AGL had intended to split in two and continue burning coal for at least another 20 years, but Mike Cannon-Brookes led an investor revolt
This is probably the biggest story yet in Australia’s still fledgling green energy transition.
AGL, the country’s biggest coal generator and biggest polluter, has been forced to abandon its ill-considered plans to split in two and keep burning coal for another two decades and more. Shareholder activism has forced it to abandon its ill-considered plans to split in two and continue burning coal for another 20 years.
This astonishing victory by activist billionaire Mike Cannon Brookes is made more remarkable by the fact coal has been such an important topic of political debate over the past decade.
It shows, for one, that resistance to the green-energy transition and science-based climate targets has moved from dodgy backroom political deals and street protests to plain daylight in the boardroom and financial market.
Australia now has two of the world’s most powerful and deep-pocketed green energy activists in Cannon-Brookes, the third richest person in the country, and Andrew Forrest, the iron ore billionaire who is the second richest person in the country, and who is making a huge push into green hydrogen and green ammonia.
It also has a superindustry with trillions in investment to manage, and a keen understanding that fossil fuel assets will become worthless and stranded within a decade. The shift is happening.
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Cannon-Brookes and Forrest are already working together on what will be the world’s biggest solar plant and battery storage facility, the $30 billion Sun Cable project in the Northern Territory. Both are harsh in their evaluation of those proposing new fossil fuel projects.
Yes, we still have conservative politicians, media and “think tanks”, cheered on by Australia’s richest person Gina Rinehart from the sidelines, still prosecuting the case for coal, and smearing their faces in coal dust, feigning interest in the future of the coal industry workers.
But the federal election, just a week ago, has amplified the green energy shift. At least 55% of people voted for stronger climate action, and at least one quarter for a lot more than that – the supporters of the Teals and the Greens demand science-based targets, and to act on them.
It’s likely that AGL saw the writing on the wall from the election result, and realised it was kidding itself if it thought it could keep on burning brown coal up to 2045 and retain customers at the same time.
The existing board – many gas and oil veterans – doesn’t seem interested in managing an accelerated transition, so they are heading for the exit.
There are many questions that remain about how this will play out, mainly in relation to the speed and extent to which AGL can execute the transition.
The Australian Energy Market Operator has created a 20-year blueprint that includes 80% renewables, no brown coal generators, and very few black coke generators. It is likely to accelerate this scenario in the future, possibly leading to a complete abandonment of coal by 2035 or earlier.
It is one thing to design a path and another to actually execute it. So much depends on the rules and the regulations of the market – which everyone knows are not fit for purpose, but which are taking an age to re-write. Other important issues include technology integration, social licensure for new projects and transmission, as well as supply chains.
David Leitch, principal of ITK and co-host of RenewEconomy’s popular Energy Insiders podcast, says the change of management at AGL will be welcomed.
He believes that AGL might try to negotiate a bid from Grok Ventures (the Cannon-Brookes investment vehicle). It will be interesting for Brookfield, the funds management giant, to join Grok in such ventures and joint bids.
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Much about the future of AGL’s Loy Yang A brown coal generator, Leitch says, will depend on the attitude of the Victorian government, which has already privately negotiated a new closure date for the Yallourn brown coal generator in the Latrobe Valley, the details of which have been kept secret.
Yallourn was originally planned to close in 2032. However, it will now close by 2028. It is possible it might have closed even earlier without a state government agreement to support it in troubled times, and when the sun did shine and the wind did blow, but we don’t know.
This is the key question for the green energy transition. Based on the experience of the abrupt exit of Hazelwood and the long-running saga about Liddell, we know that coal closures should be preceded with sufficient wind, solar, and dispatchable storage. That’s easier said than done.
NSW has a plan in place to do exactly that. It assumes that all five of its remaining coal generators will be gone within a decade. Victoria has a less clear plan. However, its second big renewables option for this year and its major push into offshore wind show that it is aware it must build before it closes.
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Only the Labor governments of Queensland, Western Australia, and the Northern Territory have any credible plans to increase renewables beyond 50% in their grids. Although it is possible that a massive push towards green hydrogen could solve the problem, they still need to have a plan for their existing workers.
Cannon-Brookes, meanwhile, can help prepare AGL for the green energy transition, but he will need to work with and count on others – regulators, rule makers, developers, suppliers, financiers, state and federal governments – to ensure the infrastructure is in place to meet those climate targets.
That is what is so exciting in the AGL environment. The transition has claimed almost as many AGL CEOs, (Andy Vesey, Brett Redman, and now Graeme Hunt), than it has Australian prime minsters (Rudd Gillard Abbott, Turnbull, Turnbull, Morrison, and Rudd).
We now have a federal government that has a more ambitious policy (43% reduction in emissions and 82% renewables by 2030) and a strong cross-bench in both the houses that will push them to do more, especially when it comes to economy-wide emissions. The public is enthusiastic about the change and wants it to happen.
This article was created by RenewEconomy. It was republished under a content sharing agreement.
Source: Climate Change News
