The NSW government says it will begin negotiations over the future of the country’s biggest coal generator, Eraring, with its owner Origin Energy, but has taken major steps to streamline planning processes and opening up the state’s distributed network in a bid to fast track new wind and solar.
The announcement was made along with the release of the so-called “health check” of the state’s grid by industry consultant Cameron O’Reilly. It made 54 recommendations, and the government has accepted 44 of them in full, and three in part, including that talks be held with Origin to extend the closure of Eraring beyond 2025.
However, NSW has also committed to get the energy infrastructure roadmap on track to try and ensure that enough capacity is in the grid to accommodate the closure of Eraring and the state’s remaining three coal generators – Vales Point, Bayswater and Mt Piper.
It will streamline renewables approvals in the planning system – which as RenewEconomy reported several months ago have approved just two large scale projects in recent years, and no new wind farms since 2021.
It will also unlock opportunities to connect new renewables to the existing grid outside Renewable Energy Zones, and new transmission.
This is a significant move as it recognises the delays and consumer opposition to new REZs and big transmission lines, and the huge opportunities to connect gigawatts of new wind and solar in existing distributed networks.
The initiatives will address two of the key frustrations of the renewables industry – planning and grid access – and comes after the urging by the heads of the state’s distributed networks, including John Cleland, from Essential Energy, which covers 95 per cent of the state.
See our story: “Cheaper and quicker”; Distributed networks put case to host wind and solar
The state government says it will also focus on supporting households solar and storage through a new Consumer Energy Strategy.
And it will create an “Energy Security Target Monitor” will actively scrutinise the plans of NSW’s remaining private coal-fired power stations as they approach retirement to ensure ongoing reliability at the lowest cost.
The big issue, however, is the closure date of Eraring, currently scheduled for August, 2025, and whether the planned renewables and storage scheduled to be built by that date will, in fact, be built.
The NSW government has not set a preferred closure date, and is in no position to do so, but says it will enter talks with Origin about its plans, which – to be clear – are not actually locked in.
Any extension – even for a couple of units for another two summers, as some suggest – will likely cost significant amounts of money, and up to $400 million a year on some estimates, although former energy minister Matt Kean this week said he had been advised it could cost billions.
The NSW response to the report is nuanced: “A decision by Origin to temporarily extend its timeline for phasing out Eraring could provide NSW with a buffer to manage these risks. However, this is only one solution and the NSW Government has other options to mitigate these risks if required.”
It says it will open talks with Origin to “clarify” its plans for Eraring. The O’Reilly report warns that closing Eraring in August, 2025 risks serious affordability and reliability risks to the state, even though an AEMO assessment says the reliability risks can be managed if current tenders are delivered on time.
The O’Reilly report also says that Eraring remains profitable – although the recent Origin results announcement suggested this is only the result of the newly imposed coal price cap that expires next year.
“The (O’Reilly) Checkout makes it clear that the case for Origin energy to extend its timeframe for phasing out Eraring is there, as does the recent AEMO report into reliability,” energy minister Penny Sharpe told journalists after the release.
“Origin has its own commercial drivers for staying open and New South Wales consumers need to understand what their plans are. We accept the recommendations from Cameron O’Reilly that we will engage with Origin about is future.”
But the move to talk to Origin is as much about electricity prices as it is with reliability. O’Reilly writes – drawing on the experience with Hazlewood and Liddell – that prices can jump after a coal fired power station closure, and this would have a big impact on consumers, and their tolerance for the green energy transition.
It should be noted, as O’Reilly does, that the Hazelwood price jumps arose because only a few months notice of its closure were given. Liddell – signalled seven years in advance – had a smaller impact, but any price rises were more to do with the lack of competition in the market.
Still, NSW Labor has the added complication of a state election looming in early 2027, so a two year extension of at least some units, could ease any pain from soaring electricity bills. But it may cost consumers in other ways.
“The Eraring closure notice provided an important signal to the market about progress towards our nation’s climate goals, and Origin does not shy away from the need to exit coal generation as soon as there is sufficient renewables, firming and transmission capacity available.”
But the NSW government is being strongly urged by renewable and climate advocated to focus on making sure there is enough renewables and storage in place for Eraring to close as currently scheduled, and it appears to have softened its position considerably over the last few months.
“The NSW Government needs to make it easier, not harder, to get more solar and renewables on homes and businesses and in the energy grid, and they need to get cracking.” John Grimes, the CEO of the Smart Energy Council.
Climate groups agreed. “The NSW Government cannot justify keeping Eraring open at taxpayers’ expense,” said Beyond Zero Emission’s Hunter Engagement Lead Sam Mella.
“Instead of investment in fossil fuels, we urgently need investment in distribution upgrades, energy storage, system security and microgrids to deliver low-cost renewable energy, sovereign supply chains and good quality jobs.”
The Master Electricians Australia (MEA) called for a stronger focus on household solar and storage, rather than billion-dollar infrastructure projects such as Snowy 2.0 and the Marinus link.
“The solution is an absolute no-brainer. The best way to prevent successive summers of blackout pain is to leverage the investments so many of us have already made in the clean energy transition by encouraging home energy storage,’’ CEO Malcolm Richards said in a statement.
