Analysts reveal shock forecast for Australia's biggest power station Eraring

Australia's largest coal plant will likely operate until 2030 despite planned earlier closures, as delays in renewable energy threaten power supplies, leading analysts say.

Leading investment analysts say Australia’s largest coal-fired power station Eraring will stay open into the next decade, contrary to claims by owner Origin Energy and the NSW government.

In 2022, Origin said Eraring, south of Newcastle, would close in August 2025. But last year — amid intensifying fears of supply shortages and price shocks — the NSW government did a deal with the energy giant to keep the plant online for at least two more years and possibly four.

Now analysts at global investment bank UBS say Eraring is likely to operate for even longer because the Albanese Labor government is on a path to miss its 2030 emissions reduction target.

Leading investment analysts say Australia’s largest coal-fired power station Eraring will stay open into the next decade.

“Eraring ... can be relied upon – likely with an extension of the NSW Gov(ernment) support mechanism – to generate harder for longer, relieving electricity bills in NSW over the next three to five years and ensuring stronger system reliability while the build-out of new electricity transmission and renewables catches up,” the analysts said in the wake of Origin’s latest annual profit results.

UBS said that the imminent reset of the national emissions reduction target to 65-75 per cent by 2035, compared to 43 per cent by 2030, “affords ... more time on coal-fired generation closures.”

“We now assume that Eraring will run until (June) 2030.”

Origin Energy CEO Frank Calabria. Picture: Britta Campion of The Australian

“We assume no generation beyond FY30 albeit recognise upside risk that the plant may run to 2032, its original technical life,” the analysts say.

“Our revised outlook … reflects that electricity transmission and renewables build out is delayed, and Eraring must run harder for longer to keep wholesale electricity prices lower and ensure electricity system reliability in NSW until the planned electricity transmission developments and sufficient new renewable generation is commissioned.”

“Australia’s potential inability to meet its 2030 emissions reduction target benefits Origin”, UBS says.

On Monday night Origin said there was no change to its position on Eraring as explained by Origin CEO Frank Calabria last month when he announced a $1.5 billion annual profit.

In 2022, Origin said Eraring, south of Newcastle, would close in August 2025. Picture: Supplied / Origin Energy

At the time Mr Calabria told analysts: “We’ve got our notice for closure in, pursuant to the agreement with the NSW government, for August 2027. But clearly we continue to assess the market and the needs of the market.”

The agreement between Origin and the NSW government requires Eraring to produce at least six terawatt hours of power annually. UBS expects the plant will in fact pump out 13.5TWh in 2025-26, even more the following financial year, and then 10-13TWh annually until 2030.

The office of NSW Climate Change and Energy Minister, Labor’s Penny Sharpe, declined to comment. Under its current agreement with Origin, Eraring has to close by August 2029.

Former NSW Climate Change and Energy Minister, Liberal Matt Kean, who now chairs the federal Climate Change Authority, is expected to provide federal minister Chris Bowen with advice on the level of the 2035 target later this month.

Originally published as Analysts reveal shock forecast for Australia's biggest power station Eraring