AGL Energy – the country’s biggest coal generator, and polluter – says the best way to a zero carbon grid is through local, distributed energy hubs, and it rejects the modelling from the Australian Energy Market Operator’s Integrated System Plan that forecasts rapid coal closures.
AGL on Thursday brought forward the closure of the Loy Yang A and Bayswater coal fired generators by just a few years, but the dates earmarked for Loy Yang A (2045 rather than 2048) are still well outside AEMO’s predictions that by 2032 all brown coal generators will be gone from the grid.
That scenario, known as “Step Change”, also models an end to all coal generation by 2042 and is considered by most in the energy industry to be the most likely scenario. But AGL rejects it, arguing that it will be impossible to deliver because the infrastructure, mostly transmission, can’t or won’t be built in time.
“We don’t see at the moment that there is the amount of investment going into the system that you can force out coal much earlier (than AGL’s new closure dates),” AGL chief operating officer Markus Brokhof said in an interview with RenewEconomy on Friday. “But if the system is ready, we will be ready.”
Brokhof pointed to the one major transmission project that is going ahead, the $2.4 billion Project EnergyConnect that will link South Australia to NSW, which was originally proposed in 1999, and won’t be complete until 2025.
“The fact is that we have one large interconnector crossing states, which needed a period of 26 years,” he said.
The reason for that is largely because previous South Australia state governments opposed the plan because it would expose the government’s newly privatised utility to competition. But politics still dominates the Australian market.
AGL says the best path to decarbonising the grid is through the creation of green energy and industrial hubs, and it just so happens it has the infrastructure to do just that, at the sites of the Loy Yang generator in Victoria, the Liddell/Bayswater sites in NSW, and at Torrens Island in South Australia.
It is looking at building a mix of on site renewables and storage, green hydrogen and green ammonia, and encourage industries such as data centres to establish themselves within the precincts, and even industries that can take advantage of excess heat.
Big batteries are also planned, with the first starting construction at Torrens Island, along with a new solar storage technology from the Australian company RayGen, in which AGL has made a small investment.
So can enough of these green energy hubs be built, then, to deliver the type of rapid transition to a zero emissions grid that is modelled in AEMO’s ISP, and which is needed to try and cap global warming at 1.5°C.
“We cannot change the entire energy landscape Australia,” Brokhof says.
“Yes, we can try to contribute substantially to this, but it’s much more players in this, you know, if everybody is is doing the same, then most probably you’re right.
“We can bring forward the closure of the power stations, but the government needs to contribute to this. Each country has to allocate its reduction targets to each of the sectors, and then we can say we would like to follow it. But even this has not happened (in Australia) so far.”
Here is a (lightly edited) transcript of the interview with Brokhof:
RenewEconomy: AGL announced on Thursday that you are bringing forward the closure dates for the last two coal fired power plants, but only by a couple of years. Why not more?
Markus Brokhof: On the one hand, I think we always said we want to contribute to carbon reductions, but we want to have a smooth transition. We don’t want to have a transition that is a crash, and where customers suffer. We are open to move to an earlier closure, if the system is ready and as long as we are needed in the system … We are not neglecting the fact that society is looking for green energy, and that is also part of our energy hub story.
We want to convert these sites to low carbon energy infrastructure, no doubt about this. But we also want to have some realism, what is possible in a very short time period, when you would like to replace all coal fired generation. If it comes to transmission, if it comes particularly to firming capacity, we don’t see at the moment that there is the amount of investment going into the system that you can even force out coal much earlier. But if the system is ready. We are also ready.
RE: Your view is quite different from the most of the energy industry. The AEMO scenarios suggest brown coal closed by 2032. That’s 13 years before you’re even advanced closure date for Loy Yang. Why are you so different from the rest of the industry? Because that step change scenario was actually based upon, basically a survey the opinion of most of the people in the industry,
Brokhof: It was a free survey and nobody understood what kind of investment you need to put into this scenario in order to make it happen. AEMO then came out and said it’s $90 billion. I think Bank of America has said $260 billion, maybe it’s in the middle. And then you have to build new transmission lines, you have to have firm capacity. If you look at one of the inter-connectors which is being built, EnergyConnect between New South Wales and South Australia, the project was proposed in 1999. The project will go in operation in 2025. So that is 26 years, so if everybody believes and you can build all the inter-connectors and transmission lines in a much shorter period, okay. But you know, the, the fact is that we have one large inter-connector cross states, which needs a period of 26 years.
RE: Â So how can we bring that forward then? What needs to be done to fast track this and meet these targets? Because they’re not just aspirational targets just for the sake of it? They’re also deeply ingrained into what’s needed to do for 1.5 degrees and these are important for consumers, as you’ve noted, but they’re also important for investors.
