The New South Wales Government has entered into an agreement with Origin Energy to extend the operation of the Eraring Power Station until August 2027.
This will manage an orderly exit from coal-fired power to ensure the lights stay on for homes, businesses and industry while New South Wales delivers the transition to low-cost, reliable renewable energy.
This temporary and targeted agreement seeks to guarantee a minimum supply of electricity until the new expected closure date of August 2027.
The latest analysis from the AEMO confirms that, without Eraring, New South Wales would face energy reliability risks from 2025.
A temporary extension of Eraring is expected to provide time to deliver the renewable energy, storage and network infrastructure projects required to replace the power station.
The state will not make upfront payments to Origin Energy to operate Eraring. Instead, the government and Origin have agreed to an underwriting arrangement that requires the company to:
- Decide by 31 March in 2025 and 2026 whether it wishes to opt in to the underwriting arrangement for the following financial year
- Share up to $40 million per year of any profits it earns from Eraring, if it does opt in
- Claim no more than 80 per cent of losses Eraring makes from its operations from the New South Wales Government, capped at $225 million each year, if it does opt in
- Report the profits or losses it makes from Eraring in its annual report for each year, if it does opt in
Under the agreement, Origin must also:
- Ensure Eraring endeavours to generate at least 6TWh each year, the equivalent to the typical annual output of two of Eraring’s four generating units and enough to resolve the forecast reliability gap
- Substantially maintain Eraring’s existing workforce of around 220 people, commit to a maintenance plan and adhere to its licence conditions, which includes environmental protections
Origin has given notice that it now expects to close Eraring on 19 August 2027. The permanent closure will be managed by Origin in line with its obligations under the National Energy Market and must occur before April 2029. This ensures Eraring’s closure will contribute to New South Wales meeting its legislated 2030 emissions reduction target.
New South Wales is already approximately halfway towards meeting the state’s 2030 renewable generation target.
The government is speeding up the delivery of new renewables to reach its net zero target by delivering new generation and storage capacity.
The agreement will be tabled in Parliament in the next sitting week to ensure transparency.
New South Wales Premier, Chris Minns, said before the election that if extending Eraring is required to keep the lights on in New South Wales, the State Government would do it.
“Today’s decision delivers certainty for households and businesses,” Mr Minns said.
“The people of New South Wales now have certainty that the State Government has a plan to ensure we have reliable energy while we transition the workforce and the economy to net zero.
“The best way to undermine the renewable energy transition is to have the lights go out in 2025. I’m not letting that happen.”
New South Wales Minister for Climate Change, Energy and the Environment, Penny Sharpe, said that New South Wales is stepping up the transition to cheap, clean, reliable renewable energy.
“To keep the lights on and prices down, we need to make sure new renewable infrastructure and storage capacity is online before coal-fired generators reach the end of their life,” Ms Sharpe said.
“This temporary and targeted agreement will provide financial support only if it’s needed, and only for as long as needed, during an orderly exit of coal-fired power.
“This is a proactive and sensible step to ensure a plan is in place, if needed, to avoid electricity outages and rising power prices.
“The New South Wales Government remains entirely committed to the transition to renewable energy and our emissions reduction targets. A net zero future holds immense opportunities for our state’s economy and our environment.”
New South Wales Treasurer, Daniel Mookhey, said that this agreement gets the balance right.
“It means the clean energy transition can continue without exposing families and businesses to extreme bill shocks during a severe cost-of-living crisis,” Mr Mookhey said.
“Taxpayers are well-protected. We won’t be handing over a $3 billion cheque to Origin as some said we would. Instead, this agreement incentivises Origin to only use the underwrite if there is a sudden change in market conditions.”
Image: Steve Tritton/shutterstock.com
