Delaying the closure of Origin Energy’s Eraring coal power plant would be “unconscionable,” given that a new report from the Climate Energy Finance (CEF) finds that it would cost up to $150 million per year in taxpayer funds.
The 2.88-gigawatt power plant is the biggest in the country and is slated for closure in August 2025. The NSW (New South Wales) government is worried that if the plant closes, the state will be at risk of blackouts and energy price hikes.
The report compiled by CEF found that there will be no reliability gap once the plant closes and that keeping it open is simply not the right thing to do, given the “massive handouts and windfalls” enjoyed by the owners.
The report’s modelling calculated that the $150 million per year price tag to keep it open beyond 2025 will equate to more than six times what NSW has spent in the past four years electrifying and solarising social housing.
CEF director Tim Buckley argues that with enough firmed renewables coming online by the summer of 2025/26, there is scope to allow the plant to close on the current timeline.
He said the state could opt for a phased approach, shutting two out of the four units slightly earlier in March 2025.
This would allow for keeping the last two units open until August 2026 at the latest, which would be more fiscally acceptable.
That would allow funds to be directed towards speeding up the deployment of distributed energy resources such as rooftop solar and batteries, virtual power plants, and supporting commercial and industrial (C&I) renewables.
Eraring – a taxpayer burden
Eraring has already been costly for NSW taxpayers. The government paid AGL $75 million to take the power plant off its hands in 2013.
Taxpayers have also been subsidising the price of coal it has using since December 2022.
Climate Energy Finance estimated that the benefit for Origin has been around $468 million to date.
The subsidy, a response to the price spike in early 2022 caused by the war in Ukraine, caps the price generators pay for coal at $125 a tonne, with the government funding the excess.
That subsidy is set to end on June 30 this year.
The complicated problem facing Origin Energy and the NSW government is one of money.
The capital cost of keeping all four Eraring units open to Origin is estimated to be $200 million a year. Also, if Eraring does announce an extension, wholesale energy prices in NSW are likely to dip
Renewables could solve any shortfall problems
NSW’s renewables asset base suggests that it will be able to cope with the shortfall resulting from Eraring’s retirement.
The Australian Energy Market Operator (AEMO) suggests renewables will be able to fill the 2.88 GW gap left by Eraring by the summer of 2025/26.
Some 4.354 GW of renewables and battery energy storage systems (BESS) are due to come online by the end of 2025.
AEMO has announced that tenders have been awarded for just over 2.5 gigawatts (GW) of battery energy storage system (BESS) firming capacity in NSW, with plans for these to be operational by the end of 2025. Additionally, another 1.3 GW is currently in progress after being secured in December of last year.
However, this development raises concerns for NSW energy minister Penny Sharpe, who must rely on most of these proposals to successfully navigate the state’s congested planning process, which typically spans between three and ten years, whilst being completed on schedule.
Despite these challenges, the Climate Energy Finance report remains optimistic, stating that there is ample new firmed renewables capacity to substitute for Eraring’s annual generation of 12 terawatt-hours (TWh) and compensate for the 7 TWh from Vales Point, slated for closure in 2029.
Moreover, if NSW were to adopt a more proactive approach towards distributed energy resources (DERs), it could further mitigate any risks associated with the shutdown of Eraring.
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