He said AGL was designing a plan to mitigate the market impact of Liddell's closure, to address the 8 terawatt hours a year of energy that it provides and the 1000 megawatt reserve capacity shortfall the Australian Energy Market Operator has highlighted.

 

"The good news is that there are attractive opportunities to repurpose the site, for example with gas-fired power or battery storage as I will discuss shortly," Vesey said.

 

"We can provide the 1000MW of capacity needed through a combination of upgrades to the Bayswater power station that adjoins Liddell, construction of new high-efficiency gas-fired power plants and the development of battery and demand response solutions.

 

"We see batteries at Liddell, as well as demand response solutions, providing up to a further 150MW of firm capacity.

 

"Through our planned maintenance program we will be able to upgrade Bayswater to add around 100MW of efficient capacity at the site.

 

"Our projects to increase gas supply will support the economics of these projects, which we believe will comprise up to 750MW of new capacity."

 

The one glaring problem with that is the expected shortfall of gas on the east coast due to all the export projects sending it offshore, along with various governments' policies to stifle onshore gas development.

 

AGL chairman Jerry Maycock explained to the AGM why Liddell had to close and how difficult it would be to sell the power station off.

 

"AGL has, since acquiring Liddell in 2014, improved its reliability," he said.

 

"However, that has partly been achieved by derating the plan by about 15% to reduce stress on the equipment."

 

That has dropped Liddell's peak output of 2000MW to about 1700MW.

 

"It is still likely to experience outages and will become less reliable as it approaches the end of its operating life in 2022 - even with significant planned investment by the company of $159 million in the plant before it closes," Maycock said.

 

"While it may be technically possible to extend the life of the power station, the costs of doing so in a way that ensures that the plant is even moderately reliable are certain to be substantial.

 

"On the other hand, the sale of such an asset would be challenging because it will be difficult to ‘unbundle' from AGL's wholesale portfolio and physically from the adjacent, interconnected, Bayswater plant.

 

"Any new owner would obviously need to pay AGL for the value of the asset in the period of remaining life to 2022.

 

"They would also need to make a highly complex and risky set of assumptions about a wide range of obligations up to and/or beyond 2022.

 

"These would include fuel and other operating costs, capital costs, subsequent closure and rehabilitation costs, as well as social costs."

 

Vesey blamed some of the higher spot electricity price on the "disorderly withdrawal" of non-AGL plant such as Hazelwood in Victoria and Northern in South Australia.