Jamie Smyth for the Financial Times:

In a dusty mining town in the Australian outback, AGL Energy is plotting a green power revolution that could transform the country’s electricity sector.

Australia’s biggest utility recently opened a solar farm in Broken Hill, the birthplace of global miner BHP Billiton. A sister AGL solar farm in Nyngan, about 500km away, is the biggest in the southern hemisphere. Together the A$440m ($325m) plants will produce 155 megawatts of electricity — enough to power 50,000 homes.

“These projects were built on time and on budget — they are proof large-scale solar can be built in Australia,” says Brett Redman, AGL’s chief financial officer.

AGL, which was founded in 1837, is undergoing a transformation. For a century the A$12bn utility has relied mainly on coal and gas to provide electricity to its customers, making it Australia’s largest polluter. But when Andrew Vesey, an American, took over as chief executive last year AGL began pursuing a future without coal — a controversial policy in a country with the world’s fourth-largest coal reserves.

“We have recognised that our communities and our customers are expecting the world to decarbonise,” says Mr Redman. “We need to be part of the change.”

AGL, which last year generated 87 per cent of electricity for its 3.7m customers from coal, is beginning a staggered phase out of coal-fired generation that will see the last of its three huge coal plants close by 2050.

It is quitting gas production and exploration, has built the largest renewable energy generation portfolio in Australia and invested A$20m last month in Sunverge Energy, a company specialising in renewable battery technologies.

However, AGL faces a similar conundrum to utilities in many developed countries: how to scrap its fossil fuel generation to make room for renewables while protecting its earnings?

The dominance of coal generation in Australia, which accounts for 61 per cent of electricity production, and a government wedded to promoting the fossil fuel makes this transition even harder.

“AGL’s newish chief executive is recognising the writing is on the wall for coal and trying to turn the ship, but it is like an ocean tanker and will take a long time to turn,” says Tim Buckley, director at the Institute of Energy Economics and Financial Analysis.



Mr Buckley says there are headwinds facing renewables in Australia: surplus electricity generating capacity; flat or declining demand; and continued policy uncertainty.

Sun shines on AGL’s Australia solar energy plans