Eraring talks need more urgency

Reports of progress in negotiations to extend the life of the Eraring coal-fired power station to safeguard electricity supplies on the national grid are welcome but not enough. After six months of talks between Eraring owner Origin Energy and the NSW government, both sides say they are confident but a deal has not been done. Eraring supplies 25 per cent of NSW’s electricity needs. Independent experts have warned that if the coal-fired plant closes as scheduled next year, it will disrupt the electricity market and likely result in blackouts.

Origin may consider that it holds the whip hand in negotiations but there are plenty of options for government. The power sector already has expressed alarm at proposed new government powers that would allow states to act to delay the closure of coal-fired power stations, which still provide up to 60 per cent of the nation’s electricity. The issue highlights the lack of forward planning and mixed messages being sent by government. Taxpayers already are on the hook to subsidise the cost of coal to generators that would otherwise struggle to make a profit from coal assets forced to make way for renewables.

Companies argue that extending the life of coal-fired plants sends the wrong market signals for investment. Left unsaid is the fact the same power companies are making big profits from already subsidised renewables when prices skyrocket in the wholesale market because of the disruption caused by the retirement of coal.

This is a mess that must be fixed. It must start with co-operation between government and power utilities to guarantee supplies. Greater clarity is needed on how electricity markets can operate successfully when assets responsible for underpinning supply are withdrawn from the market.