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Business Value Driver

Infrastructure

Effective and efficient use of assets throughout the value chain that AGL uses, owns or has control of, to enable delivery of energy to the market and to customers.

Reliable energy supply

Australia’s energy sector is transitioning from a system dependent on ageing thermal generation assets to one characterised by renewable energy, lower emission technologies, firming technologies and energy storage. As the largest electricity generator in the National Electricity Market (NEM), we have a key role to play in ensuring that we manage our generation assets and gas supply efficiently to ensure security and reliability of supply for customers.

Strategic context

The framework for delivering reliability in the NEM is primarily market-based. AGL is one of a number of players in the market (including other generators, operators of transmission and distribution networks, and the Australian Energy Market Operator) that together contribute to the security and reliability of the grid.

AGL considers reliability at both asset and fleet level, as well as in terms of investing in the new assets that will be required to replace supply from ageing thermal assets and to meet federal and state government renewable energy and climate policies.

We remain committed to the orderly transition of our portfolio away from coal to new sources of generation and storage, which will ultimately be cleaner, affordable and reliable (refer to page Environment ). AGL is committed to open and constructive engagement with our communities, governments and other affected stakeholders. However, we recognise that our thermal assets are essential to Australia’s energy security. As such, we are investing in efficiency upgrades at the Bayswater and Loy Yang A power stations to ensure these assets are secure, reliable and flexible to support more intermittent renewable energy in the NEM.

Gas has a substantial role to play in the transition to a low-carbon economy. We continue to work towards securing reliable and cost-effective sources of gas for our customers and for generation, and recognise the value that comes from our gas storage infrastructure. We are progressing plans for the Crib Point LNG jetty in Victoria. Should we receive environmental approval and choose to proceed, this project has the potential to provide a new source of gas to the east coast and to support our gas storage and shaping strategy and our development of flexible gas-fired generation capacity. From FY21, AGL will augment its operated gas storage assets with contracted storage services from the Iona Gas Storage Facility. This strategically located reservoir will provide AGL with additional flexibility to manage its gas demand requirements.

Creating value

Generation efficiency and availability

KPI

FY19

FY18

FY17

FY16

FY15

Generation sold to the pool increased 2% since FY18 and is now at its highest level since FY16.

AGL was unable to meet our budgeted Equivalent Availability Factor during FY19 primarily due to a planned outage extension at Bayswater Power Station Unit 1, Liddell’s Unit 3 turbine failure, and Loy Yang A’s Unit 2 generator failure.

The higher number of unplanned outages and corresponding decreased availability experienced at our thermal plants highlight the need for continued investment to ensure the resilience and availability of our assets.

Pool generation volume (GWh)


43,723

43,065

43,099

43,774

38,249

Equivalent Availability Factor (EAF)1

78.4%

79.6%

84.9%

80.1%

82.5%

Market development and continuity

AGL’s development pipeline is supporting the NEM as it transitions towards higher renewable penetration, through investment and development of options spanning renewables, flexible gas-fired generation, pumped hydro and grid-scale batteries. As at 30 June 2019, there were approximately $1.9 billion of new wind, solar and gas firming projects under construction as a result of AGL’s investment in enhancing energy supply, and we have another approximately $2 billion of projects subject to feasibility including pumped hydro projects at Bells Mountain and Kanmantoo.

Legend

Improving trend and/or satisfactory outcome

Neutral trend

Deteriorating trend

KPI linked to remuneration outcomes for CEO and Key Management Personnel

Key relationships and trade-offs with other Business Value Drivers

Balancing community expectations in relation to decarbonisation of Australia’s energy sector with the role that we play in contributing to the continued availability and reliability of energy represents a trade-off between the Customer, Communities & Relationships and Environment Business Value Drivers. We have set orderly timelines for the retirement of our thermal assets, which enables us, and the market, to respond with appropriate investments to provide continuity of supply for the community.

Investing in our thermal assets represents a trade-off between the Infrastructure, Environment and Finance Business Value Drivers. While our thermal assets remain significant emitters of greenhouse gases, upgrades to them are designed to improve the reliability and flexibility of their output without increasing their emissions intensity.

The eventual retirement of large-scale assets carries with it a responsibility to consider a range of impacts in the lead up to, during and following decommissioning, representing trade-offs with the Communities & Relationships Business Value Driver. These assets provide significant economic opportunities for the communities and regions within which they operate, therefore their planned and eventual closure can be a time of concern and uncertainty for our employees, their families and their communities, which also represents a trade-off with the People Business Value Driver.

Beyond FY19

Efficiency upgrades are in place to maximize the performance and reliability of our existing asset base. We have a pipeline of development opportunities to pursue given the right policy settings, and expect to be a significant contributor to Australia’s evolving energy landscape – generating reliable, sustainable energy at the lowest cost.

More information

Historical data on AGL’s generation capacity is available at 2019datacentre.agl.com.au.

Additional information about pool generation volumes is available on page Electricity portfolio in the Operating and Financial Review.

Detailed information about each of AGL’s assets (including community engagement and environmental monitoring data, where relevant) is available at agl.com.au/about-agl/how-we-source-energy.

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