Australia’s largest coal plant to close in 2025, as Origin Energy accelerates coal exit

Origin Energy will bring forward the planned closure of the Eraring coal-fired power station to 2025 – seven years earlier than planned – as it accelerates its exit from coal.

During the company’s half-year results update on Thursday, Origin Energy CEO Frank Calabria said that Origin had given notice to the Australian Energy Market Operator that it proposed to close the Eraring power station in August 2025 – ensuring Origin complied with a requirement to provide at least three years notice.

“Origin’s proposed exit from coal-fired generation reflects the continuing, rapid transition of the NEM as we move to cleaner sources of energy,” Calabria said.

“Australia’s energy market today is very different to the one when Eraring was brought online in the early 1980s, and the reality is the economics of coal-fired power stations are being put under increasing, unsustainable pressure by cleaner and lower-cost generation, including solar, wind and batteries.”

With a capacity of 2,880MW, Eraring is Australia’s largest power station and ranks amongst the top 3 power stations in Australia for greenhouse gas emissions.

Calabria said that Origin was progressing plans to repurpose infrastructure at the Eraring site, including the installation of a big battery with a capacity of up to 700MW.

“To enable Origin to support the market’s continued transition to renewables, we intend to utilise the Eraring site beyond any retirement of the coal-fired power station, with plans to install a large-scale battery,” Calabria said.

Responding to the announcement, New South Wales energy minister Matt Kean said the state government would also support an additional 700MW/1,400MWh “Waratah Super Battery” on the state’s Central Coast. The NSW government will also accelerate investments in new transmission network infrastructure to support the development of new Renewable Energy Zones.

Both Kean and the Australian Energy Market Operator stressed that they were confident sufficient capacity will be built to adequately replace the Eraring plant.

The announcement came ahead of Origin’s half-year results, which showed.a further deterioration of profits generated by the Eraring plant. Gross profits from Origin’s electricity business fell to $222 million for the half-year ending December 2021, down from $503 million in the same period ending December 2020.

Calabria telling shareholders that it was clear that the emergence of low-cost renewable energy sources, and cheaper battery storage options, had made keeping ageing coal plants in the market increasingly unviable.

The company told shareholders that it expects more than enough new generation capacity to be constructed over the next few years to adequately replace the Eraring plant.

“Eraring is a high-quality asset, run by a skilled and dedicated team, that has worked tirelessly to supply reliable and affordable energy in NSW for four decades. However, it has become increasingly clear over the last few years that the influx of renewables has changed the nature of demand for baseload power,” Calabria said.

“At the same time, the cost of renewable energy and battery storage is increasingly competitive, and the penetration of renewables is growing and changing the shape of wholesale electricity prices, which means our cost of energy is expected to be more economical through a combination of renewables, storage and Origin’s fleet of peaking power stations.”

Calabria said that Origin would continue to engage and consult with the workforce at the Eraring power station throughout the closure process.

“We acknowledge this news will be challenging for many of our colleagues, suppliers and the local community. This is only the start of the process, and we commit to consulting with our people and supporting them, through any potential closure,” Calabria said.

Origin has previously flagged the potential early closure of the Eraring plant, as it weighed up the increasing costs of keeping the ageing plant operational while also being squeezed out of the market by lower cost renewables.

In May last year, Origin said it would begin the process of closing the Eraring power station in 2030, with the plant to be fully decommissioned by 2032.

Origin warned that the profitability of the coal plant was being eroded by the emergence of higher levels of solar generation during the day, and the inflexibility of the coal plant to quickly adjust output, meant it was becoming unviable.

Calabria told shareholders at the time that he saw wholesale electricity prices as unsustainable and that the market should be prepared for a “messy” future for coal generators.