September 11, 2017 / 9:25 AM / a year ago

Australia's AGL to consider sale, extending life of coal-fired plant

MELBOURNE, Sept 11 (Reuters) - AGL Energy, Australia’s biggest power producer, has promised to propose to its board to keep one of its big coal-fired generator stations open beyond 2022 or sell it to fill a supply gap, Australia’s energy minister and AGL said on Monday.

AGL said two years ago it planned to close the ageing 2,000-megawatt (MW) Liddell power station in 2022 as part of a phased exit from coal by 2050.

Australia’s energy market operator last week, however, warned of a 1,000-MW shortfall in power after 2022 if the Liddell plant were shut, so the government is looking for ways to keep it open.

Electricity has become a hot button issue over the past year, after a string of blackouts and price spikes have hit households as well as major industrial users, including global miners BHP and Rio Tinto, in eastern Australia.

“I was asked to take to the AGL board the government’s request to continue the operation of Liddell post-2022 for five years and/or sell Liddell, which I agreed to do,” said AGL Chief Executive Andy Vesey in a statement after meeting with Prime Minister Malcolm Turnbull and Energy Minister Josh Frydenberg.

Energy Minister Frydenberg said Vesey had also committed to working up a plan within 90 days “to ensure sufficient additional supply into the market, equivalent to what is coming out of Liddell.” The power had to be reliable and stable, not intermittent as with wind or solar supplies, Frydenberg said.

Power supply in parts of Australia has grown tight due to the shutdown of coal- and gas-fired plants due to the subsidised growth of wind and solar power, with a lack of back-up supply when the wind and sun can’t produce enough electricity.

AGL has said it expects a combination of gas-fired peaking power, demand management, large scale battery deployment and renewable energy to fill the gap.

“In this environment, we just don’t see new development of coal as economically rational, even before factoring in a carbon cost,” Vesey said.

The company has been reaping the benefits of soaring power prices, following the closure of another big coal-fired plant, Hazelwood, in Victoria state, especially as AGL’s plants have lower costs than rivals’ plants. (Reporting by Sonali Paul; Editing by Tom Hogue)

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