May 04 2023

Bittersweet farewell to Liddell

Last week saw another significant step along the path to a lower emissions grid with the closure of the Liddell Power Station after 52 years of service. The length of service is quite an achievement - it is estimated only around 1 per cent of thermal plants globally run beyond 50 years, while the average age for retirements is 36 to 40 years. The closure of the final unit on 28 April was described as “bittersweet”. The lead up to the end of operations at the site was heralded with much commentary on the perils to supply reliability and the potential for higher wholesale prices, yet none have eventuated.

To its credit AGL gave eight years’ notice of closure which provided the market and the market operator a long lead time to prepare for the end of the plant’s technical life. But in doing so it became a lightning rod for different positions in the climate debate and a symbol of the politicisation of Australia’s energy system.  As a result, while the story of Liddell began as one about industrial development it ended as more of a political narrative in its final few years – victim of the lack of a bipartisan position on energy and climate policy.

But it wasn’t the first time it made major headlines in NSW. Below we take a look at the history of the power station.

How it began

Liddell Power Station was commissioned by the Electricity Commission of NSW (Elcom) between 1971-73 near Muswellbrook in New South Wales’ Hunter Valley. The neighbouring Bayswater Power Station, which shares infrastructure with Liddell, was developed in 1980. Liddell was a major addition to NSW generation fleet, built to meet growing demand – estimated to have increased by 10.7 per cent in 1970 and it was still growing at 7.3 per cent in 1980[i]. The first of its four 500MW generators was completed in 1971, followed by two units in 1972 and the final unit began operating in 1973. It was the first major plant located inland and drew water from the Hunter River with Lake Liddell developed to support the plant by storing cooling water.

Image Source: ABC

Tenders were considered in 1966 and attracted interest from British manufacturers as well as GE in the US, which submitted a proposal for 4 x 600MW turbogenerators rather than the requested 4 x 500MW and was discounted because it was nonconforming. GE had also submitted for a 600MW and a 500MW boiler and the 500MW boiler proposal was later accepted becoming the first major plant and equipment sourced from non-British suppliers in the NSW grid. The successful tender for the 4 x 500MW turbogenerators came from British manufacturer English Electric (EE)[ii]

Dramatic Turn of Events

In March 1981 one of the Liddell units failed. At the time there were also two Munmorah units (total of 700MW) out of service and to meet demand Elcom bridged the gap by utilising its share of Snowy Hydro’s output. By June Snowy was unable to continue to provide supply and power restrictions for NSW energy users ensued in late June. In November 1981 two further units failed at Liddell resulting in further power restrictions – for 20 days in December 1981 and 26 days in March and April the following year (see newspaper clip from the period below). Each of the units was out of action for than 10 months. The energy crisis led to an NSW Ombudsman’s inquiry in 1982.

Image source: Canberra Times, 1 April 1982. An interactive link to article can be found here.

Liddell Joins AGL Portfolio

In 1991 Elcom became Pacific Power with Liddell part of its Pacific Power Hunter division, along with the neighbouring Bayswater Power Station. In 1996 further restructuring saw Macquarie Generation established in 1996. In September 2014, the NSW Government sold Macquarie Generation to AGL Energy for $1.5 billion.

AGL’s acquisition was challenged by the Australian Competition and Consumer Commission (ACCC), which claimed it would lessen competition . The ACCC’s opposition, however, was subsequently rejected by the Australian Competition Tribunal which found that the merger conferred substantial public benefit.

Welcome to the Climate Wars

AGL announced its commitment to the closure of the Liddell Power Station in April 2015 when it released a revised Greenhouse Gas Policy. That policy confirmed that AGL would not extend the operating life of any of its then existing coal-fired power stations, which meant Liddell Power Station was slated for a 2022 closure. The date also reflected the age of the plant which was the “outer range of what can be technically sustained”. 

In September 2017 probably at the height of the so-called “climate wars” AGL’s then CEO, Andy Vesey, was “summoned” to Canberra and urged to reconsider closing the plant.  Suggestions were that its operations should be extended or the plant sold to another party to be operated by them.

The Prime Minister at the time, Malcolm Turnbull, told reporters that the closure of Liddell would leave a big gap in supply: “We can't allow this to happen, we can't allow that gap to occur. We've seen what happened when Hazelwood closed at very short notice, and there was a near doubling in wholesale electricity prices in New South Wales.”  Earlier he stressed that he had an “obligation” to explore options including “keeping Liddell going”.

In December 2017, AGL released a NSW Generation Plan which proposed “a mix of high-efficiency gas peakers, renewables, battery storage and demand response, coupled with an efficiency upgrade at Bayswater Power Station and conversion of generators at Liddell into synchronous condensers” while the feasibility of a pumped hydro project in the Hunter region was also to be explored with the NSW Government. The plan was referred to the Australian Energy Market Operator (AEMO) by the Federal Government “to ensure there was not an energy shortfall”.

Ultimately, both the then-Prime Minister Malcolm Turnbull and Deputy PM Barnaby Joyce were dismissive, with Joyce demanding AGL sell the plant to another operator.

In fact the plant was subject to an offer from Chow Tai Fook Enterprises and Alinta Energy to buy Liddell Power Station for a cash payment of $250 million. On 21 May 2018 AGL's Board stated it was not in the best interests of AGL or its shareholders saying it undervalued “our need for Liddell to supply our customers until 2022, and for repurposing post 2022”.

AGL also explained why extending the life of the plant wasn’t feasible this way: “Less than 1.1 per cent of large thermal plants around the world are run beyond 50 years (Liddell turns 50 in 2022) and the median age for plant retirement is between 36-40 years old. Plants approaching 50 years old are reaching the outer range of what can be technically sustained. Extending Liddell’s life by five years would have required significant investment for a shorter lifespan than replacing it. Reliability would decrease as the plant approached its end of life and it would have been a less affordable solution for customers. Replacing it is a more affordable solution that will provide reliable supply for longer.”