Brokhof: No, definitely. And the energy hub concept is coping with this. In my view, you need to build a decentralized energy infrastructure. There will be not anymore be this large scale generation, it will be smaller generation but you need to have a mix, firming capacity, firming storage. When you look to Europe, what has happened there, a much more decentralized infrastructure, smaller generation, and heat pumps, electric boilers, which is what we are trying to also build on our on our own.
RE: So your idea of actually getting to the 1.5°C target, or getting to zero carbon, is the sort of decentralized hubs rather than centralized generation or transmission …
Brokhof: Definitely. We will not replace one kilowatt thermal generation with one kilowatt renewable, that doesn’t make sense. You have to think differently, you have to build more decentralized units. You have to build these ecosystems, and maybe even behind more behind the meter technology. I think that’s a solution for Australia in the future.
RE: Can you can you then build enough energy hubs … to still bring forward the closure of the coal fired power stations, Â because it’s important for climate outcomes?
Brokhof: You’re right, but we cannot change the entire energy landscape of Australia. Yes, we can try to contribute substantially to this, but there’s many more players than us. If everybody is doing the same, then most probably, you’re right, We can bring forward the closure of the power stations, but the government needs to contribute to this because at the end of the day, it’s on the back of permitting and regulatory approvals, and AEMO also needs to play a role because they are part of all the approval processes and so on.
RE:Â You’re talking about energy hubs. What are they going to look like? Â I’m thinking about battery storage, but you’re also looking about local industries that can take advantage of heat generation and other things.
Brokhof: To give a good example, this is looking a bit like the circular economy. An ideal situation is we have an electrolyzer, which produces hydrogen and also ammonia, ammonia will feed into the fertilizer industry, the fertilizer industry would then supply the fertilizers to greenhouses or glass houses, the glass houses need heat, but they can also take co2, but then they will also need fertilizers, the remaining biomass can be used to produce biogas. Australia is much more behind because you are wasting a lot of heat, and you’re still thinking about landfill and so on, in my understanding it’s 10 or 15 years behind what other countries are doing.
RE: Â Even for that these hydrogen, or ammonia production, they do require large amounts of wind and solar but you still need transmission lines, though, at least to bring those to these energy hubs until the point of supply, or will it all be local?
Brokhof: IÂ think the attractiveness of our three hubs, we have these transmission lines already there, we have large substations, that renewables can connect to and I think that was one of the unique selling proposition that we had choosing these locations, because the connection and the infrastructure, the network infrastructure is already there
RE:Â Right now, in your 2.7 gigawatt plan, for this new fund that you’re talking about creating, you itemise a whole bunch of different projects, there’s the energy hubs, there’s batteries, there’s wind farms, I notice there’s no solar. What’s the issue there.
Brokhof: We are looking to build also a solar plant with thermal storage, with RayGen, a company that we have a share in, which is building at the moment in Victoria, two megawatt electricity and three megawatt thermal. Once this is finished, we will commercialize this and try to bring it to Liddell. To get a business case around solar PV is very difficult, because to build it on a on a large scale, you are bringing in additional energy where already we have a surplus of energy. If you don’t combine this with long term storage, then there is no business case.
RE: And what about batteries? You’re already underway at Torrens Island. You’ve got approvals for loi Yang. You’re looking at Loy Yang, Liddell and Broken Hill. Where else.
Brokhof:Â Yes. I think we have other locations that we at the moment are published. At the end of the day, we are development developing the site. We need to have to have an early mover bonus, so if you disclose it now if we give our competitors an advantage.
RE: One final question. We talked about 1.5 degrees. This is important to consumers. This is important to investors. They’ve made that clear. AGL remains the biggest polluter? How confident are you that we can actually reach this target, and manage this because it’s not just about the short term earnings outlook for your company it has much bigger implications for the broader community and the wider world.
Brokhof: That’s a country target. In Australia, we have not even allocated to the various sectors, the emission reduction targets. So at the moment if somebody speaks about the 1.5 degree targets, it cannot be because we don’t know how the Australian Government wants to implement it, and they have allocated, like in other countries, for the transport sector, for the energy sector and so on. We even don’t have a basis to say this because we  can only take assumptions. The federal government has to have a very clear allocation of reduction targets for each of the sector.
RE: So the government needs to act before the risk can follow.
Brokhof: This is really a country specific target, so each country has to allocate its reduction targets to each of the sectors, and then we can say we would like to follow it. But even this has not happened so far.
See also:Â No business case for large scale solar PV without long term storage, says AGL
