In the early evening, AGL Energy Ltd (ASX: AGL) announced that it has committed to building a 252 MW gas-fired electricity plant in the vicinity of Newcastle in New South Wales. It will invest an estimated $400 million and would produce flexible, fast-start generation which will be capable of delivering rapidly dispatchable peaking and firming capacity into the National Electricity Market.
Obviously energy has been a major political point for states, the federal government, voters, and bill payers. This could go some way to addressing some of those issues and concerns.
AGL said that it is assessing sites for the project near its gas storage facility in Newcastle. The construction of the power station is targeted to complete during the 2022 calendar year. When completed it will have 14 reciprocating engine units capable of generating 18 MW of capacity each.
AGL's Managing Director and CEO, Andy Vesey, said "AGL is committed to supporting the orderly transition of Australia's electricity generation to modern, clean and reliable energy supply. That's why we gave seven years' notice of when we intend to close the Liddell Power Station at the end of 2022 and we are pleased to commit today to build the power station near Newcastle."
"Electricity generation is undergoing an increasingly rapid transition to lower-cost, clean energy renewable and storage technologies. This requires the complementary development of flexible, dispatchable gas-fired technology, as well as policies to support these developments. We are optimistic that the proposed National Energy Guarantee (NEG) will provide sufficient policy certainty to enable market participants such as AGL to invest with even greater confidence in cleaner, more reliable and more affordable energy generation."
Foolish takeaway
In terms of energy generation this seems like a good thing for NSW residents and Australians as a whole. I'm not sure if it will be a good thing for AGL investors in the short-term as $400 million is not a small amount of money, although it potentially could be good after it's completed.
