Closure of Eraring power station put off for two years

Environmental groups have slammed the announcement that the retirement of the Eraring power station is to be delayed by two years until 2027.

Origin Energy Limited and the NSW Government have reached an agreement on extending the operations of the power station, originally planned to be retired in 2025, to support security of the state’s electricity supply through the energy transition to renewables.

The power station will now cease operations on August 19, 2027, and Origin has submitted a revised notice for closure to the Australian Energy Market Operator (AEMO).

Under the terms of the Generator Engagement Project Agreement (GEPA), Origin may receive compensation from the state to help cover the cost of its operations and will endeavour to generate at least 6 TWh of electricity during each of the extension periods of FY2026 and FY2027.

To be eligible to receive compensation, Origin must advise the state by March whether it will trigger the GEPA for the coming financial year.

If the GEPA is triggered, Origin may recover a portion of Eraring losses calculated for that financial year using an agreed formula that takes into consideration the extent to which the plant’s operating and capital costs exceed an agreed revenue profile, capped at $225Mpa.

In the event Eraring operations are profitable during that period, Origin will pay the NSW Government 20 per cent of Eraring’s agreed profit, capped at $40Mpa.

Origin retains the right to determine the final timeline for retirement of all four units of Eraring Power Station but no state compensation will be payable after FY2027, and the plant must retire in full no later than April 2029.

Origin CEO Frank Calabria said the agreement struck the right balance, with an extension to operations enabling Eraring to continue supporting security of electricity supply in NSW through the energy transition, while making compensation available to Origin in the event economic conditions for the plant are challenging.

“This agreement supports Eraring to continue to play an important role in maintaining reliable power for businesses and households through a period in which there remains considerable uncertainty about the volume and timing of new renewables, transmission and firming infrastructure coming online,” he said.

“Importantly, today we can give our Eraring employees, our suppliers and the local community greater certainty around the future of the plant as we transition towards its retirement.

He said Origin did not shy away from the need to exit coal generation as soon as there was sufficient renewable energy, firming and transmission capacity available.

“We will continue to work with all employees to support them in their career journeys as we progress towards an orderly transition for Eraring’s retirement,” he said.

Origin will continue to provide Eraring employees with a generous transition support package through to the plant’s closure, including career transition support, re-skilling, and re-deployment into new roles, where possible.

The $5M Eraring Community Fund, which was established to support activities that benefit communities affected by the future closure of the plant, will continue with its activities, prioritising projects that are sustainable and deliver an enduring community benefit.

Eraring, a 2880 MW black coal plant on the shores of Lake Macquarie, became fully operational in 1984.

Origin has committed to construction of a large-scale battery at Eraring.

The first phase of the project consists of a 460 MW two-hour battery located adjacent the power station, with an operational target date late in the 2025 calendar year.

The Climate Council has labelled the decision as “a failure of climate leadership”.

Greens NSW MP and spokesperson for Energy and Treasury Abigail Boyd said it was a sign that the NSW Government was dragging its feet on the energy transition.

“The NSW Labor Government is gifting potentially hundreds of millions of dollars to the mega profitable Origin energy, which recently announced $747M in net profits in just the past six months,” she said.

“Labor’s Electricity Supply and Reliability Check Up report from last year, and the recent AEMO report into reliability, did not recommend extending Eraring.

“They said there could be potential reliability gaps if there is not a step change in ambitions, in investment and in the pace of transmission and generation roll out.

“We have two paths ahead of us – either we choose to keep pandering to the fossil fuel industry by keeping coal-fired power stations open longer than they need to be, or we urgently invest in publicly-owned renewables.”