Origin Energy declines NSW underwriting for Eraring as high wholesale prices boost confidence

In an indication of Origin Energy’s confidence that its Eraring coal-fired power station will turn a profit, it has elected not to opt into an underwriting deal with the NSW government.

Origin Energy has declined the option of taxpayer underwriting for its Eraring coal-fired power station for the next year as high wholesale electricity prices buoy its confidence in the profitability of NSW’s largest electricity ­generator.

Origin and the NSW state Labor government last year struck a deal to extend Eraring for at least two more years, although it could run until 2029. Under the terms of the deal, if Origin believes Eraring – which produces about 25 per cent of NSW’s energy – could be unprofitable then it can receive underwriting for the year. It must opt into the arrangement by March 31 and doing so would see Origin share any profits.

But in an indication of Origin’s confidence that the facility, which was until 2022 unprofitable, will remain in the black, it has elected not to participate in the scheme.

The state Labor government lauded the decision, with NSW taxpayers spared any liabilities. But the decision of Origin underscores the high wholesale electricity prices that have plagued Australia’s electricity market in recent years. High costs of producing electricity have been a driver for recent increases in electricity bills.

The decision to extend Eraring until at least 2027 has been controversial. Renewable energy advocates have widely criticised the decision, insisting the extension is unnecessary, increases emissions and exposes taxpayers.

But with an independent expert warning that NSW’s electricity grid would be at risk if Eraring was to close in 2025, the NSW Labor government had little choice but to enter into negotiations with Origin.

A deal was eventually done after months of talks.

While NSW taxpayers will offer two years of financial support, Origin can opt to keep Eraring open until 2029, though it will not receive any underwriting should it decide to do so.

NSW Energy Minister Penny Sharpe said the deal gave the state time to build sufficient renewables to allow Eraring to shutter.

“This government is serious about keeping the lights on in NSW,” she said.

NSW has earmarked establishing six so-called renewable energy zones around the state.

Each zone will host large-scale renewable energy projects, connected to the grid by new transmission lines.

Originally published as Origin Energy declines NSW underwriting for Eraring as high wholesale prices boost confidence