Former government rejected deal from Origin Energy over Eraring

It is now becoming increasingly clear that renewable energy projects designed to replace coal will not be ready in time. Penny Sharpe has made the right call, one her predecessor should have made, writes James O’Doherty.

Unfortunately, until the boffins at the CSIRO work out how to feed our brains’ electrical signals into the national energy grid, we need to find more reliable power solutions.

And that will require tough choices.

As Australia powers towards its emissions reductions goals, power companies are running a mile from the coal-fired power which is still the backbone of our energy mix.

AGL’s Liddell Power Station closed in April, after 52 years. Origin’s Eraring plant was set be next.

According to briefings given to Energy Minister Penny Sharpe, that could leave a shortfall of anywhere between 262 megawatts and 450 megawatts in 2025-26.

It is now becoming increasingly clear that renewable energy projects designed to replace it will not be ready in time.

If Sharpe’s predecessor, Matt Kean, had acknowledged this possibility when he was in power, we may be in a different place than we are today.

Origin did anticipate the need for Eraring’s power production to be phased out over time.

Two years ago, Kean was presented with an offer which would have ensured the Eraring Power Station kept generating baseload electricity until 2028.

Penny Sharpe. Picture: NCA NewsWire / David Swift

The secret plan — dubbed “Project Emu” — was so far along that draft terms for a deal were prepared and sent to the state government.

Under the plan, Origin would have closed two of Eraring’s four generators in February 2025 but agreed to keep the remaining two online until June 2028 to gradually phase out production.

At the same time, the company would have built extra low-emissions capacity to replace coal.

Origin made it clear to the former government in 2021 that, on a purely commercial decision, they would have announced Eraring’s closure and shut up shop in 2025.

But that would have led NSW off an energy supply cliff.

The deal never went ahead because Project Emu came with a catch.

It would have forced the government cover 90 per cent of any losses Origin incurred by keeping Eraring open at half capacity between 2025 and 2028.

It would have also been on the hook for fixing any “material failure” in the ageing generators.

That could have got very expensive, very quickly.

On the advice of an “expert panel” Kean convened, the government never went ahead with the deal.

Now Premier Chris Minns might be forced to revisit something like that plan.

Matt Kean was in talks over Project Emu. Picture: NCA NewsWire / Jeremy Piper

The government could also legislate to force Origin to keep the plant operating, although its owners would presumably want to be covered for any monetary loss.

Minns could also try to buy the plant back but, considering he is already promising a slash and burn budget, this seems unlikely.

Importantly, the government still doesn’t know whether projects currently underway will be enough to replace Eraring if it closes in August 2025. According to briefings given to Sharpe, that will become clear later this year.

All indications — like increasing uncertainty about the Hunter Transmission Project — are pointing to a potential shortfall.

Ironically, planning restrictions used to slow down and stop fossil fuels are now delaying the clean energy projects designed to replace them.

A so-called “health check” of the energy grid will soon report back to say for certain whether replacement generation and capacity will come on line in time for Eraring to close in 2025.

The Minns government will not let Eraring shut down before its replacement is ready.

Time is quickly running out for a decision on how the government will intervene if the shortfall in 2025-26 comes to pass.

That should be a priority. Perhaps everyone should bring a bit more energy to their efforts.