Australia's AGL Mulls Faster Coal Plant Exit on Carbon Curbs

  • Closures would help erode a glut in Australia's power market
  • Future of power tariffs might include flat-price structures

AGL Energy Ltd. will consider speeding the closure of its coal-fired power plants because of the risk that climate policy makers will set tougher curbs on emissions that cause global warming, according to Chief Executive Officer Andy Vesey.

Australia’s largest electricity producer may need to bring forward its timetable for plant shutdowns if the government adopts new policies as climate negotiators consider targets to restrict fossil-fuel use by 2030, Vesey said in an interview from the United Nations climate summit in Paris. Under AGL’s plans set in April, it expects to close its 6.9 gigawatts of coal-fired capacity by 2048, he said.

“In order to make room for renewable investment on the grid, we have to get a better balance between supply and demand and what we would advocate is that older, dirtier plants exit the system,” Vesey said. “People have done this already. Canada has done it. The U.K. has announced it. A sovereign has the right to dictate the kind of infrastructure it wants and then people have to act accordingly.”

AGL’s coal capacity more than tripled last year after Vesey’s predecessor Michael Fraser bought plants from New South Wales state for A$1.5 billion ($1.1 billion). AGL now wants to boost investment in renewable energy and battery storage, helping place Australia on a path of greenhouse-gas reductions called for by scientists. The nation has a target to cut emissions at least 26 percent by 2030 from 2005 levels.

‘Get Moving’

“There’s an inevitability of heading toward a carbon-constrained future,” Vesey said. “There’s a resolve that this is the way to go and it’s time to get moving.”

Julie Bishop, Australia’s foreign affairs minister, said on Wednesday at the summit in Paris that the country supports a long lasting climate deal, “which lays out a credible strategy for all countries to take greater action.”

Shutting plants will curb an oversupply in the Australian electricity market, Vesey said. The three plants earmarked for closure are equivalent to about 10 percent of the nation’s total power capacity as of 2012, according to data from the U.S. Energy Information Administration.

Creating new business plans as the power market changes is a key challenge. One option might be to offer customers flat-price tariffs in exchange for allowing the utility to install solar panels or storage batteries, Vesey said.

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