Australia’s biggest coal plant can close in 2025 and lights won’t go out. Here’s how

A relentless campaign is underway to put political pressure on the NSW government – in particular on NSW Minister for Climate Change and Energy Penny Sharpe – to delay the planned August 2025 closure of Australia’s biggest coal power station, Eraring.

The fossil fuel lobby and certain parts of the media are agitating for an extension under the pretext that closure must be pushed back to ensure supply and “keep the lights on.”

This is a massive furphy and a bad idea.

Delay would put power affordability, reliability and security at risk. It would undermine both the NSW government’s climate policy, and the federal government’s 82% by 2030 renewable energy target and its legislated 43% emissions reduction target.

This is something we can ill afford, as we witness a dramatic global escalation in the climate crisis. And it would cost the people of NSW hundreds of millions of dollars in public subsidies – at least $200-$400m per annum – to Eraring’s owner, currently Origin Energy but – subject to approvals – Canada’s Brookfield.

Our new analysis, published this week, shows that NSW can ensure on-time coal plant closures and put downward pressure on power prices by centering policy action and capital allocation on two key outcomes:

1. Incentivising continued installation at the current run-rate of 1.2 gigawatts (GW) pa of rooftop solar; and
2. Front-end loading at least 1.2GW annually of utility scale wind and solar to 2030.

We model that this would replace the electricity generation capacity equivalent of 2.88GW at Eraring and 1.32GW at Vales Point, earmarked for 2028/29 closure (at that time, Vales will be an entirely end-of-life 50-51 years of age, despite recent commentary from its owners about a possible life extension).

Key considerations for the speed of transition to utility scale firmed renewables is the ballooning investment pipeline and availability of capital.

Our analysis shows that there are more than enough proposed renewable energy projects in the pipeline, and that investment capital is zero problem, assuming the grid connection, minimum price and volume offtake agreements and approvals processes can be expedited to incentivise both early final investment decisions (FIDs) by investors and timely construction.

Renewable and battery deployments need to be accelerated within state near term, to circumvent interstate grid bottlenecks. Rather than paying Brookfield, the people of NSW would be far better served by allocation of this capital to rapidly upscale these deployments.

Action is also urgently needed on distributed energy resources (DER).

The state should invest in immediately alleviating fossil fuel energy price hyperinflation by accelerating deployment of rooftop solar and ‘electrification of everything’ for rental accommodation and public housing; accelerating the public school solar and storage scheme; and supporting ‘behind the meter’ battery storage in homes and buildings, to create virtual power plants (VPPs), decentralised networks of power generation and storage.

Our report urges the NSW government to accelerate the transition by taking the following steps:

1. 1. Adopt a formal NSW target of at least 70% RE by 2030 (including rooftop solar), which is moving toward alignment with the Federal goal of 82% by 2030.
   2. Urgently establish programs to front-end load financing and approvals for both 1.2GW pa of utility-scale and 1.2GW pa of distributed energy resources (DER). NSW has 18GW of wind and 10GW of solar project proposals, plenty to choose from.
   3. Take up the Federal government’s program to support energy upgrades to 60,000 social housing homes nationally with matched funding from the $1bn NSW Energy Security Corporation and deploy that in NSW to alleviate energy poverty and get the DER buildout done at speed and scale.
   4. Accelerate the rooftop solar and batteries program rollout across 21,700 buildings in 2,200 public schools.
   5. Move the Federal Government to lift the Small-scale Renewable Energy Scheme (SRES) cap from 100kW to 1,000kW drive a tenfold lift in commercial and industrial (C&I) deployments. DER can deliver half of the new generation capacity needed at speed and scale, with no grid delays.
   6. Accelerate the frequency and/or lift the ambition of the NSW Renewable Energy Zone (REZ) tenders, as has been recently done with the joint federal / state Capacity Investment Scheme (CIS) announcement, and accelerate long term energy service agreements (LTESA) tenders, providing revenue certainty for private investment in new renewables.
   7. Flood the market with an underwritten low cost $25-35/ megawatt hour (MWh) floor price (with minimum volume offtakes) via tenders for a number of new utility solar projects across state – not just REZs – over the next 12-24 months, de-risking these projects for investors; and expedite approvals so that they can be progressively brought online within 2-3 years. Worst case? NSW has to fund wholesale electricity at $25-35/MWh, powering up all the new batteries and dropping average prices across the board. A win-win for consumers, industry and decarbonisation.
   8. Direct Transgrid and Essential Energy to use Neara technology or similar to reassess their grid transmission and distribution (T&D) capacity constraints, in light of the lesson from PowerLink in Queensland that 10 gigawatts (GW) of new RE can be added even before major grid transmission projects are completed; and put this process in the hands of experts who are not all the Australian Energy Market Operator (AEMO) engineers. The excessive reliability focus comes at a massive cost to NSW energy users in terms of new low cost generation delay.

NSW has led Australia on the development of its REZ roadmap, but we know grid transmission, like pumped hydro storage, is slow to get community buy-in and even slower to then built.

Meanwhile, the existing grid has plenty of spare capacity to accommodate within-state distributed rooftop solar and behind-the-meter storage in homes and businesses, as well as infill utility-scale wind and solar located strategically across NSW.

We call on energy minister Penny Sharpe to take the action detailed in our report and flood the market with renewables firmed by accelerated deployment of batteries to drive capacity.

This will ensure reliable supply and reduce wholesale electricity prices, putting permanent downward pressure on energy bills while also better aligning our decarbonisation pathway with the climate science.

With ambition and the right accelerated policy levers, on-time closure of coal power in NSW  – including Eraring in 2025 – is entirely doable.

It will also bring enormous opportunities and benefits of locking in permanently lower power prices longer term, decarbonisation of industry, new jobs, and overdue action on the great existential challenge of climate change.

Tim Buckley is director of Climate Energy Finance