Company outlines plan to replace lost capacity with a mix of renewables, battery storage and high-efficiency gas peakers

AGL has rebuffed pressure from the Turnbull government and confirmed it will close its Liddell coal-fired power plant, replacing it with a mix of renewable sources.

The decision, announced on Saturday morning, was widely expected, and the company had intimated a similar plan earlier this year.

But it still serves as an embarrassment to the Coalition, which had publicly and privately pressured AGL’s chief executive, Andy Vesey, to either sell the plant or keep it open for another five years.

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AGL has instead outlined a plan to replace the 1680 megawatts of baseload capacity that will be lost when Liddell retires in 2022. The proposal includes a mix of renewables, battery storage, high-efficiency gas peakers, and an efficiency upgrade at Bayswater Power Station.

The plan is considerably cheaper than extending the life of the coal-fired plant, providing power at $83/MWh. Extending Liddell would produce power at a cost of $106/MWh.

AGL’s chairman, Graeme Hunt, said Liddell could be replaced with cleaner technology without compromising reliability or affordability.

“This plan demonstrates that old power plants can be replaced with a mixture of new, cleaner technology, while improving reliability and affordability,” Hunt said.

“Decisions for the investments are staged to enable flexibility to respond to the changing needs of the market and improvements in technology over the next five years.”

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AGL has guaranteed the closure of Liddell will cause no forced redundancies. The decision will, however, reduce its carbon footprint by 17.6%.

The decision won immediate praise from business and conservation groups.

The Business Council of Australia chief executive, Jennifer Westacott, said it was the sort of innovation that could be expected under the federal government’s national energy guarantee.

“Energy companies cannot be expected to replace like with like when there is more efficient, reliable and affordable generation technology available,” Westacott said.

“AGL’s plan will deliver secure and reliable energy to consumers while also helping to meet Australia’s carbon abatement commitments.”

The Australian Conservation Foundation (ACF) said the decision showed that Turnbull’s attempt to “strong-arm” AGL had failed.

Its chief executive officer, Kelly O’Shanassy, said he must now put forward a comprehensive plan to make the transition to clean energy.

“While state governments and energy companies are getting on with replacing polluting coal power with clean energy, the prime minister is bending over backwards to keep dirty coal in our energy system longer,” O’Shanassy said.

“Keeping Liddell polluting for another five years was nothing more than a poorly informed thought bubble from the prime minister.”

Modelling released last month by ACF and the University of Technology Sydney’s Institute for Sustainable Futures showed replacing Liddell with clean energy and smart technology would save billions of dollars and cut emissions.

“Our detailed economic modelling has shown that replacing the polluting Liddell coal plant with clean energy and smart technologies would slash pollution and save billions of dollars,” O’Shanassy said. “But we need the right policies and incentives from our governments to unlock these benefits of clean energy.”