Origin Energy reveals Eraring coal power output hit five-year high

Generation from NSW’s largest coal power station has soared as government policies to lower household and business bills incentivised Origin Energy to ramp up production.

Generation output from NSW’s largest coal power station hit a five-year high, the plant’s owner Origin Energy has revealed as government policies installed to lower household and business bills incentivised Australia’s largest electricity and gas retailer to ramp-up production.

It demonstrates how coal contributed to lower electricity bills from July 1, 2024 amid a push to accelerate Australia’s transition away from fossil fuels,

Under a deal struck by the Federal Labor government and its then Liberal NSW counterpart, coal sold to a domestic power generator was capped at $125 a tonne, a major boon to Origin - which had supply deals in place that saw it buy the fuel source at above that figure.

With wholesale prices elevated, Origin was able to buy coal to supply its Eraring coal power station, which it used to produce electricity.

Increased electricity output helped bring down wholesale power prices, which in turn allowed the Australian Energy Regulator to lower annual bill tariffs - providing much needed respite to households and businesses, and improve the standing of the Labor government with voters.

Demonstrating the impact of the coal cap, Origin on Tuesday said output from Eraring touched a 2019 high, which chief executive Frank Calabria said aided the cost-of-living crisis endured by Australians.

“In Energy Markets, Origin’s generation fleet performed strongly during the year, with high levels of reliability. Output from Eraring rose by 2.1 TWh to 14.3 TWh, supporting policy aiming to increase generation to help put downwards pressure on electricity prices, while the gas peaking fleet increased output and continued to play an important role supporting the grid and maintaining reliable supply for customers,” Mr Calabria said.

While the coal cap was beneficial, it has since ended - a policy that analysts said could provide some headwinds to Origin’s results.

James Byrne, energy analyst at Citi said Origin’s coal costs would rise.

“Eraring will have an average coal procurement cost of $155/t in FY25. The average price of coal in the stockpile today is lower, but as this is burned and replenished at higher costs, the average over financial year 2025 will be $155/t as guided. We think consensus is closer to $130/t. This should see earnings come down in financial year 2025 for energy markets,” he said.

While Origin’s energy markets business may have some headwinds, Origin continues to profit from its LNG business, Australia Pacific LNG in Queensland.

Origin said APLNG revenues for the June quarter rose 2 per cent from the previous three months to hit $2,6bn primarily by higher volumes. Origin said revenues from the segment in the 2024 financial year, however, were down 12 per cent from the previous year, primarily due to lower commodity prices.

APLNG has been a major revenue provider for Origin, allowing it to diversify its earnings from just a energy markets business that has typical swings in earnings.

LNG revenues have been a significant boost to Origin’s capacity to invest in the energy transition. Origin has committed to developing up to 5GW of new renewables, with batteries constructed on its balance sheet. The bulk of wind generation assets will be funded in conjunction with partners, Origin has said.

Origin has already committed about $1.5bn on batteries as it moves to capture significant volatility in Australia’s wholesale electricity price.

Australia has the world’s highest per capita penetration of rooftop solar, which means wholesale electricity prices – the cost of producing power – is often in negative territory, meaning that batteries can charge and receive a fee. When the sun sets, wholesale electricity prices spike and battery developers can discharge and earn lucrative returns.

Originally published as Origin Energy reveals Eraring coal power output hit five-year high