AGL’s NSW Generation Plan sets out how to manage the closure of the Liddell Power Station when it retires in 2022 to avoid any shortfall in the market.

• Liddell Power Station reaches the end of its technical life in 2022 and can be replaced with the latest technology at a lower cost than trying to keep the plant running.
• AGL’s replacement plan is technology agnostic, incorporating an upgrade of the Bayswater coal-fired power station and renewables firmed up by new gas plants and energy storage.
• AGL’s plan has been confirmed by the market operator as eliminating any shortfall when Liddell closes.
• Its previous owners, the NSW Government, also planned to close Liddell in 2022 as it is not economic to run safely and reliably after the plant reaches the end of its technical life.

Independent experts determined that to keep Liddell running for another five years, AGL would need to spend more than $920 million, but even then, it would not be safe to do so.

Liddell has many hundreds of kilometres of high-pressure steam piping that is degrading – leaks or cracks in this piping could cause serious injury to workers.

Our plan is to replace Liddell with the latest technologies, utilising the grid connection, workforce and infrastructure at the site. There will be no forced redundancies as a result of Liddell’s closure – retraining will be offered to the Liddell workforce.

We explored the options for selling Liddell or delaying its retirement, however repurposing the site with new technology is the cheapest option ($83/MWh compared with $106MW/h) and would be more reliable as the new technology will last for 15-30 years.

We understand concerns that Liddell’s closure could create a gap in baseload power. But AGL has already committed to $490 million in replacement technology and the Australian Energy Market Operator (PDF) has confirmed there will be no shortfall if AGL’s plan is implemented.

FAQs on Liddell

Will the closure of Liddell lead to higher power prices?

No. Our NSW Generation Plan will deliver energy at a cost of $83/MWh, while extending Liddell’s life would deliver energy at a cost of $106/MWh.

By providing advanced notice of closure (AGL gave 7 years’ notice for Liddell), the market has enough time to build new generation to avoid any gap or price spikes as seen by the sudden closure of other coal plants.

How will AGL ensure the lights stay on from 2022?

Our NSW Generation Plan will ensure there’s no shortfall when Liddell is retired in 2022.

The Australian Energy Market Operator identified an 850MW gap in dispatchable power when Liddell closes, but confirmed AGL’s investment plan “eliminates (PDF)” any gap and that a competitive market response to fill the gap is best for consumers.

AGL has already committed $490 million to the first stage of the plan – we are currently upgrading our Bayswater coal-fired power station and building a new high-efficiency gas generation plant near Newcastle. Other investments are staged up to 2022.

In addition, the market is investing in power generation in New South Wales, with the NSW Energy Minister confirming in June 2018 that there are 2000MW of new gas plants due to come on line, which is enough to fill more than double the Liddell gap.

What options did Liddell consider?

AGL undertook a review and engaged external experts to assess all options around Liddell – extending part or all of the plant; selling it; or closing it in 2022 as planned. Liddell has 4 units – each with a capacity of 420MW.

The review considered all factors, including safety, cost and reliability.

These included:

• Extend all four units until 2025: This option was deemed a high risk to reliability and safety, because Liddell was not designed to run past 50 years.
• Shut two units in 2022, keep two running until 2024 or 2026: This option cost $500 million and carried higher risks to reliability and safety than replacing it with new technology.
• Sell Liddell: The $250 million offer undervalued Liddell’s operations until 2022 and our plans to use the infrastructure and grid connection to repurpose the site after that date.
• Keep it open if there is a gap in 2022: AGL’s plan to replace Liddell satisfied the Australian Energy Market Operator that there will be no gap. By giving 7 years’ notice of Liddell’s closure, there is enough time for new generation to be built to ensure there is not a gap. If there is uncertainty on Liddell’s closure, this will stop investments being made and make a gap more likely.

Upgrading the Bayswater coal-fired power station and repurposing Liddell with new technology was determined to be the best option to deliver cheaper and more reliable power to our customers.

Why did AGL decide not to sell Liddell?

AGL’s Board carefully considered the offer from Chow Tai Fook Enterprises and Alinta Energy to acquire Liddell for a cash payment of $250 million.

The AGL Board determined that the offer wasn’t in AGL or its shareholders’ best interests as it undervalued Liddell’s operations until 2022 and our plans to repurpose the site after that date.

AGL has already invested more than $120 million to improve reliability at Liddell and have committed a further $150 million to ensure it runs safely and reliably until 2022.

But AGL got Liddell for nothing?

When we sought to acquire Bayswater power station from the NSW Government in 2014, we did not seek to buy Liddell as it was not considered a reliable asset. However, the NSW Government did not enable Bayswater to be purchased separately and so we acquired Liddell, along with Bayswater, for $1.5 billion.

At this time there was a significant excess supply of generation and wholesale prices were less than half current prices. Since then, the market has become tighter, which has impacted the value of generation assets. For example, the NSW Government sold Vales Point power station for $1 million in 2015 and it is now valued at $722 million.

Why can't Liddell keep running?

Plant components are designed with a finite life, typically 25 to 40 years. The rate of deterioration of metal properties increases exponentially as plants near their end of life, such as through corrosion, erosion, and high temperature metal creep.

Liddell has been set to close in 2022 for more than a decade as it is when it reaches the end of its technical life. After this point, trying to run the plant safely and reliably is more expensive than replacing it with new technologies.

What will replace Liddell?

Our NSW Generation Plan involves:

• Newcastle gas power station - 252MW
• Another NSW gas power station - 500MW
• Renewables – 1600MW
• Demand response – Up to 150MW
• Bayswater Power Station upgrade – 100MW
• NSW Pumped hydro – in feasibility – 250MW
• Liddell synchronous condenser to help stabilise the grid
• Liddell battery – 250MW

Stage 1 is entirely committed with $490 million invested to build a new gas plant at Newcastle and upgrade the Bayswater coal plant. A synchronous condenser to help stabilise the power grid, the 200MW Silverton Wind Farm and 463MW Coopers Gap Wind Farm and a 300MW solar offtake project are already under development. A feasibility study into pumped hydro storage using Lake Liddell is also underway.

What does the closure mean for the Liddell workforce?

AGL has committed to no forced redundancies when we close Liddell and repurpose the site. Our employees at Liddell will be offered retraining for the new employment opportunities as Liddell is repurposed and the NSW Generation Plan is progressed.