Eraring gets a lifeline

Coal-fired power station may win four-year extension

Australia’s biggest coal power station may stay open for four more years, with the NSW government working on the safety-net solution to head off the threat of blackouts hitting the state’s electricity users.

The state’s Labor government and Origin have been locked in talks over the future of the Eraring coal power station for months, after an independent expert urged an extension.

While it is understood an agreement remains unconfirmed, the extension would be for two years, with Origin having the option to extend it for another two years.

Minister for Climate Change and Energy, Penny Sharpe, did not comment on the timescale of the extension, but confirmed no deal had yet been reached.

“The NSW government is engaging with Origin on its plans for Eraring power station and will not comment while the process is ongoing,” said Ms Sharpe.

An Origin spokeswoman declined to comment on details of the negotiations, but pointed to comments in the company’s quarterly report published on Tuesday.

“We remain in discussion with the NSW government on the closure date for Eraring,” the company said.

While sources stressed a deal could yet collapse, there has been widespread acceptance that a deal would be done – though talks have dragged on for months – amid dire warnings should Eraring shutter as scheduled from 2025.

The Australian Energy Markets Operator last year warned that NSW risked unreliable electricity supplies from 2025. Market executives have also warned that allowing the closure then of the state’s largest source of electricity – typically producing about a quarter of NSW’s electricity – would raise prices for households and businesses, already buckling under higher interest rates and inflation.

But opponents to extending Eraring said NSW could have adequately replaced the lost generation, and the closure would have been a signal for would-be renewable energy developers to rapidly accelerate work.

Environmental voters are unlikely to welcome taxpayers underwriting Eraring, though the full details of a risk-sharing mechanism may not be released. Such a deal has been used by Victoria in the past, as the state Labor government struck deals with AGL Energy and EnergyAustralia to keep the state’s two largest coal power stations open.

EnergyAustralia’s Yallourn will close in 2028, while AGL’s Loy Yang A will shutter in 2035 – giving the state enough time to bring online sufficient quantities of renewable energy. The terms of both deals remain secret, but they are a guiding principle for any extension of Eraring’s life

Eraring has lost money in recent years. A rapid rise in rooftop solar has seen wholesale prices plunge to zero.