NSW taxpayers have been spared from forking out $225 million next financial year to keep Australia’s largest coal-fired power station running, after Origin Energy did not opt in to an underwriting agreement with the state government.
Eraring will continue to operate until its extended 2027 closure date, but the NSW Labor government will not enter into a so-called risk-sharing agreement with Origin Energy this year, saving taxpayers millions of dollars.
The Minns government last year said it would pay Origin Energy up to $450 million over the next two years to extend the life of Eraring, should the company opt in to the risk-sharing deal.
NSW Energy Minister Penny Sharpe says taxpayers will not be hit with a bill this year.Credit: Brendon Thorne, Nick Moir
Under that deal, taxpayers would share 20 per cent of any profit Eraring made during the life of the agreement, but that share would be capped at $40 million. If the plant lost money, taxpayers would underwrite 80 per cent of those losses, capped at $225 million a year.
Origin notified the government on Monday that it would not be opting in, but it will need to decide by March 31, 2026, whether it signs up to the risk-sharing arrangement for the final financial year before the plant is slated to close.
Origin is expected to close Eraring on August 19, 2027.
After coming to power in March 2023, the NSW government flagged that it was negotiating with Origin to extend Eraring beyond its 2025 closure date because of concern about a forecast energy reliability gap.
Using taxpayers’ money to extend the life of Eraring would have put the government on course for a clash with renewable energy advocates and climate campaigners. Coal is a dominant source of greenhouse gas emissions that the world must phase out to help avert catastrophic global warming.
Former treasurer and energy minister Matt Kean also warned that he was advised when in government that extending the life of Eraring would cost taxpayers $3 billion over two years, while undermining the state’s ambitious transition to renewables.
NSW Energy Minister Penny Sharpe said the government was “serious about keeping the lights on”, which included its transition to renewables while Eraring remained operating.
“This short, temporary agreement with Origin provides certainty while we deliver more renewable energy and storage to replace ageing coal-fired power plants,” Sharpe said.
Under the two-year agreement, Origin must still generate at least six terawatt hours each year – the equivalent of the typical annual output of two of Eraring’s four generating units, and enough to resolve the forecast reliability gap.
It must also maintain Eraring’s existing workforce, commit to a maintenance plan and adhere to its licence conditions, which include environmental protections.
Sharpe said the NSW Electricity Infrastructure Roadmap – the state’s 20-year plan for affordable, clean and reliable energy – was on track, with about 35 per cent of the state’s electricity already generated by renewable energy.
The government has also given planning approval to six wind farms, 12 large-scale solar farms, 14 battery energy storage systems and one compressed air storage system.
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