How renewable are the “Big Three” energy retailers? (2015)

31 March, 2015

AGL, Origin Energy and Energy Australia are known as the “big three” electricity companies, dominating the Australian energy retailing industry. While all three claim to be supporters of renewable energy, AGL, Origin and Energy Australia have all be active in recent months, attacking policies that support rooftop solar, as well as the Renewable Energy Target, which they want to see cut.

To get a better understanding of why the big three were so active in their efforts to limit renewable energy development, we took a look at just how much renewables meant to their own business and operations.

Check out the main results below, but you can also view our research briefings on AGL, Origin Energy and Energy Australia by following the links. There, you’ll see more detail on the calculations and references that went into this research.

Renewables in their energy mix

Only 16% of AGL’s power generation capacity is fed by renewable energy, with the amount of energy generated by AGL being only 11% renewable. Until September 2014, AGL’s total generated electricity was closer to 20% but the purchase of the Bayswater and Liddell coal power plants has skewed AGL’s portfolio to be one dominated by coal-fired electricity. Effectively, buying two major coal-fired power stations has cut in half the proportion of energy that AGL generates from renewables.

Taking a look at Origin and energy Australia though, and the situation becomes much more grim. Renewable energy makes up just 4.4% of Origin’s power generation capacity, and 0.6% of electricity generated. Energy Australia’s renewable energy generating capacity is 3.4%, producing about 2% of their electricity.The table below shows the most recent renewable energy generation fiures we have for all three of the big retailers.

 
% of renewable energy
in generating capacity mix
% of renewable energy
in generation mix
AGL
17.0% 11.4%
Origin Energy
4.4% 0.6%
Energy Australia
3.4% 2.0%*

*Note that our most recent renewable electricity generation figure for Energy Australia is based on the 2013 calendar year, whereas the renewable energy power capacity figures are current as of the end of 2014.

Revenue from renewable energy

We have estimated the proportion of revenue that AGL, Origin Energy and Energy Australia source from their renewable energy operations by taking the share of renewable energy generation and discounting this figures based on the proportion of revenue each company makes by producing and selling electricity. We estimate the contribution of renewable energy to each company’s revenue as follows:

Revenue generation from
renewable energy
AGL
7.92%
Origin Energy
0.60%
Energy Australia
1.67%

*Note that the AGL and Energy Australia estimates are from the first half of the 2014-15 financial year, while the Origin Energy estimate is based on the 2013-14 full financial year.

Greenhouse gas emissions

All three electricity retailers are among the highest greenhouse gas emitters in Australia. A recent report from the Australian Conservation Foundation found that Energy Australia, AGL and Origin ranked as Australia’s #1, #3 and #8 most polluting companies, respectively. However, the recent purchase by AGL of the Macquarie Generation coal-fired power stations, Bayswater and Liddell, will catapult them to the top of the list, making AGL Australia’s most carbon-polluting energy company.

The table below contains our estimates of each company’s greenhouse gas emissions, and where they will now rank among Australia’s most greenhouse gas-emitting companies.

Annual CO2-e emissions
# Ranking of Australia’s most greenhouse gas emitting companies
AGL
40,316,294 #1
Energy Australia
20,810,266 #2
Origin Energy
12,737,691 #7

The combined greenhouse gas emissions of the big three electricity retailers now amount to over 73 million tonnes, more than 13% of Australia’s total emissions.

Trends

Over time, renewable energy has become a smaller and smaller part of both AGL and Origin Energy’s power generation portfolio. Outside of electricity generation, both companies have also made major plays into the coal seam gas industry. Origin is a part-owner of the Australia Pacific LNG plant built in Curtis Island in the Great Barrier Reef World Heritage Area, while AGL has attempted to develop controversial coal-seam gas projects such as at Gloucester in Northern New South Wales.

Despite renewable energy playing an important role in both companies’ marketing, the role of renewable energy in both companies’ overall business is steadily shrinking.

Renewable Energy Policy

All three electricity retailers have been working to undermine Australia’s most prominent renewable energy policy: the Renewable Energy Target. As former Liberal Party Leader Dr John Hewson wrote in The Guardian:

“Their claim to support renewable energy while walking the corridors of power lobbying to undermine it smacks of hypocrisy”

It should be no surprise that companies whose business is overwhelmingly and increasingly dominated by fossil fuels would actively undermine policies to promote renewable energy. But AGL, Origin and Energy Australia should not be able to portray themselves as renewable energy companies when they are not only taking themselves, but also Australia, further away from renewable energy.

Knowing how little a share renewable energy plays in the business models of all three retailers makes it easier to understand why they have taken such a negative approach to renewable energy policy. Presently there is an oversupply of power in Australia’s electricity sector, due to a combination of efficiency gains, lower demand and the increased role of renewable energy. The most recent estimate is that 9 Gigawatts of power capacity need to come offline before supply and demand is again balanced out. Among many of the results of this oversupply are lower wholesale prices of power, which is squeezing the profitability of many large power stations.

Such an oversupply in the power sector should be seen as the ideal opportunity to retire old an polluting coal fired power stations, cutting Australia’s greenhouse gas emissions and maknig way for clean, cheap renewable energy to take its place. But having anchored their business models in fossil fuel-fired generation, the big three are now trying to defend that way of operating and see more renewable energy as a threat.

More information

You can see the briefing papers we produced for each of the big three retailers, including all the references we used for this research, by following these links:

We also recommend the Australian Conservation Foundation’s “Australia’s top 10 Climate Polluters” report for more information on the big energy retailers and other major greenhouse gas emitting companies.