3 minute read

Statement on Liddell

Tim Nelson
Tim Nelson
05 September 2017

AGL today issued the following statement on Liddell:

"AGL has committed to the closure of the Liddell power station in 2022, which is the end of its operating life.  AGL has provided this advance notice to avoid the volatility created by the sudden exit of other coal-fired power stations. AGL is actively assessing what capacity will be needed post 2022 and we, along with other market participants, will consider AEMO’s report in light of these plans."

Many readers of this blog will know that I have been an advocate for advanced notice of power station closures for some time. This article (written three years ago) summed up my concerns about sudden closure with this statement (p. 36):

Given the sunk-cost nature of existing power generation infrastructure, the intuitively logical short-run policy option is to ‘do nothing’ and let existing assets continue to meet demand until they fail. At such a point, prices would increase prompting new investment. However, reduced maintenance investment and mothballing plants makes the aggregate supply function inherently more uncertain. Given rising forced outage rates, a rapidly ageing capital stock and the slow (and unpredictable) speed of recalling mothballed capacity, reliability of supply events will become harder to predict. Prices will become more volatile, with long ‘bust’ periods followed by sudden ‘spikes’. Add to this the compressed investment timeframes for requisite conventional replacement capacity if disorderly (rather than orderly) exit from the market occurs, and one can see how, in a practical sense, this is unlikely to be acceptable to policy makers who are accountable for security of energy supply in the long-run.