Page 19 - AGL Sustainability Report 2011

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Economic
Sustainability Performance Report 2011 17
Ongoing profitability
Optimisation of electricity
generation portfolio
AGL has Australia’s largest privately owned, operated
and controlled portfolio of renewable generation assets
and a pipeline of renewable development opportunities.
AGL’s integrated business strategy is consistent with a
carbon constrained future.
Approach
Amendments to the Commonwealth Renewable Energy Target were
legislated in June 2010. Energy companies now have the legislative
certainty required to proceed with the significant investments
necessary to meet the mandatory target. Over the next decade,
it is estimated that the industry will need to spend approximately
$30 billion on new renewable generation assets. Based on current
customer numbers, AGL would need to invest approximately $4.9
billion if it were to meet its share of the mandated scheme. The
current and future earning potential of AGL’s electricity generation
portfolio is influenced by many factors, including the operational
efficiency of the assets and their availability and ability to start
reliably when electricity prices are high.
For wind farms, the capacity factors achieved determine revenue,
and AGL recognises the importance of accurately projecting
capacity factors during the development stages of projects to
ensure that actual performance meets the investment case.
For all renewable generation assets, revenue is partly dependent
on the value of Renewable Energy Certificates and partly on
the wholesale National Electricity Market price. Higher returns
are possible where individual investor costs are lower than the
costs associated with the marginal project required to meet the
Renewable Energy Target. Through early site selection, AGL has
sourced some of the best sites for wind development in the country,
allowing for potentially greater returns over the long term.
Performance
During FY2011, the operational performance of gas and hydro
generation assets has been strong with dam levels at Eildon and
Dartmouth increasing from 27% and 33% respectively, as at
1 July 2010, to 86% and 64% respectively as at 30 June 2011.
Commercial availability and start reliability of generation assets
show strong performance well above the international benchmark,
as highlighted in the chart below.
During FY2011, AGL completed the construction of 132 MW of
new renewable energy. At 30 June 2011, AGL had 540 MW of new
renewable generation under construction. Renewable and gas-fired
generation projects under development are listed on
page 3
of
this report.
Wind farm generation
0
10
20
30
50
40
31.7 31.8
40.7
38.6 39.8 39.0 37.8
Wattle Point
Hallett 1
Hallett 2 Hallett 4
%
Legend
Capacity factor FY10
Capacity factor FY11
Note
Hallett 2 commissioned 17 May 2010.
Hallett 4 commissioned 25 May 2011.
Commercial availability/start reliability
Legend
FY08
FY09
FY10
FY11
International benchmark
3
Notes
1 Commercial availability is used to measure Torrens Island Power Station performance, and represents the percentage of times the plant is available to operate when required.
2 Start reliability is used to measure the performance of Somerton and AGL Hydro. Start Reliability is the percentage of times the plant started successfully when asked to start.
3 North American Electric Reliability Council Five Year Average. Note that the benchmark for Hydro facilities has been adjusted for the difference in operating regime between
the North American feet and AGL’s feet which operate as peaking plant which increases the frequency of starts and stops.
Somerton
Power Station
2
AGL Hydro
2
Torrens Island
Power Station
1
84
86
88
90
92
94
96
98
100
%