The AGL Energy Ltd (ASX: AGL) share price has fallen after approving the 500MW Liddell battery project.
Battery approval
AGL has reached a final investment decision (FID) on a 500MW battery project to be located at AGL’s Hunter Energy Hub in NSW, which will be a grid-scale battery with a two-hour duration.
Construction work on the battery is expected to begin in early 2024, with the commencement of operations targeted for mid-2026. The expected asset life of the battery is 20 years and the total construction cost of the battery project is estimated to be $750 million.
AGL has chosen Fluence to be the preferred engineering, procurement and construction provider.
The project will be helped by a $35 million grant awarded by the Australian Renewable Energy Agency (ARENA).
How will it be funded? AGL will use its balance sheet, use its operating cash flow and existing debt facilities, including AGL’s recently-secured green capital expenditure loans. Its ability to fund its green transition could play an important impact on AGL shares.
AGL said this project marks another “significant milestone” in AGL’s decarbonisation pathway and the transition of its energy portfolio.
The Liddell battery will be a “key component” of achieving its interim target of approximately 5 GW of new renewables and firming capacity in place by 2030.
Growing battery portfolio
AGL has a growing portfolio of battery assets and contracted capacity from third parties. It includes the 250MW Torrens Island battery, which started operations in August 2023, and the 50MW Broken Hill battery which will start operations “shortly”.
Final thoughts on AGL shares
AGL is doing the right thing for Australia (and itself) by investing in renewable energy generation and energy storage.
Being able to generate its own energy, and store it, could be helpful for future profitability and of course help with reducing emissions with the long-term goal of net zero.
I wouldn’t say AGL is a buy just because of this, the key could be what happens with (wholesale) energy prices. If AGL gets more money for its production then this would likely help net profit. I’m not sure what a fair energy price is for both households and AGL. AGL is not one of the ASX dividend shares I’d buy for my own portfolio because of the difficulty of growing profit and the long-term capital requirements.
