COAL FIRES UP ENERGY DEBATE
Liddell, in the NSW Hunter region, is the nation's oldest power station. The coal plant will reach its 50-year economic lifespan in 2022.
Owner AGL first flagged in early 2015 its plans to close Liddell when it reaches this milestone, saying seven years' advance notice gives the market ample time to react (Engie gave five months' notice for the closure of Victoria's Hazelwood; Alinta gave 11 months for SA's Northern Power station).
Liddell's capacity has been downgraded by a tenth and it is increasingly unreliable, especially in times of extreme heat. It broke down three times over summer, with 500 megawatts of capacity disappearing without warning each time.
The Turnbull government started pressuring AGL in September 2017 to keep Liddell open longer, or sell it to someone who will. So far, the company has resisted.
WHAT'S THE AGL PLAN?
The Australian Energy Market Operator initially projected a 1000MW shortfall in power available to meet peak demands after Liddell closes. The government demanded AGL outline its plans to fill this gap.
In December, AGL outlined a $1.36 billion plan to supply NSW with power for up to 30 years at an average cost of $83/MWh:
* Stage 1 from 2019 - adds 100MW capacity to the Bayswater coal-fired power station, 300MW solar and 250MW gas peaking plant. Cost: $490 million.
* Stage 2 from 2020 - adds 500MW renewables, 500MW from second new gas peaking plant. Cost: $610 million.
* Stage 3 from 2021 - build 250MW battery at Liddell site, add 250MW renewables. Cost: $260 million.
AGL says stages 1 and 2 will meet its customer demand and other power companies should respond to market signals to meet other needed capacity.
If no one else followed the investment signal, adding the third stage would completely replace Liddell.
AEMO agrees if all three stages happen there will be no shortfall. But it noted AGL has only made a full financial commitment for the Bayswater upgrade. If only this went ahead there would be an 850MW "resource gap".
WHAT'S THE ALTERNATIVE?
The government wants someone to keep Liddell running for five or seven years beyond 2022.
Alinta Energy - owned by Hong Kong-based Chow Tai Fook Enterprises - has made an informal approach to AGL, encouraged by the government and peak body Manufacturing Australia.
Delta Electricity also expressed interest in September and Chinese conglomerate Shandong Ruyi was reportedly looking at it in March.
AGL says a five-year extension to Liddell's life would cost at least $920 million and produce power for an average $106/MWh.
Another complication is that Liddell shares much of its infrastructure - like coal unloading facilities and water systems - with Bayswater, meaning any buyer would not only have to upgrade the generator but duplicate these. Similarly, AGL's workforce is shared between the two plants. The company has committed to no forced redundancies when Liddell retires in 2022, instead working to retrain and redeploy staff to planned new projects.