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Business Value Driver

Infrastructure

Effective and efficient use of assets throughout the value chain that AGL uses, owns or has control of, to enable delivery of energy to the market and to customers.

Australia’s energy sector is transitioning to one characterised by renewable energy as a result of technology developments and emission reduction imperatives. As the largest electricity generator in the NEM, our portfolio of large thermal generation and variable renewables is evolving.

As outlined in AGL’s recent climate scenario analysis (refer to Environment scorecard), we recognise that there will be a significant need for investment in renewable, firming and storage capacity in the NEM in the coming years. Given the increasing need in the market for dispatchable power to reflect the new supply-demand dynamic, our investment in flexible assets, including gas firming, hydro and grid-scale batteries, will enable the transition to renewables while capturing value for AGL as the market changes.

AGL has a key role to play in ensuring that we manage our generation assets and gas supply efficiently to ensure security and reliability of supply for customers.

As reflected in our Climate Statement, we remain committed to the orderly transition of our portfolio away from coal to new sources of generation and storage, which will ultimately be cleaner, and more affordable and reliable (refer to Environment scorecard). However, we recognise that our thermal assets are essential to Australia’s energy security, and we will continue to run our coal-fired power stations responsibly and safely to supply affordable and reliable electricity while transitioning our portfolio. As such, we are investing in efficiency upgrades at the Bayswater and Loy Yang A power stations to ensure these assets are minimising their greenhouse intensity as well as being secure, reliable and flexible to support more intermittent renewable energy in the NEM. Upgrades of Unit 4 at Bayswater Power Station are now complete, with remaining upgrades planned to be completed over the next three years.

Gas has a substantial role to play in the transition to a low-carbon economy. We continue to work towards securing reliable and cost-effective sources of gas for our customers and for generation, and recognise the value that comes from our gas storage infrastructure. We are progressing plans for the Crib Point LNG import project in Victoria. Should we receive environmental approval and choose to proceed, this project has the potential to provide a new source of gas to the east coast and to support our gas storage and shaping strategy and development of flexible gas-fired generation capacity. From FY21, AGL will augment our operated gas storage assets with contracted storage services from the Iona Gas Storage Facility. This strategically located reservoir will provide AGL with additional flexibility to manage gas demand requirements.

Operated generation capacity

23.5 PJOperated gas storage inventory

5.8 PJ/paOperated gas production

11,208 MWOperated generation capacity

Creating value

Generation efficiency and availability

Generation sold to the pool has increased by 0.2% since FY19. This was driven by higher generation from AGL Macquarie due to improved reliability and increased volume of coal deliveries, increased generation from Silverton and Coopers Gap wind farms, and the inclusion of Perth Energy volumes. This was partly offset by decreased generation at AGL Loy Yang due to the Unit 2 outage, and lower generation from Victorian hydro assets.

AGL was unable to meet the budgeted Equivalent Availability Factor during FY20 primarily due to a planned outage extension at Bayswater Power Station Unit 4 and the major outage of Unit 2 at AGL Loy Yang. The higher number of unplanned outages and corresponding decreased availability experienced at our thermal plants highlight the need for continued investment to ensure the resilience and availability of our assets.

During FY20 AGL completed energy efficiency upgrades at Bayswater Unit 4 including turbine, cooling tower and air heater upgrades.

KPI

FY20

FY19

FY18

FY17

FY16

Target

Pool generation volume (GWh)

43,828

43,723

43,065

43,099

43,774

-

Equivalent Availability Factor (EAF)1

76.9%

78.4%

79.6%

84.9%

80.1%

FY21: > 78.6%

  1. 1 Equivalent Availability Factor is strongly linked to commercial availability, which is currently a targeted remuneration outcome for some Key Management Personnel.

Legend

Improving trend and/or satisfactory outcome

Deteriorating trend

Neutral trend

KPI linked to FY20 remuneration outcomes for CEO and Key Management Personnel (page STI approach and outcomes )

Market transformation and development

As reflected in our Climate Statement, AGL is committed to continuing to invest in new sources of electricity supply. Through both direct investment and offtake agreements, we will use our balance sheet to support the development of the new renewable energy sources and flexible generation capacity the market needs to support greater penetration of intermittent renewable energy.

During FY20 we continued our strong track record of investing in renewable and peaking generation as well as energy storage projects:

  • The $295 million gas-fired Barker Inlet Power Station in South Australia was completed in November 2019, the first major dispatchable power station constructed since 2012.
  • The $450 million Silverton Wind Farm in New South Wales reached full output in May 2020 (asset owned by the Powering Australian Renewables Fund, in respect of which AGL has a 20% interest).
  • Construction of the final turbine at the $850 million Coopers Gap Wind Farm in Queensland was completed in April 2020, and is expected to reach full generation later in 2020 (asset owned by the Powering Australian Renewables Fund).
  • Two major battery deals were completed, comprising a 15-year agreement with Vena Energy for full operational dispatch rights for the 100 MW Wandoan Battery in Queensland commencing in July 2021, and an innovative derivative agreement with the Maoneng Group to secure capacity on four 50 MW batteries in New South Wales which will be operational from 2023. These are in addition to the Dalrymple 30 MW ESCRI battery on the Yorke Peninsula in South Australia that we partnered with Electranet to deliver in FY19.
  • The acquisition of the 120 MW Kwinana Swift Power Station, an open cycle gas turbine peaking plant south of Perth in Western Australia, as part of the Perth Energy acquisition in September 2019.

The map on the following page shows AGL's existing operated and controlled asset portfolio, as well as development opportunities under active consideration.

KPI

Target

Grid scale batteries installed and managed

FY24: 850 MW

Decentralised assets under orchestration

FY24: 350 MW

Liddell Power Station transition

In April 2015, AGL announced that the Liddell Power Station would close at the end of its technical life in 2022. The first unit at the site will close in April 2022, and the remaining three units will close in April 2023. This will support system reliability throughout the 2022-23 summer months. With three years until the power station's retirement, AGL is preparing plans to safely decommission, demolish and rehabilitate the site, while considering the planned retirement of the neighbouring Bayswater Power Station in 2035.

Although station retirement and rehabilitation activities represent a significant liability, the site presents significant opportunity for AGL, other investors and the community to redevelop the site, leveraging use of existing infrastructure, land and enduring assets and create a further economic contribution in the Upper Hunter Valley. Some of the options currently under consideration in addition to AGL's potential use of the site to develop a large-scale battery include intensive agriculture, bioenergy, water processing and storage and ecological services.

Further information about rehabilitation activities completed to date and how AGL is working with the community and our people during the transition of the site is available in the Environment and Communities & Relationships scorecards respectively.

Beyond FY20

Efficiency and reliability uplift programs are in place to maximise the performance and reliability of our existing asset base. Underpinning these are an increased focus on asset management planning aligned to the needs of Australia’s dynamic energy market. We have a pipeline of development opportunities to pursue given the right policy settings, and expect to be a significant contributor to Australia’s evolving energy landscape – generating affordable, reliable and sustainable energy.

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