Chris Minns gives Eraring Power Station a lifeline in order to keep NSW’s lights on

The Minns government will engage with Origin Energy to extend the life of Eraring after it accepted all but four of the 54 recommendations from the energy health check.

The Minns government will engage with Origin Energy to extend the life of Eraring power station after it accepted all but four of the 54 recommendations from a review into the state’s energy market.

As revealed by The Daily Telegraph in July, project delays would result in significant reliability issues in the electricity grid prompting the government to look at extending Eraring as an insurance policy.

The report recommended the government engage with Origin about negotiating an extension of the plant as the state faces energy reliability issues over the next two years.

Despite flagging the extension Origin Energy has maintained that it wants to exit coal generation as soon as renewable energy can pick up the slack, noting that the Eraring coal-fired power station faces “economic challenges” that need to be navigated to keep the plant open longer.

The statement indicates that the government will need to put money on the table to keep Eraring open longer than the mid-2025, when Origin wants to shut the plant down.

“We acknowledge the recommendations regarding Eraring’s closure, and as we have consistently said, we will continue to engage with the NSW Government to find a path forward that can help navigate the economic challenges facing the plant and avert any risk to the reliability of electricity supply in the state,” an Origin spokeswoman said.

“The Eraring closure notice provided an important signal to the market about progress towards our nation’s climate goals, and Origin does not shy away from the need to exit coal generation as soon as there is sufficient renewables, firming and transmission capacity available.”

Energy Minister Penny Sharpe would not be drawn on how much the government is willing to pay to keep Eraring open longer than 2025.

“I’m not going to speculate on what the cost would be. We start from the beginning of zero, we go from there,” she said.

“I can’t give you a time and I can’t give you a cost.”

Ms Sharpe ruled out the option of buying back Eraring.

Energy Minister Penny Sharpe would not be drawn on how much the government is willing to pay to keep Eraring open longer than 2025 NCA Newswire / Gaye Gerard

One of the recommendations accepted by the government was for the creation of the Energy Security Target Monitor (ESTM), which will look at the exit plan of the remaining private coal-fired power stations to make sure the lights stay on at the lowest cost.

Origin will be forced to prove any claims of costs to the company’s bottom line regarding its extension to the new ESTM, meaning it will have to provide proof any extension will cost the business more.

In order to prevent future reliability risks the government will enforce rules that other coal fire generators planning to exit the grid will need to provide an exit strategy, in which firm generation capacity must be above 600 megawatts.

They will be required to submit their plans at least three years prior to the proposed retirement.

Premier Chris Minns said one of the biggest challenges was keeping the lights on while managing the transition to renewables in such a short period of time.

“The challenge is made worse by privatisation, cost overruns and delays under the previous government,” he said.

Despite an Eraring extension, Mr Minns said he was still committed to the state’s Net Zero Plan to deliver a 70 per cent cut in emissions by 2035.

The Minns government will take the first steps in extending the life of Eraring power station

STRONG CASE TO EXTEND LIFE

Judging whether an extension was necessary on both costs to consumers and reliability factors, the report found “the case for extending Eraring on affordability grounds appears strong”.

The Electricity Supply Check Up released on Tuesday found that it was unlikely NSW would achieve its 2GW long duration storage targets while a time frame for meeting the state’s energy road map to power the stage was “less certain”.

Liberal Energy spokesman James Griffin called for the negotiations between the government and Origin to be made public.

“Negotiations between the Government and the owners of Eraring must be transparent and ensure that NSW households and businesses get the best outcome and the market continues to have confidence in the NSW energy road map,” he said.

Former Energy Minister Matt Kean was more critical of the recommendations, saying there was no need to extend the life of Eraring.

“I back the AEMO which states if the renewable road map is delivered there will be no energy supply shortfall, and I note today the energy minister confirmed road map projects were on schedule, including the Waratah Super Battery,” he said.

Climate groups are outraged at the prospect of extending Eraring, with Greens MP Sue Higginson suggesting the government would not have support from NSW Greens to pass any legislation to throw the plant a lifeline.

“I find it unfathomable the first real decision the government is making on climate change is to extend the life of a coal-fired power plant,” she said.

“Independent experts have made it clear that extending Eraring is not the only way to increase power security – there are enough renewable energy projects in the pipeline.”

Climate Council chief executive Amanda McKenzie argued extending Eraring would be a disaster.

“It will cost taxpayers enormously, continue to pollute and encourage every other ageing coal station to hold out for a handout,” she said.

The Electricity Supply Check Up released on Tuesday found that it was unlikely NSW would achieve its 2GW long duration storage targets. Nick Cubbin/TWAM

EARLIER

Earlier on Tuesday, The Daily Telegraph revealed that cabinet had signed off on its response to the report handed to Energy Minister Penny Sharpe last month.

The Telegraph was told that Tuesday’s announcement would signal the beginning of a process rather than a declare a final government decision.

Details of the cabinet decision were being kept top-secret on Monday night, as were the final recommendations from the review headed by former energy adviser (and one time Labor staffer) Cameron O’Reilly.

However, Premier Chris Minns has been all but forced to keep Eraring open longer than planned to keep the lights on until major renewable energy projects are finished.

The O’Reilly review, costing more than $200,000, was tasked with working out if NSW would have enough power to keep the lights on if Eraring closes in 2025 – the earliest possible closure date as flagged by Origin Energy.

The Daily Telegraph in July revealed that Minns would step in to keep Eraring open longer if the O’Reilly review found that renewable replacements would not be ready in time.

While the review was handed to the Energy Minister in mid-July, the government had been delaying its release until after a crucial update from the Australian Energy Market Operator (AEMO).

In that report, released last week, AEMO warned that NSW may not have enough electricity by 2025, and said that keeping two of Eraring’s four generators open longer could help keep the lights on.

Chris Minns will keep the state’s lights on. Picture: NCA NewsWire / Jeremy Piper

The need to extend the life of Eraring is largely due to the fact that renewable energy projects due to replace it have been beset by delays and cost blowouts.

Last week, the cost of the Snowy 2.0 pumped hydro project was revealed to have blown out even further, after a revised estimate put the price tag close to $12 billion.

After Origin Energy announced plans to close Eraring as early as 2025, a number of options were put to the previous Coalition government which could have extended its life.

The Telegraph revealed last year that former Energy Minister Matt Kean knocked back one proposal – dubbed ‘Project Emu’ – which would have kept two of Eraring’s four generators running until 2028.

The highly-confidential Project Emu progressed so far that draft terms were prepared and provided to the state government.

But the deal would have required the NSW government to pay 90 per cent of any losses Origin incurred by running two of Eraring’s four generators from 2025 to 2028.

Meanwhile. Premier Chris Minns on Monday shot down Mr Kean’s claims that it would have cost $3 billion to keep Eraring open for two years beyond its planned closure date.

The Telegraph understands that as of Monday night Origin Energy had not yet seen a copy of the O’Reilly report, but expected its release imminently.