Eraring Power Station to remain operational until 2027, possibly 2029 

In a strategic attempt to safeguard against power price spikes and ensure energy stability, the New South Wales government has struck an agreement with Origin Energy to delay the closure of the Eraring Power Station until August 2027, with a potential extension to April 2029.  

Initially set to shut down in August 2025, Australia’s largest coal-fired power station will continue to play a pivotal role in the state’s energy landscape. 

The power plant will operate at less than half of its maximum coal generation capacity of 2,880 MW. 

Key Highlights 

Extended Operation: Eraring Power Station, initially slated for closure in August 2025, will now operate until at least August 2027, potentially extending to April 2029. 

Government Deal: The agreement aims to prevent immediate closure, safeguard against power price spikes, and ensure reliability through the next state election. 

Underwriting Arrangement: Origin Energy can opt for an underwriting deal that covers up to $225 million annually in losses, ensuring the power station’s financial stability. 

Balancing Reliability and Transition 

The NSW (New South Wales) government asserts that this agreement is temporary but necessary to maintain grid reliability while transitioning to renewable energy sources. Energy Minister Penny Sharpe emphasised the importance of keeping Eraring operational to avoid outages and control power prices during the transition. 

“NSW is stepping up the transition to cheap, clean, reliable renewable energy. But to keep the lights on and prices down, we need to make sure new renewable infrastructure and storage capacity are online before coal-fired generators reach the end of their life,” Sharpe stated. 

This decision underscores the government’s commitment to an orderly energy transition without compromising current energy needs. 

Financial Dynamics of the Deal 

Reduced Capacity Operation: Eraring will run at less than half its 2.88 GW capacity, producing a minimum of 6 terawatt hours (TWh), which is sufficient to meet current reliability needs compared to its potential of 16 TWh and the 14.8 TWh it produced in 2023. 

Profit and Loss Sharing: Origin can invoke the underwriting agreement based on market conditions, ensuring it can manage financial risks effectively. 

Loss Coverage: Origin can cover up to 80% of its losses, capped at $225 million annually. 

Profit Sharing: If profitable, Origin retains a sizeable portion of the profits, sharing only up to $40 million with the state. 

Market Reactions and Renewable Energy Delays 

The energy sector’s reaction has been mixed, with some criticism directed at Origin and the NSW government for inadequate preparation for Eraring’s closure. 

Delays in renewable energy projects and new capacity installations have compounded the issue, leaving a gap that Eraring will now temporarily fill. 

Despite assurances from the Australian Energy Market Operator (AEMO) about sufficient emergency reserves, the government’s focus remains on preventing the kind of price spikes witnessed earlier this month when several coal units were non-operational. 

During that period, energy prices soared until an administered price cap was triggered, highlighting the market’s volatility and the urgency of stabilising power costs. 

Political and Economic Implications 

The NSW government’s decision to keep Eraring operational reflects broader political and economic considerations. 

Treasurer Daniel Mookhey emphasised that the situation might have been different had Eraring remained under public ownership, suggesting that privatisation has led to the current necessity of such agreements. 

“Had Eraring remained in public ownership, an agreement like this would not have been necessary,” Mookhey said. 

“But the previous government’s decision to privatise the Eraring power station means entering into agreements like this in order to make sure the lights stay on as we speed up the clean energy transition. It’s more proof that privatisation doesn’t work.” 

Accelerating Renewable Energy Projects 

The NSW government has reiterated its commitment to accelerating the development of renewable energy projects. 

The extension of Eraring’s operations is intended to temporarily bridge the gap until new renewable capacity and storage solutions are fully operational. 

Long-Term Energy Strategy 

The state’s long-term energy strategy focuses on transitioning to a more sustainable and reliable energy mix. 

This includes significant investments in renewable energy zones, grid enhancements, and energy storage solutions. 

The government aims to ensure a smooth transition without compromising consumer energy reliability or affordability. 

Conclusion 

The NSW government’s decision to keep Eraring Power Station operational until at least 2027, with a possible extension to 2029, is a strategic attempt to improve energy reliability and price stability during the transition to renewable energy. 

While the agreement provides critical short-term stability, it also highlights the challenges and complexities of transitioning from fossil fuels to renewable energy sources. 

As NSW navigates this transition, the government’s approach underscores the importance of balancing immediate energy needs with long-term sustainability goals. 

The Eraring agreement is vital to this strategy, reflecting the complex decisions required to manage the evolving energy landscape effectively. 

Learn more about Eraring Power Station’s schedule and other energy-related news from Leading Edge Energy

The news about Eraring’s extended lifespan may be received differently by the various stakeholders – some may be frustrated over the increased emissions whilst others who have concerns over the reliability of the grid we’re transitioning to may find this to be an agreeable path.  

Leading Edge Energy, as energy management consultants, will continue to report developments in the Eraring situation and any important progress on Australia’s transition to renewable energy to ensure that our clients and energy users are always informed about what’s happening in the NEM. Follow along in our Blogs & News and Monthly Electricity Review sections to stay current.