Federal Government pressure on AGL defies market operator advice, says academic

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Future: Liddell power station. The Federal Government’s pressure on owner AGL to keep it open after 2022 has put a national focus on the ageing Muswellbrook facility.THE Turnbull Governmenthas “revived a dead horse to flog it again”, said a leading n energy academic during the latest public stand-offbetween the government and AGL over the Liddell power station closure.
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n National University Energy Change Institute director Professor Ken Baldwin said politics rather thanpolicy appeared the most likely driver of this week’s very public government pressure on AGL to sell the Muswellbrook power station to rival Alinta Energy rather than close it in 2022.

The revived Liddell stoush, only months after a previous stand-off ended with AGL confirming its closure plans, has coincidedwith a push by Coalition politicians, including Tony Abbott and Barnaby Joyce, to lobby for coal under the banner of the Monash group.

Professor Baldwin said the n Energy Market Operator was providingclear advice to the Federal Government and the public about what is needed to secure energy supply after Liddell closes.

“Certainly if the government listens to AEMO then it should be reasonably sanguine about the prospects of Liddell closing, but if there are other agendas at play then this could be influencing the public commentary,” Professor Baldwin said.

“We can only surmise what other agendas are at play.”

n National University Professor Ken Baldwin

Professor Baldwin’s comments came as n Competition and Consumer Commission chairman Rod Sims provided some weight to the government’s position, with a statement saying consumers would get lower energy prices if AGL sold the ageing station.

The ACCC opposed the sale of both Liddell and nearby Bayswater power stations to AGL in 2014 and warned it gave too much market power to one supplier.

Mr Sims said it would “benefit consumers if Alinta got hold of Liddell” because it would increase competition, while conceding there were other ways Alinta could enter the market than the “low price entry point” of buying Liddell.

AGL on Thursday repeated that it required Liddell’s infrastructure for its future replacement plans. It had received an approach from Alinta expressing an interest in entering negotiations to acquire Liddell but no formal offer had been received, it said.

Ageing: Liddell power station workers in September near a turbine shut down for maintenance. Liddell is nearly 50 years old.

“Should a formal offer for Liddell be received, it would be given consideration in order to meet our obligations to customers and shareholders,” AGL said.

Professor Baldwin said Federal Government pressure on AGL, which included Prime Minister Malcolm Turnbull’s phone call to AGL chair Graeme Hunt about Liddell on Tuesday night, and Mr Turnbull’s comments about AGL “doing the right thing” in the “public interest”, were unusual, but even more so from a government with a free market philosophy.

“I thought they were flogging a dead horse the last time we had this government pressure on AGL to extend or sell Liddell. The horse has been revived again and is still being flogged,” he said.

Professor Baldwin said AGL’s stated plans to replace Liddell with renewables, storage, demand management and gas generation, if delivered, had reassured AEMO and did not take account of other companies entering the market.

In March AGL competitor Energy said two gas-fired generators it has at the approvals stage in NSW could be part of the solution to the Liddell shortfall and could be operating before 2022.

This week Genex Power pointed the way to a renewables energy future by announcing plans to add a 150 megawatt wind project to its large solar and pumped hydro project in north Queensland which it said could provide 24/7 dispatchable power.

While AEMO chief executive Audrey Zibelman warned the Federal Government on March 16 that AGL’s stated commitment so far was only to install 100 megawatts of “additional firm generation” leading a “significant resource gap of 850 megawatts”, she also warned against a focus on individual suppliers or types of supply such as coal.

A market approach allowing “multiple other participants to compete to invest in a variety of resources” would address the “reliability deficit” and produce the best outcome for consumers, Ms Zibelman told the government.

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