Australia’s biggest coal generator may be phased out, unit by unit, rather than a hard exit

Origin Energy has flagged that the closure of Eraring, the country’s biggest coal generator, could be done in stages rather than a hard stop, as the market operator raises more concerns about the impact of an exit without sufficient capacity to provide critical system services.

In an interview with Renew Economy’s Energy Insiders podcast, Origin Energy CEO Frank Calabria repeated his latest line that a planned closure in August, 2027, remains the “base case”, but that there are “lots of scenarios out there.”

Eraring was to close in August, 2025, but was extended after a deal with the NSW government, which included an underwriting agreement until August, 2027 – now its official closure date with the Australian Energy Market Operator – and full closure by April, 2029.

There is now widespread speculation that Eraring could continue operating after 2027, given the lack of replacement wind and solar capacity, and now the latest warnings from AEMO about the need for more capacity to provide critical system services such as system strength.

Calabria was asked if the closure of Eraring could occur over time, unit by unit, or if some could just be mothballed. The facility features four 720 MW units.

“There’ll be a closure, and the question will be – will it be units by time, versus all at once,” Calabria said.

“I would expect, because you’ve got this ability … (it) could be that you’re staging stuff, but that will come down to how the market evolves.

“That’s a likely, I think that’s, that’s a reasonable assumption, not a definitive one, but a reasonable assumption.”

Would that be in the lead-up to 2027 or after 2027?

“Look at the moment … we’ve given notice on all in 2027 and that’s the base case. It’s premature to think about anything else at the moment,” Calabria said.

Earlier in the interview, he said: “There’s just a lot … coming into the system, and getting the exact timing of that from a reliability and security point of view is is certainly not straightforward.”

Calabria’s comments were made on Friday, before the release by AEMO on Monday of its Transition Plan for System Security report, which flags concerns about the state of system security in all states, apart from South Australia, which ironically is the country’s most advanced renewable grid with a 75 per cent share of renewables.

AEMO is concerned about system strength. It does not yet agree with battery technology providers that grid forming inverters can provide all the system strength services traditionally provided by coal and gas, and its favoured technology, synchronous condensers, are hard to obtain, and expensive to boot.

It has warned of having to intervene in the NSW market to guarantee system security, and in its latest report even flagged potential load shedding in some extreme circumstances.

It has even flagged scenarios where there could be no coal power in NSW, at times as early as 2031, because of retirements, planned maintenance and outages.

Clearly, though, these talks have been ongoing and are playing loud in the minds of the state government, and Origin. NSW energy minister Penny Sharpe awarded herself new powers to allow Transgrid – before final regulatory approvals – to put in an early bid for a 10-piece set of syncons to try and guarantee their early arrival.

Origin has been criticised – including by this publication and on the Energy Insiders podcast – for its lack of investment in wind and solar since it first announced the planned early closure of Eraring in 2022.

It has yet to build or even contract a single new wind turbine or large-scale solar facility, although it is working on the country’s biggest wind project, the 1.5 gigawatt (GW) Yanco Delta, and is currently holding a tender for turbine suppliers and balance of plant.

It has also spent a lot of money on new big battery projects, including the country’s biggest at Eraring.

“I don’t accept those comments in the sense that you think it’s a strike of buyers by us. I mean, you’re right, in the early days, there were lots of PPAs (power purchase agreements) written under the Renewable Energy Target scheme, and there were very clear obligations on retailers.

“And there’s clearly been several attempts at reform, and therefore an understanding, as the expiry of that scheme comes in, and we’re currently under the mechanisms of the LTESA and the CIS, and a lot of people are actively bidding into the CIS, the capacity investment scheme.

“And we also, not to put a fine point on it, but just we also were in the midst of a takeover bid [from Brookfield], which … for an 18 month period, [did] not make that straightforward.

“We made a commitment several years ago, about four to five gigawatts, and that is several years ago, by 2030 and we’re on track to achieve that. We’ve committed 1.7 gigawatts of storage, and we’re in construction on that, and writing off-take contracts, writing PPAs for (battery storage).”

Calabria says a lot of solar has been built, and some solar-battery hybrids are also coming through, but Origin’s big focus is on wind, as well as battery storage.

“In terms of writing those PPAs, they have to be also at attractive prices, as we manage that cost of energy, and that’s actually been challenging.

“If you really wanted to really point to it, we feel we’ve got the most economic wind project in the market, but the costs of constructing those and the PPA prices people want for those is actually quite, quite expensive right now in the system, and that’s actually probably been a more recent phenomena.”

And Calabria notes this has been a wider issue than Origin. In fact, no new wind projects have reached financial close so far in 2025, although a couple in South Australia are poised to do so.

“I think if you had a look at where our priorities have been in terms of allocating and what’s happened in the market, and also the transmission build-out [and] the emergence of REZs, there’s a lot of developers that have got assets for sale.

“They don’t know whether they’re going to get them developed today. I think in terms of making sure we are managing the risk, the timing of transition, the emergence of REZ zones, we had to make a bet, and we therefore put ourselves in control of that by the biggest wind farm site.

“Now, there were definitely things that probably through the takeover bid meant that we weren’t making big bets on large acquisitions at that point in time. But in terms of priority, I think we’ve got that about right.

“Everyone has got to actually be investing. But I’m not seeing renewables developers investing much either. So I think it’s actually become way more challenging.

“There’s just a lot going on coming into the system, and getting the exact timing of that from a reliability and security point of view is is certainly not straightforward,” Calabria says.

You can hear the full interview with Frank Calabria, including his views on the transition in retail, the emergence of VPPs, home batteries, the proposed “free solar” offer and the growth of EVs in the Energy Insiders podcast. It will be published later on Monday.

See: Energy Insiders Podcast: Origin CEO Frank Calabria’s big energy vision

See also: “We have the best site:” Contracts for Australia’s biggest wind project put out to tender

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