The Forward Issue 02 AGL

Last week we looked at BHP - a miner grappling with what its products become when customers burn them (read more here). This week we turn to Australia's largest electricity generator - a company whose climate story is simultaneously about being part of the problem and, depending on your view, part of the solution.

AGL Energy operates Loy Yang A in Victoria and Bayswater in New South Wales - two of Australia's largest and oldest coal-fired power stations. Its Climate Transition Plan sets out how it intends to exit both, and what it plans to replace them with. The dates matter enormously - for the electricity grid, for workers, and for Australia's emissions trajectory.

Published 13 August 2025 · Covers year ended 30 June 2025 · Voluntarily aligned with AASB S2 ahead of mandatory FY26 application. Covers Loy Yang A (Victoria, planned closure FY35), Bayswater (NSW, planned closure December 2033), and the Liddell closure (completed 2023).

Energy & Utilities ASRS Group 1 High Emission Intensity

Annotated with plain-English context and our take on what it means for you

Passage 01 - The Closure Timeline

"AGL has committed to close Bayswater Power Station by December 2033 and Loy Yang A Power Station by the end of FY35. These dates represent an acceleration of approximately five to seven years from our previous commitments, and are confirmed in the 2025 CTAP released August 2025."

Our Take

Accelerating coal closure by five to seven years is significant. The question - asked by climate advocates, grid operators, and investors alike - is whether 2033 and 2035 are fast enough. Australia's Climate Change Authority has modelled that meeting the government's 2030 emissions targets requires coal's exit from the NEM to be largely complete by 2030, not 2035.

AGL's "preferred 2030" framing for Bayswater is important context. The hard commitment is 2033; the ambition is 2030 "subject to energy security conditions" - a condition that the Australian Energy Market Operator's trajectory suggests will become easier to meet as renewable firming capacity comes online in 2025–2027.

Plain English: AGL has committed to closing its coal plants earlier than previously planned - but climate modelling suggests even these new dates may be too slow for Australia to hit its 2030 targets. The 2030 "preference" for Bayswater is the number to watch.

Passage 02 - The Replacement Investment

"AGL has a pipeline of renewable and firming projects that has grown threefold since 2022. In FY25, AGL commenced construction of the Liddell Battery, brought the Torrens Battery online, and made a final investment decision on the 500MW / 2,000MWh Tomago Battery. We are targeting 12GW of additional renewable and firming capacity by 2035, with an interim target of 5GW by 2030."

Our Take

$5 billion is a substantial commitment - but it needs context. Loy Yang A alone generates approximately 8,000 GWh per year. Replacing that capacity with firmed renewable energy requires significant battery storage, transmission, and interconnection investment that goes well beyond AGL's own balance sheet.

The "3.5GW in the pipeline" framing is also worth unpacking. Pipeline is not built. As of the report date, a significant portion of this capacity remained in early-stage development, subject to planning approvals, transmission access decisions, and financing arrangements. The gap between pipeline and operational capacity is where energy transition plans most commonly fall short of expectations.

Plain English: AGL is promising to spend $5 billion building the batteries, solar farms, and wind turbines that will replace its coal plants. That's real money - but "in the pipeline" means planned, not built. Watch how much of that 3.5GW is actually operational by 2027.

Passage 03 - Just Transition for Workers

"In FY25, AGL achieved a gross Scope 1 and 2 emissions reduction of over 29% compared to our FY19 baseline - well ahead of our 17% target. AGL's operational emissions were 30.7 Mt CO₂-e in FY25, around 7% of Australia's total emissions. We are strengthening our interim target to a 19% gross reduction from FY27, and have added a 90% gross annual emissions reduction target following coal closure."ort."

— AGL Energy FY25 Annual Report, released 13 August 2025

Our Take

The just transition commitment is real and important - but $40 million across two closure events serving thousands of direct and indirect workers is modest. Liddell's 2023 closure affected approximately 500 direct employees; Bayswater and Loy Yang A together employ roughly 3,000 people directly, with several times that in indirect roles across the Hunter Valley and Latrobe Valley.

This is where AGL's ASRS disclosure sets a floor, not a ceiling. Under ASRS, companies must disclose their approach to workforce transitions - but the standard doesn't specify how generous that approach must be. Investors, unions, and state governments are the audience for this number, and $40 million will face scrutiny as closure dates firm up.

Plain English: AGL has set aside $40 million to help workers and communities affected by its coal closures. For roughly 3,000 direct employees across two major power stations, that works out to around $13,000 per person - before indirect workers are counted. Expect this number to be contested.

Scope 1, 2 & 3 Emissions

The three categories of greenhouse gas emissions under the GHG Protocol. Scope 1 covers direct emissions from sources a company owns or controls (e.g. coal combustion at AGL's power stations). Scope 2 covers indirect emissions from purchased electricity and energy. Scope 3 covers all other indirect emissions across the value chain - including emissions from gas sold to AGL's customers. For AGL, Scope 1 dominates while its two remaining coal stations are operating.

National Electricity Market (NEM)

Australia's interconnected electricity grid covering Queensland, NSW, Victoria, South Australia, and Tasmania. Managed by the Australian Energy Market Operator (AEMO), it's one of the world's longest AC power systems. The NEM's transition away from coal is central to Australia meeting its 2030 and 2050 emissions targets.

Firming Capacity

Electricity generation or storage that can reliably deliver power on demand, regardless of weather conditions. As intermittent renewables (wind and solar) grow, firming capacity - batteries, pumped hydro, gas peakers, demand response - becomes increasingly critical to grid stability.

Just Transition

The principle that the shift to a low-carbon economy should be managed in ways that are fair to workers and communities currently dependent on fossil fuel industries - including retraining, income support, community investment, and genuine consultation rather than managed decline imposed from outside.

Virtual Power Plant (VPP)

A network of distributed energy resources - home batteries, EV chargers, solar systems - managed through software to collectively behave like a single power plant. AGL operates one of Australia's largest VPPs, aggregating thousands of home battery systems to provide grid services.

Yes - Australia needs coal out of the grid by 2030 to meet its climate commitments

No - grid stability means a managed exit to 2035 is the responsible approach

It depends - the exit date matters less than what replaces coal and when

I'm not sure - the economics and engineering are too complex to call

Reply to this email with your answer - we'll publish the results in next week's edition.

⚡ This week at CFS - ASRS S2 Climate Disclosure (May)

AGL's transition plan disclosure sets a benchmark that Group 2 companies will face from July 2026. If your organisation needs help understanding what ASRS S2 climate reporting will require - and how to build a credible transition plan before the deadline - get in touch by emailing Bronwyn directly.