Diversified sources energise veteran provider

diversSINCE lighting the first gas street light in Sydney in 1841, AGL Energy hasn’t looked back.
It was the second-ever company to list on the ASX and, today, AGL provides gas and electricity to more than 3.5 million customers in Queensland, NSW, Victoria and South Australia.
In its most recent annual report, AGL recorded an underlying profit of $598.3 million; a rise of 24.1 per cent on the previous year. However, uncertainty surrounding CSG regulations required the company to writedown its CSG assets in NSW by $343.7 million.
Despite the writedown, AGL managing director Michael Fraser said it was a “good year” for the company.
In July the company announced it was pushing ahead with its Nyngan and Broken Hill solar projects and began constructing its Newcastle gas storage facility in NSW a month later.
AGL’s large variety of projects include wind, hydro, solar, geothermal, biomass, CSG and LNG, of which a number are well underway.
Renewable
Nearly half of AGL’s total assets focus on renewable energy and make up 30 per cent of the company’s total generation capacity. AGL’s renewable assets are spread across the nation, with projects in every state except the Northern Territory.
As stated on the company’s website, AGL aims to move “toward a more sustainable energy future”.
Solar
Supported by the Australian Renewable Energy Agency (ARENA) and the NSW Government, AGL is on track to deliver large-scale solar projects in Nyngan (102 megawatt) and Broken Hill (53MW).
Construction will start at Nyngan in January and at Broken Hill in July next year and, once complete, will cover an area four times the size of Sydney CBD.
Former Federal Climate Change minister Mark Butler said the project could spur further solar developments across the country.
“Australia has the highest average solar radiation per square metre of any continent in the world and we should take advantage of that natural asset,” he said.
“This project is 15 times larger than any other solar power station in Australia and represents a big step forward towards making solar a bigger part of Australia’s energy mix.”
The solar project will cost $450 million, with ARENA providing $166.7 million and the NSW Government funding $64.9 million.
Once complete it will power 50,000 homes with renewable energy and provide 450 jobs during construction.
Completion of the Nyngan development is expected by mid-2015 while Broken Hill is scheduled for completion in November the same year.
Wind
AGL has a number of wind farms in operation and at planning stage. The Macarthur wind farm is the largest in the southern hemisphere, comprising 140 3MW turbines, 16km east of Macarthur in western Victoria.
Equally owned by AGL and Malakoff Corporation, the $1 billion wind farm can generate 420MW of renewable energy and power 220,000 average Victorian homes each year.
Macarthur has been operational since the start of this year and is expected to produce power for 25 years.
AGL’s wind portfolio also includes Oaklands Hill, which is 3km south of Glenthompson in western Victoria and provides 63MW of renewable wind energy.
Completed in February last year, Oaklands Hill has 32 wind turbines that will provide power to the National Electricity Market (NEM) for at least 25 years.
Heading north, the proposed Coopers Gap wind farm is 180km northwest of Brisbane and would be capable of producing 350MW. AGL planned for Coopers Gap to be connected to a new Powerlink substation along the Western Downs to Halys 275kV transmission line and is currently in the process of exhibiting the revised assessment report.
The Bluff wind farm is made up of 25 2.1MW wind turbines that are expected to provide energy to the NEM for at least 25 years.
About 10km northwest of Hallett and 25km southeast of Jamestown in South Australia, the project has been operational since March 2012 and has the capacity to provide 52.5MW of renewable wind energy to customers.
At peak times, the wind farm can provide about 26,600 homes with power each year. In July, the company postponed the appointment of an engineering, procurement and construction contractor for the proposed $550 million Silverton wind farm near Broken Hill until 2014, due to “ongoing uncertainty around the 2020 Renewable Energy Target”, the company stated.
If the project goes ahead, Silverton could become the largest wind farm in the southern hemisphere with a potential capacity of 1000MW, according to AGL.
Other projects
The company is heavily invested in hydroelectric power, with 12 power stations within Dartmouth, Eildon and Kiewa in north-eastern Victoria, which provide about 1280 megawatt-hours per year.
Wholly-owned Geogen Victoria drives the company’s geothermal exploration in Victoria, NSW and Queensland with a goal to develop commercial-scale renewable power generation.
AGL also owns a number of landfill gas and biogas generation facilities across the country. CSG AGL attributed the $343.7 million writedown of its CSG assets last financial year to proposed new rules by the NSW Government.
Mr Fraser told the Australian Financial Review that the state’s draft planning policy would cut the company’s gas reserves by more than 400 petajoules.
The new CSG rules include exclusion zones around vineyards and a 2km buffer zone around residential areas.
