Origin Energy says discussions are ongoing with the New South Wales government over the timing of the closure of its Eraring coal-fired power plant, amid delays to the state and national transition to renewable energy.
Origin CEO Frank Calabria said on Wednesday that the gentailer did not “shy away” from the need to exit coal generation as soon as possible, once enough firmed renewables were built to replace it.
Last year, the utility surprised the market by bringing forward the planned closure of Eraring to 2025 – seven years earlier than planned. Calabria has said this date remains in place, but has also repeatedly stressed that the final decision would depend on the state of the market.
Speaking at the company’s Annual General meeting this week, Calabria said Origin is “in discussions” with NSW Labor over where it lands on this decision.
“This process followed the release of the government commissioned Electricity Supply and Reliability Check Up, which recommended the state government engage with Origin to delay the closure of Eraring to support reliability of energy supply,” he said.
“We do not shy away from the need to exit all coal-fired power generation as soon as renewable energy, storage and firming generation can replace it, as we have committed to in our climate and emissions targets.”
The fate of the 2,800MW Eraring plant – the biggest remaining coal generator in the country – has been a topic of hot debate, particularly given the delays and problems in the Snowy 2.0 pumped hydro project and other large scale renewable projects.
There has been growing speculation that Origin may decide, or be asked (or told, and paid) to keep at least a couple of the plant’s four 720MW units open for at least another summer to ease supply and price pressures on the market.
Earlier, chair Scott Perkins told the AGM that the green energy transition was not happening fast enough.
“The delay to delivering new, cleaner energy infrastructure … is causing governments to carefully assess the timing of coal-fired power stations exiting the market, including Origin’s Eraring Power Station, as they seek to ensure reliable supply to customers under all scenarios,” he said.
“Inflation, challenges in the construction contracting market and supply chain issues are all contributing to the delays and increasing project costs. Costs that will ultimately be borne by customers, at a time when they have already been managing higher energy costs amid broader cost of living pressures.”
The Australian Energy Market Operator has said that if government tenders for nearly a gigawatt of “firm power” and other renewable and storage projects are delivered on time, then there should be no breach of the country’s tight reliability standards.
But NSW Labor has refused to rule out a delay to Eraring’s closure while the renewables market plays catch up.
“We inherited a renewable energy roadmap that was off course,” Premier Chris Minns said last month of the previous Coalition government’s plan to build 12GW of new renewables and 2GW of long duration storage by 2030.
To do this it has announced a $1.8 billion “boost” the capacity and reliability of the grid over the short term, including through investment in community batteries and virtual power plants. But amid the clamour of “cost of living” pressures, it is also not ruling out delaying the exit of coal.
“Managing reliability, affordability and community acceptance, are all crucial if we are to maintain continued public support for the transition,” said Perkins on Wednesday.
“Notwithstanding these near-term challenges, Origin remains firm in our belief that in the long-term, the energy transition will be good for customers, good for our business and good for the planet.”
For Origin’s part in doing what’s is “good for the planet,” Calabria says it is continuing its own efforts to build out new renewable energy and firming capacity, including the the first 460MW/920MWh stage of a giant battery at Eraring.
Calabria says progress also continues to be made on the Hunter Valley Hydrogen Hub which, pending a final investment decision, is targeting first hydrogen production from 2026.
Origin itself has been criticised for not doing enough to fill the gap caused by the anticipated closure of Eraring, and has promised to build just 4GW of new renewables and storage capacity this decade.
Global funds management giant Brookfield, which is part of an $18.7 billion consortium bid for Origin and wants to take over its utility business, has flagged 12GW of renewable and storage investment over the next decade.
That commitment, and its impact on reduced prices and emissions, was enough to win approval from the competition regulator last week, despite concerns that it could actually deliver the promised capacity in that time-frame, and the potential competition issues arising from its part ownership of the AusNet network company.
Meanwhile, fossil fuels remain a major part of Origin’s business, with Calabria reasserting the view that gas-fired generation will play “an important role in ensuring reliable power supply under all scenarios” of the grid’s decarbonisation journey.
“As more renewables enter the market, Origin’s view is new gas-fired generation will be required, and a functioning capacity mechanism that includes gas will be important to encouraging the necessary investment in this new firming capacity,” he said.
“The delivery of reliable energy through the energy transition is a critical focus. We are positioned well with the strong gas production and record cash distribution from Australia Pacific LNG. The coal stockpile has also been restored and supply stabilised.”
