Energy giant AGL’s record loss has supercharged the end of coal in Australia and called into question the Morrison government’s commitment to expanding gas.
That is the message from energy experts who are concerned that Australia’s heaviest emitters are not reading the writing on the wall and transitioning fast enough.
The warning follows this week’s release of the Intergovernmental Panel on Climate Change’s (IPPC) report, which found the Earth is just 10 years away from heating 1.5 degrees on top of pre-industrial levels.
On Monday, the IPCC delivered a damning assessment of Australia’s role in climate change, warning the planet was heating at a faster-than-anticipated pace.
Just days later, the country’s biggest emitter posted a multi-billion-dollar loss.
AGL’s bottom-line earnings fell from a $1 billion profit in 2020 to a $2.06 billion loss, the company said on Thursday.
AGL is currently in the midst of trying to split itself into two new companies – with AGL Australia to hold its power and telecommunications division as well as some cleaner energy generation assets. A new entity, Accel Energy, is to own its emission-heavy coal and gas-fired power stations.
Climate and energy program director at The Australia Institute, Richie Merzian, said AGL had not moved fast enough to transition to renewables.
“AGL didn’t think things were going to change as quickly as they have and they got caught with their pants down,” Mr Merzian told TND.
He said the major reason AGL has suffered such a huge loss was because of its coal assets, which are increasingly worthless, but also because of gas.
“A big part it is because of coal, but gas isn’t the investment they thought it would be,” he said.
“AGL had invested millions for a gas import terminal in Victoria, which they lost because it had to be scrapped.
“Between this and the IPCC report, it really puts the ‘gas-fired recovery’ into question.”
The curse of coal
AGL has repeatedly refused to bring forward the closure of its coal-fired power stations, and Dan Gocher, director of climate and environment at the Australasian Centre for Corporate Responsibility, said this was a key reason the firm had lost out.
“AGL claims that it is not in position to commit to develop the necessary replacement electricity generation capacity to replace its coal-fired power stations,” Mr Gocher said.
“Unfortunately for AGL shareholders, the market will take care of replacing that capacity, which will make AGL’s coal-fired power stations unprofitable and destroy even more shareholder value.”
Coal helped build modern Australia, but it has become one of the most contentious topics in the nation.
“Isn’t it amazing what this little black rock can do?” was the key slogan of the Minerals Council’s notorious marketing campaign about coal’s “endless possibilities” in 2015.
Prime Minister Scott Morrison famously held up a hunk of coal in Parliament in 2017, saying “don’t be scared”.
But Australia is now increasingly out of step with its largest trading partners in Asia, the institutional investment community, and a growing number of the world’s biggest companies over its refusal to commit to net-zero carbon emissions by 2050.
A transformation of Australia’s energy sector doesn’t need to be destabilising, experts say.
Research released by The Australia Institute’s Climate & Energy program earlier this year showed that an orderly approach to phasing out thermal coal would shield Australian workers, communities and the economy from the negative consequences of an unmanaged transition.
The study, authored by John Quiggin, professor of economics at the University of Queensland, found that a managed transition out of thermal coal over 10 years could be achieved with minimal disruption to coal workers, regional communities and the Australian economy.
No pain, lots to gain
“Australia’s transition away from excessive carbon pollution must begin with an urgent and co-ordinated phase-out of thermal coal production and use,” Professor Quiggin said.
“Fortunately, with enough advance notice and an appropriate transition plan, the thermal coal industry can be phased out over time without any significant dislocation to workers.”
Climate Council spokesperson and energy expert Madeline Taylor said renewables were now not only clean, but cheaper.
“Fossil fuels increasingly cannot compete with renewable energy, which is bringing down power prices for consumers and creating a cleaner, healthier energy system,” Dr Taylor told TND.
“The states and territories, and our strategic allies and trading partners are all ramping up their commitment to renewable energy and clean industries.”