit to Liddell.
Brokhof is proud Bayswater has been able to absorb 100 of Liddell’s 140 staff, meaning AGL kept its promise there would be no forced redundancies. The rest will retire or leave the industry.
Bayswater’s crew of 460 will swell to 560, with contractors and sub-contractors being cut to make way for the newcomers.
AGL aims to make a final investment decision on a 500MW battery for Liddell “probably in the second half of this year”, Brokhof says. A second battery of the same size may be a future option for a site near the Tomago aluminium smelter, AGL’s biggest customer, also in the Hunter region.
A 250MW pumped hydro project about 11km from Liddell that would use a deep coalmine void created by Japan’s Idemitsu Corporation remains at the feasibility study stage. “We are exploring double that [size],” Brokhof says.
Hydrogen production is another option for a post-Liddell future. AGL last year expanded a feasibility study involving Andrew Forrest’s Fortescue Future Industries and other partners to explore development of a green hydrogen and ammonia production facility.
Luring other manufacturers to a site well-served with high voltage transmission, roads and railway is another aim of AGL’s. Agriculture may even feature, Brokhof says.
A mining engineer by training, Brokhof hails from Dusseldorf, part of the Ruhr region of Germany that has been navigating a transition off mining and heavy industry for decades.
“There are thousands of templates” about how to help communities adjust, he said, while walking near 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 bring investments.
AGL’s Liddell-Bayswater site, bought from 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 among the largest in Australia and roughly equal the total water available to farms and mines in the valley.
However, the area’s transition away from fossil fuels may need to speed up, particularly if Bayswater’s closure is brought forward and the mines start to shut. “The latest is 2033,” Brokhof says, referring to the shutdown timing of the 2,640MW plant.
The end of a relatively low-cost coal contract in 2028, however, could challenge Bayswater’s economics before then. A reduced operation, such as retaining just one or more of the four units, may be the result, people familiar with the plant say.
Steve Reynolds, mayor of Muswellbrook, worries the community won’t be ready for what is coming.
“We’re in for a turbulent time, there’s no doubt, with the transformation that is going to happen across this region,” Reynolds says.
“We really need that person from the state government, specifically, that’s going to assist us because there’s so many different departments that are siloed under environmental minister, the mining regulator [and so on],” he says. “If we miss this boat, it will be the generations to come that will pay for their failures.”
Michele O’Neil, the Australian Council of Trade Unions president, says a national energy transition authority is required to improve coordination.
“This is something we should have done at least a decade ago and we’ve left many communities without the support needed,” she says.
Such a body could help diversify the economy “and create good secure long-term jobs well before closures happen”, O’Neil says. “It can’t just be left up to the market”.