When the new laws were put into place, Australian Petroleum Production and Exploration Association (APPEA) chief operating officer eastern region Rick Wilkinson said the decision could cause prices to rise.
“We are concerned that the decision… will have serious ramifications for households and businesses given that NSW imports 95 per cent of its natural gas from interstate,” he said.
Furthermore, Mr Wilkinson said the “no-go zones will strangle efforts to safely source natural gas”.
AGL has openly criticised the government’s decision to introduce the new rules. Mr Fraser told the Australian Financial Review they “make no sense at all”.
AGL owns and operates the Camden gas project, which produces about 5 per cent of NSW’s gas needs, and comprises 144 gas wells, underground gas gathering lines and the Rosalind Park gas plant.
Stage one of AGL’s Gloucester gas project was approved in February this year and comprises 110 gas wells and infrastructure. Once complete, the project will involve a central processing facility; a gas-fired electricity generating facility with capacity of up to 15MW; a gas transmission pipeline between the facility and the existing gas supply network at Hexham; and a delivery station at Hexham to connect the gas to the Sydney-Newcastle trunk pipeline.
The company applied at the beginning of October to begin fracking at four CSG pilot wells, as part of stage one.
AGL is exploring for CSG in the Hunter region under PEL 4 and PEL 267, and proposed to conduct up to 190km of 2D seismic in PEL 267.
According to the company’s website, AGL is part-way through the exploration process with about 300km of seismic data, 16 core holes, six stratigraphic holes and two pilot test wells. It expected exploration to continue for another three to five years. Almost $200 million was taken off the value of the Hunter project, which is now valued at $10 million with no gas reserves; the Gloucester project was reduced by about a quarter and the Camden project’s value fell by a third.
The expansion of projects has fallen by the wayside for AGL, which planned to expand Camden and Gloucester.
Apart from its NSW CSG assets, AGL has a 50 per cent interest in the Galilee gas project in Queensland in a joint venture with Galilee Energy (50 per cent)
Gas
In order to secure supply in peak times, AGL’s gas storage facilities form a safety net for continuous natural gas.
The company’s current gas storage project is in Tomago, which will be able to store two weeks’ worth of gas for the Greater Newcastle region.
Once complete, the project will comprise an LNG facility, LNG storage tank, truck loading facility, gas receiving station and associated infrastructure.
The processing plant will be capable of processing up to 66,500t of LNG each year, while the storage tank will be able to hold 30,000t or 63,000 cubic metres of LNG.
AGL group general manager upstream gas Mike Moraza said the facility would be a valuable part of the NSW gas industry.
“The facility will enable AGL to meet the growing demand for gas by the people and businesses of NSW,” he said. “NSW customers will benefit from the facility which will enable AGL to help provide security of gas supply by managing peak gas demand and pipeline constraints.”
In November this year, construction will start on a 5.5km pipeline to connect the facility to the receiving station at Hexham. The company expects the pipeline to be complete by mid-2014.
Construction of the $310 million project began in August 2012 and is anticipated to be complete in mid-2015.
The company’s second gas storage facility is Silver Springs, which uses the depleted Silver Springs/Renlim fields in Queensland’s Surat Basin.
The facility is “Australia’s largest underground commercial gas project”, as stated by the company, and was opened in November 2011.
AGL can store up to 47PJ of natural gas in the facility to support its customers and manage peak periods in summer and winter.
Thermal
Using gas and coal to power its thermal energy projects, AGL has four thermal assets in South Australia, Victoria and NSW. Loy Yang provides Victoria with about 30 per cent of its power requirements and is arguably the company’s biggest thermal project.
Comprising the 2210MW Loy Yang A power station and Loy Yang coal mine, the project is 165km southeast of Melbourne.
Each year the mine produces 30 million tonnes of coal and supplies the Loy Yang A and Loy Yang B power station.
Coal is transported via conveyor belt to an 80,000t capacity bunker, and then transported again from the bunker to the stations.
Also in Victoria, AGL has proposed to construct and operate a 500MW to 600MW gas turbine power station – ultimately about 920MW – to meet rising electricity demand.
The Tarrone power project would be about 7km west of Willatook and would supply power during peak times.
The company is planning a similar power project in NSW, 4km south of Dalton, which will initially be 500MW and ultimately up to 1000MW.
AGL also has a thermal power project in South Australia, just 18km from the Adelaide CBD.
The Torrens power station is the largest in South Australia and the largest natural gas-fired station in Australia.
The 1280MW facility is owned and operated by AGL and receives gas via the SEAGas pipeline from Victoria and Moomba in the Cooper Basin.