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ABC News
ABC News
Business
business reporters Rhiana Whitson and Michael Janda

Origin Energy to shut Australia's largest coal-fired power plant, Eraring Power Station, by 2025

Origin Energy's Eraring power station in the NSW Hunter region produces around a fifth of NSW's energy consumption. (ABC News: John Gunn)

Origin Energy is seeking approval to shut Australia's largest coal-fired power plant seven years early, with the Eraring facility in the NSW Hunter region now set to close by August 2025.

The company said notice has been submitted to the Australian Energy Market Operator (AEMO) indicating the potential early retirement of the plant after the required three-and-a-half-year notice period.

Eraring is the biggest of 16 remaining coal-fired power plants supplying the National Energy Market (NEM), with seven of those already scheduled to close by 2035 and the last planned to shut by 2051.

The ABC understands that Origin has 240 employees at the power plant, but contractors raise the total number of staff there to about 400.

While electricity generated from coal still supplies 60 per cent of power in the National Energy Market, that is down from 87 per cent when records began in 2006.

Eraring is Origin's only coal-fired power station, meaning that the company will generate power from a combination of renewables and gas.

'Biggest battery in Southern Hemisphere'

In its place, the company said it has "well-progressed plans" for battery storage of up to 700 megawatts on the site.

Eraring Power Station is planned to house a 700MW battery after it ceases energy production in 2025. (ABC News: John Gunn)

"Origin's proposed exit from coal-fired generation reflects the continuing, rapid transition of the NEM as we move to cleaner sources of energy," said the company's chief executive, Frank Calabria.

NSW Energy Minister Matt Kean said Origin's decision to close Eraring was months in the making.

NSW Energy Minister Matt Kean says a 700MW big battery will help ensure the state's energy supply remains reliable. (AAP: Bianca De Marchi)

"Origin approached me about the possibility of this decision a number of months ago," he said.

"During that time, we've worked to develop a comprehensive plan to deal with the possibility of today's decision. That plan will involve making sure that we focus on keeping reliability of the system and that we put downward pressure on prices."

Mr Kean said that he believed regulatory approval from AEMO to close the plant would be forthcoming.

"AEMO, the independent system operator, has considered our plan and has said that we will meet our energy security target even with the closure of Eraring in 2025," he told reporters.

"Today I'm announcing that we will be building the biggest battery in the Southern Hemisphere. A 700-megawatt transmission battery that will free up capacity in our transmission system and that will enable users to access more of our existing supply."

AEMO's chief executive Daniel Westerman seemed unfazed by the announcement.

"Planned additional transmission capacity – including the announced battery — will give the state access to enough electricity generation to meet the Energy Security Target at the time Eraring closes," he said in a statement.

Origin Energy to shut Eraring Power Station by 2025 (Rhiana Whitson)

Closure 'risks reliability' warns federal government

Mr Kean's federal counterpart, Angus Taylor, had a very different take on the closure, describing it as "bitterly disappointing" for both energy users and power workers.

"The early and sudden closure of this 2880MW generator will leave a considerable gap in reliable generation in the National Electricity Market, representing more than 20 per cent of NSW generation output," he said in a statement.

Labor's shadow minister for climate change and energy Chris Bowen highlighted the division between the two.

"Labor welcomes the NSW Government's commitments to build a big battery to ensure reliability, and to bring forward new generation capacity to ensure affordability," he said in a statement.

"The NSW Liberals and Federal Labor are doing what Scott Morrison won't: acknowledge and plan for the market realities of the global energy transition."

Greens leader Adam Bandt said all parties should get together to agree on a comprehensive plan to phase out coal-fired power.

"We urgently need a national climate and energy plan to manage this accelerating shift from coal," he said in a statement.

Stay of execution for other coal plants

A year ago, Eraring was identified as the coal power plant most likely to be unprofitable by 2025 in a report from think tank the Institute for Energy Economics and Financial Analysis and consultancy Green Energy Markets.

Green Energy Markets director Tristan Edis forecasts that an Eraring Power Station's worth of rooftop solar generation would be added annually for the next four years. (Supplied: Green Energy Markets)

Tristan Edis from Green Energy Markets said its closure may extend the life of some other coal-fired power plants, but probably not for too much longer.

"The other higher cost and marginal coal generators like Gladstone and Vales Point will likely remain under operational and financial stress from having to continually dodge the daily solar surge and accompanying power price plunge," he told ABC News.

"Green Energy Markets' latest forecasts are that we will see around 3,000MW of rooftop solar added each year for the next four years.

"As Origin have recognised, this has fundamentally transformed the shape of the electricity market making it poorly suited to inflexible, baseload coal generators.

"Unfortunately many of our politicians are unwilling to recognise this reality and adapt to it."

In July last year, Origin Energy slashed more than $1.5 billion from the value of its assets.

That write-down wiped $583 million from the value of its power stations due to lower electricity prices "driven by new supply expected to come online, including both renewable and dispatchable capacity, impacting the valuation of the generation fleet, particularly Eraring power station."

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