Energy operator sounds alarm on closure of NSW’s biggest coal station
The grid will need frequent interventions without new grid-forming batteries or synchronisers to replace coal, the energy market operator has warned. Australia risks a system that has enough power, but cannot operate safely in practice.
Australia’s energy market operator has warned that NSW could face frequent and costly government intervention to keep the lights on if the state’s largest coal plant closes before critical grid-support equipment is installed — a projection that strengthens the case for extending the life of the Eraring power station beyond 2027.
In a sweeping assessment of system security, the Australian Energy Market Operator said delays to essential infrastructure projects — including synchronous condensers, grid reinforcements and grid-forming batteries — threaten to leave the east coast power system without enough tools to keep the grid stable in real time. Without a rapid acceleration of investment, AEMO cautioned it will be forced to lean more heavily on expensive fossil-fuel generators, driving up costs for households and businesses.
NSW presents the clearest risk. Transgrid is racing to install new synchronous condensers to maintain system strength before Origin Energy’s Eraring coal plant retires. But in a warning that underscores AEMO’s doubts about whether the equipment can be delivered by 2027, the operator said delays could leave the state without enough large synchronous machines to hold the grid steady.
If that occurs, AEMO warns it may need to intervene in the market as much as 30 per cent of the time, compelling coal and gas units to run even when cheaper renewable energy is available. Such a level of intervention would impose “substantial cost” on consumers and heighten the risk of cascading failures across the grid.
The prospect of sustained intervention will add to pressure on the NSW government and Origin to maintain Eraring’s operations. Under current plans the plant is due to close in 2027, though Origin retains the option of running it through to 2029 if it remains profitable.
An Origin spokeswoman said the company would decide the plant’s future in due course and any decision would take account of system needs.
“The transition continues to move forward, with progress being made on transmission and energy infrastructure, but there are a range of scenarios Origin needs to consider,” she said.
“Our base scenario is unchanged, and it is up to Origin to make a good decision, which we’ll do with our customers and energy security for the people of New South Wales in mind. Origin has always acted responsibly in this regard, and the community should have confidence we will continue to do so.”
Transgrid said the AEMO outlook echoes its own view around the need for the grid supporting infrastructure and need for backstops while the equipment is being installed.
“After securing the supply of the highly sought after synchronous condensers at the end of October 2025, Transgrid is evaluating tenders for the design and construct component of the critical project,” a spokesman said.
“In its [Project Assessment Conclusions Report], Transgrid advised that ‘re-dispatch’ or contracting of coal, gas and hydro would be necessary to meet the minimum level of system strength before synchronous condensers are available.”
The warning reflects a shift in emphasis from AEMO. While the operator has long argued for a dramatic increase in large-scale wind and solar, it is increasingly alarmed about the state of energy system security — the technical backbone that keeps the grid functioning even when supply is plentiful.
Reliability depends on having enough generation to meet demand. Security, however, hinges on the physical properties of the system — inertia, frequency control and system strength — that have historically been supplied by synchronised energy sources such as coal, gas and hydro. As those plants retire, the grid must rapidly replace their stabilising functions with technologies like big batteries and advanced inverters. Without them, AEMO warns, the system may have enough energy on paper but could become dangerously unstable in practice.
Recent overseas failures illustrate what is at stake. In April, a widespread blackout in Portugal and Spain cut power to millions, disrupted telecommunications and transport networks, and was linked to seven deaths.
State governments are spending billions on transmission upgrades, battery storage and new system-strength equipment. But AEMO’s assessment suggests the transition is not keeping pace with the accelerated withdrawal of coal units, and in some regions the gap is widening.
Wait times for new synchronous condensers can stretch into years, a reality that helps explain AEMO’s recent push to extend the mandatory notice period that coal generators must give before closing. Plants can currently shut with 3.5 years’ notice; AEMO has asked for this to be lengthened to five years.
Although Eraring looms largest, AEMO emphasised that system-security threats are emerging across the National Electricity Market.
Victoria is exposed to similar risks. When EnergyAustralia’s Yallourn plant closes in 2028–29, the state’s metropolitan grid will face vulnerabilities ranging from voltage instability to thermal overloads unless new condensers, reinforcements and batteries are delivered on schedule. Any delays could trigger emergency actions, including security contracts or directions to gas plants — measures that themselves depend on the availability of fuel in a tightening gas market.
Queensland’s vulnerabilities are different but no less serious. The planned retirement of the Gladstone coal station in 2029 will strip a major source of inertia from a grid already grappling with record penetration of rooftop solar. Minimum demand has collapsed to new lows, forcing AEMO to rely on emergency controls to prevent solar exports from overwhelming the system. The operator says new “backstop” options — including the ability to curtail rooftop solar in extreme conditions — must be introduced to avoid widespread customer impacts.
The risks stretch beyond day-to-day operations. AEMO warns the traditional system-restart process, used to re-energise the grid after a major blackout, may no longer be viable as coal units exit. The operator is now considering a fundamental redesign of the restart framework, leaning on inverter-based resources and new restoration support services to rebuild the grid in a decentralised fashion.
Originally published as Energy operator sounds alarm on closure of NSW’s biggest coal station
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