How rooftop solar is eating into Australia’s biggest coal generator

“What we are doing is responding to the changing profile throughout the day, when volumes or prices are low,” CEO Frank Calabria told an investor briefing on the company’s annual results, released on Thursday.

“We are now operating Eraring in a far more flexible fashion. We are running them at much lower volumes in the early morning and in the middle of day when solar comes in.”

Origin says Eraring is a flexible plant, unlike the brown coal generators in Victoria and other older black coal generators in NSW and Queensland. It says it can respond to demand swings by flexing from 800MW to 2,880MW in 1.5 hours.

That’s due to the  inherent flexibility of plant, and in the nature of the way it buys coal (no take-or pay contracts) and manages its inventories, Calabria said. But he did warn that while it can handle the changes now, there may come a time when the number of units may need to be reduced.

Indeed, the Australian Energy Market Operator recently noted that Eraring was operating at its minimum production levels more often – up to 12 per cent of the time at three of its four units – due to falling demand. And Eraring, also due to unplanned outages, experienced the biggest fall in output in the last quarter – an average decline of more than 800MW.

See: Covid and rooftop solar take another big bite out of Origin’s electricity business

Origin reported last month that rooftop solar is eating into its overall demand, and on Thursday it revealed how that is impacting on earnings. Origin said gross profits from its electricity business was down 15 per cent, or $203 million, to 1.2 billion.

The fall in margins and new regulation on prices were responsible for the bulk of those falls, but milder weather and lower usage from rooftop solar and efficiency accounted for about $33 million of lost earnings.