Australia’s Biggest Power Producer Sees Future Without Coal

Australia’s largest electricity producer committed to close its coal-fired power plants within 35 years as part of an effort to cut the nation’s dependence on the fossil fuel.

AGL Energy Ltd. will expand further in renewable energy, focusing initially on smaller projects, Chief Executive Officer Andy Vesey said Friday in a phone interview from the western state of New South Wales, where it’s starting a 102-megawatt solar plant.

The Sydney-based company’s plan to shift away from coal comes after the heads of more than 40 global companies including Ikea, Dow Chemical Co. and HSBC Holdings Plc pledged to push for a low-carbon economy and called on world leaders to seal a deal this year in Paris to limit fossil fuel emissions.

While Australia was already expected to close its coal-fired power stations by 2050, AGL’s plans make a “strong statement,” said Tony Wood, energy director at the Grattan Institute in Melbourne.

“This crystallizes what the economic analysis today says, and that is, if the world is to meet its targets we won’t be burning coal in its current form by 2040, let alone 2050,” he said in a phone interview.

In addition to shuttering all of its existing coal stations by 2050, AGL won’t extend the life of its coal plants or build any conventional coal stations, the company said earlier Friday in a statement.

‘Big Transition’

Achieving long-term targets to reduce greenhouse-gas emissions will be a “big transition” for Australia, which gets about 88 percent of its electricity from fossil fuels, Vesey said. Political deadlock over the future of the country’s renewable energy policy has stifled investment in wind and solar power developments.

“Seeing more large-scale projects will depend on whether we have a coherent, stable energy policy that incentivizes investment and creates room for that with mechanisms that lead to the shutdown of old, inefficient thermal plants” said Vesey, who became CEO earlier this year.

It wasn’t long ago that AGL was increasing its investment in coal. Last year, with then CEO Michael Fraser at the helm, AGL completed the A$1.5 billion ($1.2 billion) purchase of coal-fired power plants from the New South Wales government.

AGL’s assets also include the Loy Yang coal-fired power station, which supplies about 30 percent of Victoria state’s power, according to its website.

Until AGL gets certainty around government policy, the company will focus on so-called distributed-energy opportunities, Vesey said. “You can expect to see more movement there,” he said.

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