The tough questions

We’re changing the way we do business. We know that big changes can raise tough questions. So we’re cutting to the chase and answering them.

Published: 28 April 2017

1. How do we know you’re serious about getting out of coal?
In this day and age it makes good business sense to properly plan for climate change and the changing laws and regulations that will come with it.

We did some modelling on climate change mitigation and found that while there are some risks associated with ruling out further investment in coal, there are bigger risks in sticking with it. We also found that there are overwhelming opportunities in clean energy, and we support Australia’s international commitments to cut back on carbon emissions. The only thing that’s uncertain is the timing, so we’ve looked ahead, read the writing on the wall, and developed an orderly plan to get out of coal.

Our plan clearly states: “AGL will not build, finance or acquire new conventional coal-fired power stations (i.e. without CCS).” Instead, our business will prioritise investment in renewables and complementary near-zero emission technologies.

We have publicly committed to not extend the operating life of any of our existing coal-fired power stations; and both our Greenhouse Gas Policy and our Carbon Constrained Future Report, as well as our Sustainability Report clearly spell out this commitment to the public, our customers, and the broader investment community. We have set a deadline for when each of our coal plants will close.

As one of Australia’s biggest energy companies, we can make a big difference.

We’ve been a vocal public advocate in our sector for government policies to reduce greenhouse gas emissions.

Policy certainty from government would help all businesses better make long-term investment decisions that factor in climate change.

Short answer: This is inevitable. We’ve taken the uncertainty out of the timing by making our own plan to exit coal.
2. Okay, but why haven’t you acted sooner?
What we’re talking about here is the large scale transition of an essential public service — energy. Because of this, we have to manage the change carefully so we avoid things like big price hikes and an increased likelihood of blackouts.

Our plan is aligned with the best available science on climate change. The Intergovernmental Panel on Climate Change (IPCC) says we have to get to net zero emissions by 2050 to avoid what scientists call the tipping point when warming reaches dangerous levels, triggered by global temperature rises of 2°C. We close our first coal-fired plant in 2022, and our plan gets us out of coal no later than 2050.

Short answer: Our plan lines up with the science. We’re acting ahead of government policy, but if we rush this the lights might not turn on when you need them.
3. What will replace coal?
Zero emissions energy like wind and solar, as well as lower emissions sources like gas will replace coal over time. Energy storage options, like batteries will also be really important, because once we can store renewable energy for longer we will be able to use it whenever we need it. Right now, things in the energy market are a bit uncertain, like whether technologies are developing fast enough and what government policies and regulation will be.

We’re building the biggest Virtual Power Plant in the world in Adelaide so we can buy energy from our customers, and we’re the biggest private generator of renewable energy in the country. This is at a time when we’re still waiting on a policy framework from government, which would give our sector certainty to decide how to manage future investments.

In August 2016 we launched the $3 billion Powering Australian Renewables Fund (PARF) to help investors directly invest in renewable energy projects, and get more renewables to market.

The fund will help deliver another 1,000 MW of renewable energy capacity, enough to power 530,000 average homes annually, and has already helped finance projects like the Silverton Wind Farm in NSW, which is being built right now.

Back in 2007-08 we generated enough energy from renewables to power 145,000 average Australian homes. By 2015-16 that figure had gone up to 726,000 homes — a 400% increase in just eight years.

All of this makes us the largest ASX-listed owner, developer and operator in renewable energy generation in Australia today.

Short answer: Renewable energy, but that won’t happen overnight and a lot depends on how quickly battery storage develops.
4. But why aren’t you investing in clean coal?
We’ve had a look at clean coal and have a research site with the CSIRO at one of our coal-fired plants so we could find out whether the theory stacks up in practice. So far, the science does but the economics doesn’t.

Quite simply, the conditions we need to responsibly invest in something like carbon capture and storage (or clean coal) just aren’t there right now. That’s not to say they won’t ever be, but we have a responsibility to invest in the lowest cost, low emissions technologies, like renewables.

Short answer: Clean coal isn’t a smart investment right now.
5. But isn’t AGL currently the largest emitter of greenhouse gas in Australia?
That’s true, we are the largest generator of electricity in the country, which makes us the largest carbon emitter. Electricity generation accounts for one-third of Australia’s carbon footprint. As the largest emitter, it’s even more important that we have a solid climate change plan. Our emissions footprint is currently around 44 million tonnes, with the vast majority of emissions being produced at just three power stations. Under our plan, each of these power stations will be closed down starting 2022, ending 2050.

We’re also the biggest generator of renewable energy and have launched a $3 billion investment fund which aims to generate another 1000 MW of energy — enough to power another 530,000 average Australian homes annually.

We check our strategies against the best available climate change science and policy such as the Intergovernmental Panel on Climate Change (IPCC), the CSIRO and the Climate Change Authority. The 2015 Paris Agreement targets “net zero emissions” by 2050 and that’s what we are doing too. Basically, that means lowering carbon emissions as much as possible, and using offsets, like planting more trees, for any remaining emissions to get to net zero. It might sound hard, but we’ve mapped it out, and it’s possible.

We believe big emitters need to acknowledge there is a problem and plan to address it in a way that’s consistent with the best available science on climate change and Australia’s international commitments under the Paris Agreement.

Short answer: We want to stay the biggest generator of renewable energy and have a plan to lose the mantle of biggest emitter.
6. What will happen to the people employed in coal?
The longer the planning and the deeper the consultation, the better the outcome. Transitioning out of coal has a massive social and economic impact on the people who work in these power stations. These are our employees and our community, and we won’t just walk away.

These transitions are hard. That’s why we’ve come out early and made our plans clear. The lead-in time in our plan gives us the opportunity to properly work with local, state, and federal governments, and other organisations to design a transition for workers that understands their circumstances. In practice this could involve working with government to deliver a package of support to workers and investments in services that would help the workers transition to new jobs.