Liddell Taskforce

In August 2019, the Morrison Government set up the Liddell Taskforce to consider the effect of the closure on price, reliability and security in NSW and the National Electricity Market (NEM). Its final report was released in September 2020.

In response to the taskforce the Federal Government announced that 1000MW of new dispatchable capacity was required to replace the plant. It also warned that the private sector had until April 2021 to reach final investment decisions on new plant to replace Liddell or that it would step in. The Morrison Government’s language was strong: “we will not risk the affordability, reliability and security of the NSW energy system on the hope sufficient investment in like-for-like capacity could eventuate…. We want to see industry step up and deliver the new dispatchable capacity required”.

Part of its argument was that without replacement wholesale prices would increase dramatically. This ‘no replacement’ modelling was described as a “contrived case” by Frontier Economics, the analysts who undertook the work. Amongst other assumptions, it was based on no new plant entering the market that is not already committed and “that new investment cannot occur regardless of how high prices may rise, though in reality high prices should increasingly drive new investment”.

Closure and Next Steps

In August 2019 AGL informed the Australian Energy Market Operator (AEMO) that the first unit at Liddell would close in April 2022, while the remaining three units would close in 2023. While the original target was for all units to close in 2022 following an independent engineering assessment, AGL decided the last three units would close in April 2023 which allowed them to be available to support system reliability throughout the 2022-23 summer months. By this time the three year notice of closure rule had come into effect and AGL had to go through a bureaucratic process to get approval just to change the unit order of closure.

The first unit was closed on 1 April 2022. The remaining three units were progressively closed last week between Monday 24 April and Friday 28 April. The closure will reduce AGL’s carbon emissions by 8 million tonnes or around 5 per cent of electricity sector total emissions, according to AGL.

Demolition of the plant is expected to begin next year and more than 90 per cent of the materials in the power station are expected to be recycled. Critical infrastructure, such as the transmission connections to the grid, to be retained as the site transitions into the Hunter Energy Hub.  AGL is planning to build a 500 MW grid-scale battery on the site and has a feasibility study underway into developing a hydrogen facility. It is also exploring partnership options in industries such as solar, wind, and waste-to-energy.

The workforce at Liddell has either been redeployed to the neighbouring Bayswater power plant or have taken voluntary redundancies. There were no forced redundancies as a result of the plant’s closure while retraining and other supports were made available prior to the final days of Liddell.

Prices and Impact

Liddell originally had a registered capacity of 2000MW. According to analysts WattClarity’s assessment of output from all four units at the plant during 2022 (including unit 3 prior to its April 2022 closure) found they were generating less than the registered capacity of 500MW per unit.  Based on the plant’s availability duration curve it was estimated that the maximum capacity offered to the market was just over 1250MW and the plant exceeded 1200MW in only a few of the half hourly periods considered over the 13 months to January this year. The average was 800MW.

Figure 1: Available Generation Duration Curve

Source: WattClarity

AEMO has not flagged a reliability gap for NSW as a result of the closure. Its Electricity Statement of Opportunities (ESOO) update released in February shows the state will meet both the reliability standard, as well as the tighter interim reliability measure (see figure 2). It has flagged the potential for a reliability gap with the retirement of the 2880MW Eraring Power Station in NSW currently slated to occur in 2025. The reliability standard was projected to be breached in 2027-28 for NSW and yesterday Snowy Hydro advised that its Snowy 2.0 project (2000MW) which was expected to have first power available by the end of 2027 may be further delayed with first power now not expected until June – December 2028.

Figure 2: Reliability and reliability forecast, all regions 2022-23 to 2031-32

Source: Update to 2022 ESOO

AEMO’s data on expected new capacity for the NEM shows 5000MW of committed new capacity. This includes EnergyAustralia’s 316MW Tallawarra B which is expected to be ready for summer 2023-2024 and Snowy Hydro’s Kurri Kurri open cycle gas plant (660MW), expected to be completed by the end of next year.  AEMO also expects additional renewable generation to come online, as well as the 700MW Waratah Super Battery Project from late 2025 to help reduce risks. The region will also be helped by transmission developments such as HumeLink and the Hunter Transmission Project. A full list of the committed, anticipated and proposed generation developments for NSW is shown in table 1.

Table 1: Existing and New Developments NSW

Source: AEMO Generation Information, February 2023

While there was concern about the potential impact on power prices with the closure the absence of the plant will already have been factored into future contract prices. There was no real movement in CAL2024 contract wholesale prices during April and certainly no upward movement. In fact the price at the end of April was $131.91/MWh compared to $136/MWh on 3 April.

Spot prices for NSW did not show any dramatic changes either as shown in figure 3. Of course spot prices are subject to a range of variables and market conditions that can vary dramatically from hour to hour depending on sun, wind, other plant availability and demand, so the removal of three units like those at Liddell would likely be swamped by any variations caused by other factors in any case.

Figure 3: Spot prices and Liddell Unit Closures

Source: NEOexpress, IES


As the energy shift continues Liddell won’t be the last major headline that is created. There will undoubtedly remain major challenges and nervous moments to be managed and we are likely to continue to see a political urge to step into the market.  But if the closure of Liddell has shown anything, it is that above all the noise the market will continue to respond to operational changes.




[i] THE ELECTRICITY COMMISSION OF NEW SOUTH WALES and its place in the rise of centralised coordination of bulk electricity generation and transmission 1888 – 2003, Kenneth Thornton

[ii] ibid

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