Why Premier had to clean up energy mess Matt Kean left for NSW

Analysis: Labor was left with little choice but to cut a deal to extend the life of Eraring and keep the lights on in NSW, writes James O’Doherty.

• Eraring power station lifespan extended

The fact that the Minns Labor government has now stepped in to secure NSW’s energy security by extending the life of a coal-fired power plant tells you a lot about the approach by the previous Coalition government led by former Energy Minister Matt Kean.

It took a Labor-left minister in Penny Sharpe to take the pragmatic approach that Kean repeatedly ignored when he was in office.

The underwriting deal announced by the government on Thursday has been a long time coming. In fact, it could have been done years ago.

Report after report have warned of worsening blackout risks due to repeated delays to battery and transmission projects.

Those warnings came as recently as this week from the independent Australian Energy Market Operator.

The Premier had to step in to clean up the energy mess Matt Kean left for NSW. Picture: NCA NewsWire / Jeremy Piper

According to the forecasts, replacement projects simply would not be ready in time to make up the gap when Eraring was due to close in 2025.

Premier Chris Minns has long known that he had no choice but to step in and extend the life of Eraring, because there simply would not be enough power in the grid if it closed next year.

The deal to keep Eraring open longer could indeed end up costing taxpayers a lot of money: if the power plant operates at a loss, we could be on the hook for up to $225 million each year until August 2027, in the worst-case scenario.

Daniel Mookhey, Treasurer of NSW, announces the agreement to keep the Eraring power station open until August 2027. Picture: NewsWire / Christian Gilles

But what is the alternative? Ask families across NSW to turn the lights off, unplug their heaters in winter and throw away their air-conditioning remotes in summer?

And, if the plant fails to generate the power required to close the “reliability gap,” we will not pay a cent, Treasurer Daniel Mookhey said on Thursday.

“If they trigger this arrangement and then don’t produce the power they said they would, we don’t pay them,” he said.

Sharpe said the deal gives “certainty” to the government, electricity users, and coal suppliers - who have been panicking that their contracts to supply Origin are about to end.

That certainty is a long time coming.

Way back in 2021, Origin and the NSW government were working on a deal which would have kept Eraring operating at 50 per cent capacity until 2028, while building 800 megawatts of replacement battery capacity.

The energy market operator warned of an increased risk of blackouts if Eraring was to close. Picture: Richard Dobson

The Daily Telegraph first revealed details of the top-secret proposal, dubbed “Project Emu,” in 2022.

According to modelling provided by Origin to the state government, the staged exit proposal would have avoided a spike in wholesale power prices from 2025 - as long as the government agreed to cover up to 90 per cent of any losses from 2025 to 2028.

Kean knocked that proposal back, in the belief that enough renewable energy projects would be up and running in time to avoid potential blackouts.

What a mistake that turned out to be.

It is thought that the Emu was chosen to be on Australia’s coat of arms because it is physically incapable of walking backwards, so signifies a nation moving forward.

In failing to sign up to “Project Emu” in 2021, Kean took a backwards step for our energy security.