Australia’s biggest electricity generation company has announced it is to end the use of coal power by 2035.

AGL said it plans to reduce greenhouse gas emissions from 40 million tonnes to Net Zero by that date as its interim CEO describing the company’s plans as “a major step forward in Australia’s decarbonisation”.

Under the plan AGL will complete its exit from coal-fired generation by the end of 2035 and announced a targeted earlier closure date of its Loy Yang A Power Station, which will cease operation up to 10 years earlier than its previous target. The company said it has recognised a non-cash impairment charge of approximately $700m million (after tax), over the decision to close the planet earlier than projected.

The company said it will progressively decarbonise its asset portfolio with new renewable and firming capacity, with an ambition to supply its customer demand with up to 12 GW of new generation and firming capacity, requiring a total investment of up to AUS$20 billion, in place before 2036.

AGL chair, Patricia McKenzie, said: “We have set a new direction for AGL. Our decarbonisation and energy investment strategy sets a clear pathway for the company’s future and its leading role in Australia’s energy transition.

“We have listened to our stakeholders – in particular, our shareholders, as well as government and energy regulatory authorities. Their views were an important consideration as we reviewed the company’s strategic direction after withdrawing the demerger proposal.”

“This represents one of the most significant decarbonisation initiatives in Australia,” she added. “It supports the transition to a lower carbon world aligned with the Paris Agreement goals. AGL will be Net Zero for operated Scope 1 and Scope 2 emissions following the closure of all AGL’s coal-fired power stations.”

The company’s incoming interim CEO, Damien Nicks added: “AGL’s targeted accelerated closure of Loy Yang A power station by the end of FY35 represents a major step forward in Australia’s decarbonisation journey, supporting the transition to a lower carbon world aligned with the Paris Agreement goals.

“The targeted earlier closure of Loy Yang A Power Station will avoid up to 200 million tonnes of greenhouse gases being emitted compared to the previous Loy Yang A Power Station closure date”

He added: “With the closures of Bayswater and Loy Yang A, we have also announced an ambition to meet projected customer energy demand with up to 12 GW of new firming and renewable assets before 2036. AGL’s future portfolio will be ‘demand driven’, meaning we will focus on capacity that responds to what our customers need – with the majority of new supply anticipated to be from wind and storage, including batteries.

“As part of this ambition, we’ve set an interim target of 5 GW of new renewables and firming in place by 2030, expanding upon our 3.2 GW5 pipeline of high-quality projects to meet our growth ambitions. We will also continue our plans to leverage our existing sites to create low emissions integrated industrial Energy Hubs.”

“AGL’s growth ambition will require significant capital investment, estimated to be up to $20 billion which will be delivered in the 12 year lead up to our targeted exit from coal-fired generation. This represents a clear long-term investment opportunity for AGL and its shareholders to deliver on its growth ambition. AGL will evaluate various sources of funding, which includes a mix of AGL’s own balance sheet, entering into offtakes, or through partnerships utilising third party capital.”

“We believe that our ambitions to decarbonise and build a low-carbon portfolio represent an attractive opportunity to participate in Australia’s energy transition and will ultimately provide access to a wider pool of capital sources.”

He added: “This is an ambitious strategy that we will aim to deliver through the 12-year period to the targeted closure of our coal-fired generators. We will work with our stakeholders to make sure this change is responsible, that our customers’ energy needs are met and that our workforce and communities are supported through this change.”