Energy transition go-slow is costing NSW households

Right now, NSW is smack bang in the middle of a disorderly transition to clean energy. Lack of knowledge and money didn’t get us here – lack of strong, clear leadership did.

Eraring power station is currently expected to close next year but the Labor government in NSW is expected to announce an extension of at least three years.

We need to face facts. Right now, NSW is smack bang in the middle of a disorderly transition to clean energy. Lack of knowledge and money didn’t get us here – lack of strong, clear leadership did.

But while the pathway to date has been beset with obstacles and hurdles, we can get back on track if we focus on what needs to be done and get on with it. First though we must make some immediate and important decisions.

The Electricity Statement of Opportunities (ESOO) updated by the Australian Energy Market Operator is now predicting reliability gap of more than 1GW from 2025 to 2028. This is due to several significant transmission delays – including to Project EnergyConnect. The rollout of renewables has faltered and it is clear that transmission continues to be the missing link in delivering reliable and affordable electricity.

Following this, a new timetable for the closure of the country’s largest coal-fired power station, Eraring, is expected to be outlined any day now. Eraring is currently expected to close next year. However, due to the energy reliability concerns which have now been identified, the Labor government in NSW is expected to announce an extension of at least three years.

The NSW government has left itself with no better choice than this extension, as a result of their lack of action. Leaving aside the fact that meeting our emission reduction targets would be put in serious jeopardy if such a decision were made, there are many negative consequences of keeping Eraring open for longer than necessary.

Such a decision would cost taxpayers and consumers hundreds of millions of dollars in direct subsidies and higher electricity bills.

The uncertainty created for those involved in the development of infrastructure in the renewable energy sector would be significant. And that would probably lead to the third-round effect of delays to the shutdown of other coal-fired power stations in NSW.

There are many in government and elsewhere who would argue such costs to the taxpayer, consumer and environment are worth it if we are to maintain a secure supply of energy across the state. But will keeping Eraring open for longer actually achieve that? I am firmly of the view it will not.

Keeping an ageing Eraring open will not guarantee power security and reliability. Recent and repeated unexpected shutdowns demonstrate that. There have been several unplanned outages experienced by three Eraring units in late April and early May 2024, and some units are still down. These outages contributed to severe price volatility in the market as a result. As the station ages, such outages will become more common.

So if Eraring can’t secure NSW’s energy needs, what can? Australia leads the world in rooftop solar installations, and NSW is the gold medal state. The voters and taxpayers of NSW have invested in solar panels and batteries primarily because they want to get the transition done, but they also want to have control of their energy costs and supply. The NSW government must not let all that investment in solar go to waste, and they must not pile additional and unnecessary costs on to households and businesses.

Keeping Eraring open will cost consumers $120m-150m a year in subsidies to Origin Energy. It will also mean higher wholesale electricity prices and that means higher electricity bills. Nexa Advisory’s research shows that will increase each year of a disorderly transition. NSW customers will pay $106 more by FY2027, increasing to $324 by FY2032.

We need to get on with the switch to clean energy. To do this state and federal governments need to enable build-out of renewable energy generation, and associated storage and transmission. That means three things must happen.

It is critical that governments give investors and developers certainty by sticking to the timetable set for coal-fired power station retirement.

We also need to remove the regulatory drag of slow planning and approvals processes, which is impeding critical renewables storage and transmission projects. We still haven’t built the renewable energy infrastructure we need because our regulatory environment is not fit for purpose and there has been no planning or co-ordination at a national level. We also need to put the work in to build social licence and community acceptance.

There must also be commitment to these strategic measures designed to support the system in what we must now accept is a disorderly transition.

Nexa Advisory has grave concerns that actions by governments to try to alleviate reliability risks in the short term will not only cost consumers and taxpayers unnecessarily, but undermine the consultative action undertaken to date, and harm investment certainty. This will threaten renewable generation and storage penetration in the longer term.

Keeping Eraring – a 42-year-old coal-fired power station – open beyond its use by date is costly and not a guaranteed route to power reliability.

Government and industry must focus all their efforts on co-ordinating better to regain order – this is the only way to fast-track the transition and ensure energy security long-term.

Stephanie Bashir is the chief executive of Nexa Advisory.