Eraring extension to cost taxpayers more than $150m a year, renewable energy group says

A renewable energy think tank says NSW taxpayers would be up for up to $150m a year if a deal with Origin to extend the life of the Eraring coal-fired power station were reached.

Extending the lifespan of NSW’s largest coal-fired power station would cost taxpayers between $120m-$150m a year, a report from a renewable energy think tank has concluded.

The report comes as proponents for an accelerated transition away from fossil fuels increase pressure on the state government to back away from a deal which independent authorities say is necessary.

The estimated bill is based on projections for wholesale electricity and coal prices which vary substantially.

An independent expert commissioned by NSW last year urged the government to strike a deal with Origin Energy, the owner and operator of Eraring, in a bid to protect consumers who would be hit hard as there were insufficient replacements to allow the retirement of a generator that typically provides 20 per cent of the state’s energy needs.

Independent think tank Climate Energy Finance director Tim Buckley said the state has developed enough replacement renewable energy sources and NSW could be better served by allowing Origin to close the facility.

Eraring is due to close in August 2025, the earliest it is permitted to shut under federal law.

“There is enough replacement capacity in the pipeline in NSW to offset the capacity withdrawn when Eraring closes,” the report says.

“Any state investment should instead be directed to rapid deployment of distributed firmed renewables.”

An Origin spokeswoman said the report was inaccurate.

“We welcome an informed, factual, and robust conversation about the closure of Eraring. Unfortunately, we do not believe this report makes a meaningful contribution to that conversation as it is formulated on information and assumptions that are incorrect,” the spokeswoman said.

“Origin remains in active negotiations with the NSW government about Eraring’s future and both parties look forward to bringing the process to a conclusion as soon as possible.”

An artist’s impressions of a $600m battery mooted by Origin Energy for the Eraring site.

The conclusion reached by Clean Energy Finance is at odds with bodies such as the Australian Energy Market Operator, which believes there’s a looming shortfall in generation capacity in NSW due to a sluggish introduction of new developments.

Energy authorities are also worried by what would underpin renewable energy during periods of so-called renewable energy droughts when the sun is not shining nor the wind blowing.

Gas, which is used as a peaker and can be fired up on short notice to fill shortfalls, is significantly short in supply, and pumped hydro projects such as Snowy Hydro 2.0 are years from completion.

But renewable energy advocates insist allowing Eraring to close would accelerate work on new renewable energy projects, which have been slowed by community opposition and increased costs.

Labor is under sustained pressure from its left flank, which opposes fossil fuels, and the federal government can ill afford to alienate a key voter block.

In a bid to push back against opposition, the government has declared it will not be held hostage by Origin – comments seen as placating any potential voter unrest.

But allowing Eraring to close before sufficient replacements are ready would increase the risk of blackouts and price rises.

Australians pay some of the world’s highest electricity bills and increased costs would heighten pressure on households already struggling under a rampant inflation and 13 interest rate rises.

Talks between Origin and the NSW government have dragged on for months.

Details about negotiations are tightly guarded as both sides seek to minimise vocal opposition, but Australia’s energy market is in widespread agreement that a deal will get done.

“The only questions are how long and how many units. The wholesale market post August 2025 will be sky high if there was any concern about Eraring closing and there is no change between July and August. That shows you the level of concern,” said one energy market trader.

Originally published as Eraring extension to cost taxpayers more than $150m a year, renewable energy group says