NSW Energy Minister Matt Kean flags Eraring power station intervention

Faced with a reliability shortfall, NSW Energy Minister Matt Kean flags an intervention to keep the nation’s largest coal power station open for longer.

A stockpile of coal at Eraring Power Station in NSW. Picture: Getty Images

NSW Energy Minister Matt Kean has flagged the state government may intervene to extend the life of the nation’s largest coal power station, Eraring, as consumers grapple with soaring costs and a projected energy shortfall.

Delays to both Snowy Hydro 2.0 and the Kurri Kurri generator have left the NSW government facing a reliability shortfall from 2025-26, with the Liddell coal-fired power station set to close in April and the Origin Energy-owned Eraring following in August 2025.

With the Australian Energy Market Operator warning in its February update that the delays had increased the risk of the state facing an energy shortfall until 2027-28, Mr Kean foreshadowed that the state government might intervene in the energy market to ensure reliability. “What we’ve got to do is make sure there’s enough capacity in the system to be able to meet demand,” he told The Australian during an interview.

Matt Kean. Picture: Monique Harmer

“Right now, we have a plan to deliver that capacity. But obviously, we will take the necessary steps to ensure there’s enough energy in the system to keep the lights on and drive prices down. That’s always been our ­approach.”

Pressed on whether extending the lifespan of Eraring, which accounts for 25 per cent of the state’s power needs, would be ruled out, Mr Kean said: “Of course we’re not ruling things in or out.”

“The government’s already demonstrated that it will do what is necessary to protect families and businesses at this time.”

Comprising four 720MW coal-fired generator units and one 42MW diesel generator, ­Eraring has an overall generating capacity of 2922MW.

Snowy Hydro’s 2000MW pumped hydro storage project was supposed to offset a large proportion of this, but confirmation of an at least 12-month delay to that project until the end of 2027, in addition to a similar delay to the Kurri Kurri gas power plant near Newcastle (now predicted to be completed in December 2024), has compounded fears of a shortfall in NSW.

The closure of Liddell coal power station in April will also remove 1200MW in capacity.

As part of their February update, AEMO noted increasing reliability risks facing NSW from the cascade closure of coal power stations in that state: Liddell, Eraring and then Port Vale, part of five power stations across Australia representing 8.3 gigawatts or 14 per cent of the market’s total capacity that will extinguish by the end of the decade.

Origin chief executive Frank Calabria in February told The Australian the “base case” for retiring Eraring remained August 2025 but that timeline was malleable if market conditions changed. “That’s still in our base case, but nevertheless there’s a lot that’s got to happen for us to then make that final call,” he said.

With a projected spike in electricity bills of about 30 per cent in 2023-24, Mr Kean said it was going to be a “challenging year” for households and businesses.

He has previously slammed Jim Chalmers for not holding up his end of the deal cut between state and federal governments to provide vulnerable households with up to $1070 in energy rebates – compensation for the NSW government foregoing mining royalties as part of a cap on coal and gas prices.

Mr Kean’s comments follows increased market speculation that the government may move to prolong the lifespan of Eraring, with Macquarie analysts saying in mid-February the “unpalatable” decision may require taxpayers to underwrite the fixed costs with running the plant.

At the time, a spokeswoman for Mr Kean said delays to Snowy Hydro were “disappointing” but pointed to plans for its 700MW Waratah Super Battery, expected to be installed by 2025, as well as launching a competitive tender for 380MW of back-up supply.

Grattan Institute energy program director Tony Wood said the state government would need to take action to ensure demand could be met, and extending the life of Eraring appeared to be the simplest option available.

“The most obvious lever available to government and industry is Eraring,” he said. “It appears to be the simplest, but whether it is the overall easiest one to deliver is another question.”

He said a deal between Origin Energy and the NSW government could see taxpayers step in to offer financial assistance to the power plant if market conditions dipped below an agreed point.

Mr Wood said the solution could not involve bringing online more renewable energy to fill the gap, adding that Origin had been kept in good condition, meaning extending the lifespan of Eraring should be feasible if market conditions were amenable.

“It’s not as though you only have one lever, but there is a gap this decade in NSW … made worse by the timing of Snowy Hydro. There are several things you can do but it isn’t just building more renewables,” he said.