The State Government will engage with Origin Energy about a potential extension of Eraring power station, but it has made it clear that it does not want the coal-fired generator to remain open "one day longer than it needs to."
While falling short of confirming it would intervene to extend the life of Eraring, the government said it accepted that it may be necessary for the coal-fired generator to continue operating beyond mid-2025 in order to provide energy security during the roll-out of the clean energy transition.
The government released Dr O'Reilly's report and its response on Tuesday. It has accepted 50 recommendations, 44 in full, three in part and three are already underway or complete.
The O'Reilly report highlights the risk of losing 2080 megawatts of baseload power at a time when the energy grid is undergoing an unprecedented transformation.
"Under any circumstances, replacing a plant like Eraring that provides around 20 per cent of NSW's delivered electricity would have been extremely challenging. With just three-and-a-half years notice, it is almost impossible without reliability and affordability impacts," the report's executive summary states.
Energy Minister Penny Sharpe said, while the government would do everything it could to accelerate the rollout of renewable energy projects, it accepted there was a case for keeping Eraring open.
"The check-up makes it clear that the case for Origin Energy to extend its timeframe for phasing out Eraring is there, as does the recent Australian Energy Market Operator report into reliability," Energy Minister Penny Sharpe said.
"Origin has its own commercial drivers for staying open and NSW consumers need to understand what their plans are.
"We accept the recommendations from Cameron O'Rielly that we will engage about the future, but we come from the starting point that we don't want coal-fire (power) to be open one day longer than it needs to and not one extra cent that needs to go into it from the people of NSW."
The government has also accepted a related recommendation that it seek clarity from Origin on Eraring to provide certainty for the plant's 500 workers and suppliers.
Ms Sharpe said the potential cost to taxpayers of keeping Eraring open and for how long would be determined by talks with Origin.
But she refused to concede that keeping the plant open would come at a cost to taxpayers.
"There are some that say that it doesn't need to stay open but the bigger picture here is that we need to start the conversation. I'm not going to speculate on what the costs could be," she said.
"We start the figure at zero and we go from there."
An Origin Energy spokesman said the company had noted the O'Rielly and AEMO reports as well as the government's outlook assessments for electricity and security.
"We acknowledge the recommendations regarding Eraring's closure, and as we have consistently said, we will continue to engage with the NSW Government to find [an acceptable] path forward that can help navigate the economic challenges facing the plant and avert any risk to the reliability of electricity supply in the state," the spokesman said.
"The Eraring closure notice provided an important signal to the market about progress towards our nation's climate goals, and Origin does not shy away from the need to exit coal generation as soon as there is sufficient renewables, firming and transmission capacity available."
Ms Sharpe also confirmed that gas would play a key role in the government's transition strategy.
"The reality is that sometimes the sun doesn't shine, and sometimes the wind doesn't blow," she said.
"There is going to be the need for gas to do firming when we don't."
