The Minns government will “engage” with the owner of Australia’s biggest coal-fired power station for a “temporary” extension of its operating life, prioritising short-term energy security over emissions reductions.
A final cost and length of extending operations of the 2,880-megawatt Eraring power plant near Newcastle would hinge on negotiations with owner Origin Energy, the government said on Tuesday.
Origin declared in February 2022 that it planned to close Eraring in August 2025 and has said it needs to spend as much as $250m a year on equipment and repairs alone to keep it operating. The company bought it for $50m from the Coalition government in 2013.
Extending the plant’s operation was one of the recommendations of an independent “check-up” of the state’s energy policies conducted by analyst Cameron O’Reilly and a small panel.
“NSW has no time to waste as coal-fired power retires and needs to be replaced by renewable generation, transmission and storage,” Penny Sharpe, the energy minister, said.
Sharpe did not set a deadline for the negotiations to end or say how much of a share of Eraring’s capacity would need to run and for how long.
“They had their own profit-driven incentive to stay open,” Sharpe told a media conference. “We have to get ready to make sure that any exit is managed but, importantly, any extension is also managed.”
The team found New South Wales wasn’t likely to have enough renewable energy generation and storage in place in time to counter the exit of fossil-fuelled power stations.
O’Reilly, now with Marsden Jacob Associates, did not make an assessment of how many of Eraring’s four units should operate or for how long.
One of the 54 recommendations will require Origin to demonstrate any claims about the extension of Eraring to an energy security target monitor and “provide all information” required to verify those claims.
The government accepted 50 of the recommendations, with 44 approved in full and three in part. Three others were already under way, the government said.
AGL Energy closed the remaining three units of its 1680MW Liddell plant in the Hunter Valley in April and all other coal-burning generators may be closed or mothballed by the mid-2030s.
The previous Coalition government considered an offer from Origin for Eraring. Then energy minister Matt Kean said on Monday the full cost of keeping two of the plant’s four units going for two years was a net $3bn, a figure Sharpe and others rejected.
Kean attacked the announcement on Tuesday, saying the Coalition’s energy infrastructure “road map” was on track and that the Australian Energy Market Operator had “clearly” said there was no need to keep Eraring open.
The opposition’s treasury spokesperson, Damien Tudehope, did not directly criticise the decision to keep Eraring open but noted the O’Reilly report did not “say it will necessarily have to happen”.
Tudehope said the Minns government should be honest about what alternatives were being considered and accused Labor of failing to negotiate the best deal for NSW residents.
“Can you imagine if you’re the CEO of Origin Energy today, what he’s heard from the government is that it needs to keep Eraring open, and will pay whatever is necessary,” Tudehope said.
“That’s the impact of negotiating in this manner, where we have a minister who stands up and says ‘I’ve got no idea what will cost’.”
The NSW Greens energy spokesperson, Abigail Boyd, said it should not be up to operators to dictate when to close coal-fired power stations. She urged the Minns government to “show some leadership”.
“What we have here is Origin Energy, who decided to bring forward the closure date of this station, now holding the government over a barrel when it comes to whether or not it will keep that station open,” Boyd said.
Climate advocacy organisations such as the Climate Council, Beyond Zero Emissions and Farmers for Climate Action have also reacted with dismay and argued the government can’t justify keeping Eraring open at taxpayers’ expense.
Other opponents of the extension, such as energy analyst Tim Buckley, have called on the government to use the funds it would pay Origin to instead quicken the rollout of rooftop solar and batteries for households and businesses to limit the risk of blackouts.
Scott Hargreaves, the executive director of the Institute of Public Affairs, a conservative thinktank, said the decision to keep Eraring open was a welcome step towards shoring up Australia’s energy security.
“Today’s announcement that Eraring will remain operating could be the much-needed circuit breaker to allow for decisions to be made which put energy security and the national interest first, not the demands of activists,” Hargreaves said.
The AEMO said last week that this summer would probably see an elevated risk of power outages, particularly in Victoria and South Australia. It also modelled an extension of Eraring’s operations and said it would reduce blackout risks later in the decade.
The energy security monitor would also “actively scrutinise” the plans of the state’s other coal-fired power stations as they approached retirement from the grid “to ensure ongoing reliability at the lowest cost”. These plants are Vales Point, Mount Piper and Bayswater.
The government’s engagement with Origin over Eraring would run in parallel with the pursuit of “all alternative solutions to deliver the renewable generation, transmission and storage solutions that NSW needs”.
Sharpe said: “We’re throwing everything [at the problem] because our responsibility is to the people of NSW.
“We don’t want their costs going up,” she said. “We want to make the transition so that our future is secure when it comes to the real crisis, which is also climate change. So we’re looking at pursuing all options.”
An Origin spokesperson said the company acknowledged the report’s recommendations. “[A]s we have consistently said, we will continue to engage with the NSW government to find a 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.”
