Despite the abolition of the so-called 'carbon tax', it seems that many Australian companies have seen the writing on the wall, committing to a low-carbon future dominated by renewable energy sources.
AGL Energy Ltd (ASX: AGL) was the first to make a public announcement, declaring earlier this year – despite a recent acquisition of massive coal power assets – that it would completely decarbonise its electricity generation capabilities by 2050.
Fellow electricity generator and retailer Origin Energy Ltd (ASX: ORG) is expected to follow suit at its Annual General Meeting today, announcing the closure of its Eraring coal-powered station in the early 2030s (its scheduled closure date). Origin is also expected to announce that it won't invest in any further fossil fuel-powered generators, as it is now committed to a goal of 100% renewable energy.
Like AGL, which has a solar generation business segment, Origin Energy has been working to develop renewable energy sources for a number of years with previous investments in geothermal energy sources and similar.
Also akin to AGL, shareholders will now be wondering if the strategy involves additional costs to Origin Energy, which recently undertook a capital raising in order to shore up its balance sheet. Thankfully, unlike AGL, Origin hasn't made huge acquisitions in coal generation in recent years and all costs should be factored into the equation already.
What happens with its LNG assets and gas power stations is another question, since Origin told Fairfax media that it would need to keep some gas-powered stations active as a backup to wind and solar sources.
Given Origin's recent prices of around $5.36 per share (down 62% in the past year), I would say that much of the risk and extra costs of a switch to renewables is already priced into the company.
