ZAIDA GLIBANOVIC and TOM HAYES
AGL announced it has entered into a Structured Transition Agreement (STA) with the state government on Monday, August 21, relating to arrangements for the operation and retirement of the Loy Yang A power station and the associated mine.
According to the deal reached between the Victorian government and the power plant’s owner, AGL, it intends to give employees, the community, and industry confidence that the power plant will continue to be operational until mid-2035.
The deal includes a $50 million community and economic development fund.
The agreement comes despite pressure from AGL’s billionaire shareholder Mike Cannon-Brookes, who is urging the company to bring forward the closure of Loy Yang A to accelerate the decarbonisation process.
The new agreement between AGL and the state government does not change AGL’s existing remediation provision and impairment charges related to the Loy Yang A plant and mine.
AGL’s rehabilitation obligations will continue to be subject to statutory processes set out in legislation.
The STA provides for AGL and the state government to collaborate on the orderly closure of the station by a scheduled closure date of June 30, 2035, in line with AGL’s targeted closure date for the plant announced in September 2022.
As part of the agreement, AGL has also provided formal market notification of Loy Yang A’s closure.
The state government said the agreement balances the requirement to support a safe and reliable energy system, while delivering investment certainty until Victoria has enough renewables and storage capacity to replace Loy Yang A.
AGL and the state government’s plan briefly outlines a ‘risk sharing mechanism’ that will come into place in the event of adverse market conditions, with the state government wanting to ensure system reliability by keeping the power station operational.
Minister for Energy and Resources Lily D’Ambrosio, said the government reached an STA with AGL that will ensure a firm 12-year notice period for the workforce, community and energy market – with confidence the power station will remain available until 2035.
“AGL’s decision to close Loy Yang A in 12 years time allows time for workers to plan, reskill and retrain with our full support as Victoria moves towards 95 per cent renewable energy generation by 2035,” Ms D’Ambrosio said on Monday.
“One of the biggest barriers for renewable energy investors is clarity around when fossil generators will close – a guaranteed closure timeline provides improved certainty around Victoria’s energy demand.”
AGL’s announcement came as electricity competitor EnergyAustralia announced it would transition its Mount Piper power plant to a reserve role, ending its position as base-load plant well ahead of its 2040 closure date.
The agreement between AGL and the state government drew wide-spread criticism from green groups and activists, but the state government continues to make new agreements with energy companies to ensure the stability of the state’s power.
Environment Victoria chief executive Jonathan La Nauze called on the state government to fast track the roll out of renewable energy.
“The Andrews government went to the last election with a plan to replace coal in Victoria by 2035, and now they have secured agreements with two of the three remaining power stations,” he said.
“Locking in a deadline with AGL for closing Loy Yang A sends an enticing signal to renewable investors about the opportunities in Victoria.
“Nonetheless, 2035 is still too late to be burning coal if we are to avoid catastrophic global warming.
“After the hottest July on record, it is incumbent on AGL and the Victorian government to do everything in their power to ensure that Loy Yang can close even sooner.”
Tracey Anton from Friends of Latrobe Water said, “The agreement throws up more questions than answers which will require the Victorian government to be more transparent about the details of the deal.”
“We still have little information or certainty about ongoing use of coal extraction from the pit or the proposed coal-to-hydrogen project as this will delay rehabilitation.
“These are valid questions due to AGL’s current Development Licence Application currently sitting with EPA to expand the coal ash landfill for 19 years, and management of the existing contaminated groundwater plume.”
The Victorian Greens have urged the state government to bring Loy Yang A’s closure date forward, and “to come clean on the ‘risk sharing mechanism’ included in the announcement, and whether it involves Victoria taking on the financial risk of keeping one of the state’s outdated polluting brown coal power stations running longer than its private owner otherwise would”.
Energy expert at the University of NSW Dylan McConnell told The Guardian that the state government seems focussed in ensuring the availability of coal-fired power stations as “strategic concern” as market security, in case renewables aren’t available in time.