For example, when Hazelwood in the Latrobe Valley closed down recently, AGL was the first to step up and work with the State Government on a plan to offer jobs to some Hazelwood workers at our Loy Yang A plant by offering early retirement to some of our most experienced staff to make way for younger workers.

In the Hunter Valley we set up the Hunter Energy Transition Alliance (HETA) with government, education institutions and industry to build new industries and jobs in the area.

We also take site rehabilitation seriously, and are in the process of writing a comprehensive rehabilitation strategy for what happens to assets and land when we close our coal-fired power stations. Some rehabilitation strategies include transforming the site back to pasture, repurposing the plant for other uses, or even repowering the station for clean energy generation.

What happens on each of our coal-fired power plant sites will be different depending on what the local community needs, the geography of the area, and whether the plant can be adapted for another purpose.

Short answer: Our people are our responsibility. We’ll work together to find solutions.
7. Does all this mean we will have more black-outs?
No, it really shouldn’t. That’s partly why our plan is focused on an orderly transition out of coal. Lots of energy infrastructure in Australia is getting pretty old, and that means it’s getting less reliable too. In fact, roughly three-quarters of Australia’s electricity generators are beyond their original design life, so we need a plan for how and when they’ll be replaced. Our plan is to build new generation facilities before we switch off an older coal station. This approach is our best chance at making sure customers get uninterrupted access to an essential public service like electricity.

Short answer: Old infrastructure and a lack of planning around transition can contribute to increased blackouts but long term planning should make things more stable and reliable.
8. Why are you investing in gas-fired generation?
Because renewable energy isn’t available at all times. When the wind isn’t blowing, or the sun isn’t shining, not enough energy is generated to meet demand. Batteries that can store energy for use during these times can help solve this problem, but that technology isn’t developed enough at the moment. In the meantime, we need to fill this gap.

Coal-fired power stations have a high carbon footprint and can’t be switched on and off fast enough to supplement renewables. But gas plants have a lower emissions footprint and can quickly supplement energy supply from wind, solar, and hydro. So if we can rely on renewables as much as possible, but switch on gas when we need to, we can combine those energy sources to provide a reliable energy supply to Australian homes and businesses.

Short answer: For now, renewables don’t provide what’s called a “firm” supply, but we can fix that reliability problem if we supplement renewables with gas when the wind isn’t blowing and the sun isn’t shining.
9. Okay, but energy is an essential service, what are you doing to help customers manage their bills?
We know there are people who, quite simply, struggle to pay their bills. Many in the community have been calling on the energy industry to step up in supporting these customers. We’ve heard that call.

We launched a $6m Affordability Initiative and offer customers flexibility in their payment and deferral options. Our hardship program called Staying Connected, provides customers in greatest need with specialised payment plans, debt relief, and matching payments on a case-by-case basis. We’ve committed $1.2 million over three years to fund financial counselling services for customers who are struggling to make ends meet, and we’re establishing the Fairer Way Package, which makes sure concession card holders and customers in greatest need are both on competitive plans and won’t incur late fees.

Because domestic violence can be a factor when people are struggling to pay bills, AGL introduced a domestic violence policy, to provide better support both for our people and for customers who are impacted by domestic violence. Training for our customer service staff means calls are transferred to specialists who work through flexible payment arrangements on a case by case basis and extra steps to protect account privacy.

Finally, our outreach with customers taught us that in many low-income households, energy use is significantly higher than the average. This is because there are often more people in the home for more of the time and low-cost household appliances are usually less efficient. So we’ve began partnering with state governments and the community sector to deliver solar technology and home energy visits to households in need, and developed tools that make it easier for customers to manage their energy usage, set usage alerts, and have more control over their bills.

We’ll keep developing tools, like AGL IQ, that make it easier for you to manage your energy needs, lower your usage, and bring your bill total down.

Cutting energy waste is one way to do that. The other is to invest in solar panels so you have your own energy supply that allows you to sell surplus energy back to us for use in the grid. Not to go all sales-y on you, but we even have a no upfront cost solar plan.

We also have a 24/7 contact centre service, and the Australian Energy Regulator runs a website called Energy Made Easy, to help customers in SA, NSW and Qld compare prices and services provided by energy retailers. The Victorian Energy Compare website helps customers there.

Short answer: We might be a business, but we’re also serious about being a part of the community. We’re doing our best to not leave low income earners without electricity, and we’re working on ways to make it easier for everyone to manage their energy use
10. It seems like the whole energy market is changing… how are you going to keep up?
The energy market of tomorrow looks nothing like the energy market of today. As a company we have a choice: we can be cautious bystanders, or we can get moving. We’ve decided to get moving.

We don’t just want to survive the disruption of the energy sector, we want to be the disruptors. We want to use our place in the energy market to drive a change in the way the market works. We want to transition away from a reliance on coal-fired power stations by finding ways to help our customers generate their own power. That’s why we are exploring how we can provide solar energy to people living in apartments, and thinking through solutions for renters. We’re not waiting for anything.

Disruption isn’t new to AGL. As early as 1860, the Australian Gas Light Company (as we were called back then) had to deal with the arrival of the electric light — only 19 years after we first got started. We are going through another energy transition now.

We will keep looking over the horizon to what’s coming next and because we’re doing that, we’ll continue to be a part of providing sustainable, affordable and reliable energy for Australia.

Short answer: Things have always changed in the energy market and right now they’re changing in a big way, fast. We’re determined to play our part.
11. Why have electricity prices increased?
For more detailed information on electricity prices visit our dedicated ‘Electricity Pricing FAQs’ page and the ‘Why have electricity prices increased?’ page.