NSW government to reveal Eraring decision within days when it releases independent report
The future of Origin Energy’s Eraring coal power station will be decided in the next few days, as the Minns government comes under pressure to prolong the generator beyond its scheduled retirement.
The NSW government will this week reveal whether it will prolong the operations of its largest coal power station, Eraring, when it releases its long anticipated independent report into the state’s electricity market.
The Minns government is under mounting pressure to enter into negotiations with Origin Energy to prolong the running of Origin Energy’s Eraring coal power station beyond its scheduled retirement date of 2025.
The Australian Energy Market Operator last week warned of heightened threats of blackouts and price spikes if Eraring closes, but doing so would likely antagonise a cohort of supporters and threaten Australia’s emission reduction targets.
The government has said it would not determine its stance on Eraring until after it received an independent report into the state’s energy markets, which The Australian revealed had recommended striking a deal to extend the lifespan of the generator.
The release of the report had been scheduled by August 31, but The Australian understands the state government will release it in the next couple of days when it also announces its response to the recommendation.
Labor appears to have little choice but to underwrite or move to acquire Eraring – which generates about 20 per cent of NSW’s energy needs – but newly installed Premier Chris Minns is unlikely to want to bear the political consequences.
A buyout is widely seen as unlikely, as Origin earmarks the site of Eraring for a $600m battery that capitalises on existing infrastructure. The NSW government rejected the chance to acquire Eraring in 2021, indicating a deal would be difficult to reach.
Underwriting would leave NSW taxpayers on the hook for potentially hundreds of millions of dollars. Origin has said Eraring requires an annual spend of about $200m-$250m plus the cost of buying coal to run, though it earns money from selling electricity.
Eraring is, however, on course to be losing money as soon as next year when the emergency coal price cap finishes.
The federal government in conjunction with state counterparts introduced a $120 a tonne cap on the price of coal, a scheme designed to put downward pressure on household and business bills.
The scheme will end in 2024 and Origin’s supply costs will spike, likely plunging the facility back to a loss-making operation.
NSW taxpayers would likely have to cover the losses until the state has developed sufficient sources of renewable energy to compensate for the retirement of Eraring in Lake Macquarie.
But Australia is struggling to develop a large pipeline of renewable energy generation, with transmission infrastructure emerging at the critical bottleneck in reshaping the country’s electricity generation.
Without certainty that new renewable energy generation projects can be connected into the grid, many developers remain on the sidelines – slowing the transition.
Coal is the dominant source of electricity generation, providing about 60 per cent of Australia’s energy needs. But the federal government has legislated a target of having renewable energy sources generate more than 80 per cent of Australia’s electricity by 2030.
Unable to develop enough renewable energy sources, NSW is on course to continue its reliance on coal for a little while longer. But without a deal, NSW would face the heightened threat of blackouts. Even if blackouts are avoided, prices would likely rise across Australia’s east coast – unpalatable for a new government.
Australian households are already buckling under a cost of living crisis, and many can ill-afford more power bill pain after enduring two consecutive annual price increases of more than 20 per cent.
Electricity prices have surged in recent years, primarily due to a global energy crunch – but industry executives worry that public support for the transition to renewable energy will wane.
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