Australia’s largest power station, Eraring, secures approval to run at lower minimum output

Origin has approval to run its Eraring power station at a lower minimum level when there’s little need, increasing the profitability of the facility which is under financial pressure from renewables.

Australia’s biggest coal-fired power plant has received approvals to dial down its electricity supplies to cope with surging solar and wind generation, boosting its chances of staying open until 2029 to help ease a rocky path to a renewables-dominated grid.

The influx of green energy means that during sunny and windy days the cost of generating electricity often falls to below zero, which means generators are charged for delivering power into the system.

The trend is a key reason for the demise of coal, which has to run throughout the day with the fuel unable to be switched off without incurring substantial losses.

In a boost to Origin Energy, owner of Eraring, to endure the wild swings in wholesale pricing, the power giant has secured permission to run the NSW coal power station at a lower minimum output.

The Australian Energy Market Operator will now allow Origin to run each of the four coal power units at 180 megawatts at times when electricity is not needed, down nearly 15 per cent from the previous lowest levels of 210MW.

By trimming its lowest output, Origin’s potential losses from ­Eraring could be stunted.

Improving the financial performance of Eraring could also allow Eraring to stay open until 2029.

The NSW government deal with Origin expires in 2027, but the company has the option of keeping Eraring open until 20. Eraring would probably only stay open until 2029 if Australia’s transition to renewable energy falls markedly behind schedule.

Origin had to prove to the market operator that each of the four units were able to safely run at the lower levels and the ­nation’s wider grid had the ­capacity to withstand the lower output. Origin secured the approval of AEMO late last month.

The approval is a boost to Origin, which will now run Eraring until at least 2027, and NSW taxpayers, who will share the financial liabilities of the plant after a deal was struck between the nation’s largest electricity and gas retailer and the state Labor government.

Eraring was set to close next year, but an independent expert report concluded NSW and the wider National Electricity Market could not allow the plant to close without risking electricity supplies and price rises.

But Eraring has in recent times been losing ever larger amounts of money as higher costs to purchase coal compared to other fossil fuel power stations and the influx of renewables took a toll.

Eraring returned to profitability last year after the introduction of a federal and state scheme in which the price of coal was capped in return for operators increasing electricity output – the centrepiece measure of the federal Labor government to lower power bills.

The scheme allowed Origin to purchase coal for less than it typically did, and Eraring’s output hit a five-year high.

The development of Snowy Hydro 2.0, which is set to be the bedrock of the nation’s grid during periods when the sun is not shining or wind is not blowing, shapes as the most critical risk. Snowy is scheduled to be ready in 2027, but it has encountered a spate of problems that has alarmed industry figures.

Originally published as Australia’s largest power station, Eraring, secures approval to run at lower minimum output