AGL Energy

AGL’s climate disclosures and reporting are detailed, comprehensive and useful. It reports revenues from green energy and carbon neutral sources as well as emissions intensity of revenue. Its “Accelerating our transition” report provides sector-leading disclosure, analysis, scenarios and explanations of the company’s transition risks and changing assumptions. Accel Energy and AGL Australia should build on this analysis to develop ambitious transition plans for the demerged entities.

AGL scored full marks for its scenario testing due to its comprehensive approach and analysis of risks, costs and opportunities. It could further develop its transition plan to take account of the full implications of its findings if it wants to be ahead of the sector and Australia’s national commitments and be seen as a climate leader. AGL’s position on the most likely, and therefore relevant, scenario to use has changed during the past year from using the least ambitious to considering the more demanding scenarios.

AGL has plans for grid-scale battery capacity and some growth in renewables but its plans are not sufficient to transition its 11 GW of capacity to renewables on a timescale compatible with Paris goals.

A number of factors are converging which undermine AGL’s justification for maintaining its high emitting baseload fossil fuel capacity. The Australian regulatory environment is changing, the IPCC and IEA have ruled out unabated coal generation after 2030, the cost of renewable technologies continues to decline and the ability of grids to incorporate variable renewables is improving, especially when solar and batteries are used together as will be the case in Australia. The demerged Accel Energy risks being left with stranded assets and a small renewable portfolio.

There is a significant risk that the demerged Accel Energy contains all the transition risks facing AGL. The company’s own risk analysis shows that seven of its eight significant transition risks will be located in Accel Energy. The new company should act quickly to develop its own transition plan showing stakeholders how it plans to operate in the low-carbon economy.

AGL plans to demerge the high and low-carbon parts of its business. Its targets are based on closure dates for three large coal plants. AGL has a coal phaseout date and net-zero target but both are 2050. AGL does not have specific renewables targets but aims to develop 850 MW of battery capacity by 2024.

By demerging AGL believes the low and high carbon parts of its business are better able to transition. Its transition relies on closure of Liddell, Bayswater and Loy Yang. The company is increasingly open to reduced operating lives for these assets which will be necessary if it hopes to align with the goals of the Paris Agreement.

90% of AGL’s generation is coal and gas. However, AGL’s scenario and risk analysis increasingly accepts that the transition is likely to be faster than assumed until now and that its coal plants will operate at a lower level and close earlier due to more demanding scenarios.

AGL has the second highest emissions intensity of any company in the benchmark but has not reduced emissions intensity between 2015 and 2020. AGL has decided to demerge its high carbon business from its carbon neutral retail and renewables business.

AGL acknowledges climate change, produces good scenario and risk analysis and is increasingly aware of the risks to its fossil fuel plants. Despite this the company is currently locked into a high emissions trajectory and is not demonstrating the change needed.