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AEMO to judge AGL Liddell replacement plan

Environmentalists have praised AGL's commitment to close the Liddell power station in NSW. (AAP)

The Australia Energy Market Operator has been asked to assess AGL Energy's plan to fill the shortfall left by the closure of the Liddell coal-fired station.

A plan to replace the 1000MW shortfall when AGL Energy closes the Liddell coal-fired power station will be assessed by the Australian Energy Market Operator.

The energy giant on Saturday unveiled how it plans to fill the generation gap after it closes the NSW Hunter Valley plant in 2022, with extending its life or selling it to someone who will, as the Turnbull government has urged, not on the table.

Energy Minister Josh Frydenberg says the government has asked AEMO to examine AGL's plan, which involves a mix of solar, wind, pumped hydro and battery storage, and gas peaking plants in three stages over the next few years.

"Obviously it's a significant proposal, there is a host of new technologies and new investments as part of it," Mr Frydenberg told reporters in Melbourne on Sunday.

"But we want to leave the judgement on its merits to the experts, which is the Australian Energy Market Operator."

Mr Frydenberg said it's not embarrassing for the government that its calls for the plant to stay open or be sold were not heeded.

"Our principle motivation has always been to ensure there is not a shortfall in the market," he said.

"You need all forms of energy in Australia's future energy mix, there's a role for coal there's a role for gas, there is increasingly a role for wind and solar and for battery storage."

Federal opposition energy spokesman Mark Butler says AGL's plan underscores what experts have long said, that the future lies in renewables backed up by gas peaking plants, pumped hydro and battery storage.

"If AGL had given into the pressure from the prime minister they'd be pumping almost a billion dollars into propping up an old, unreliable coal-fired power station for just five years and delivering power at more than 20 per cent more expensive prices," he told reporters in Adelaide.

Coal-fired power stations in Victoria and NSW coal-fired power stations are reaching the end of the 50-year life spans and becoming increasingly unreliable, he said.

Two of Victoria's three coal-fired plants had unexpected outages during last February's heatwave, while some of Liddell's generators were broken down and other stations were struggling to keep functioning.

"This at the end of the day is a product of age. These power stations are getting to the end of their life," Mr Butler said.

"Relying on power stations that old is a recipe for disaster."

Environmentalists, workers and business have praised AGL's plan.

The AGL plan will cost $1.36 billion and provide electricity at $83/MWh for up to 30 years.

By contrast, keeping Liddell open for just five years would cost $920 million and provide electricity for $106/MWh.

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