Origin Energy has given more hints that Australia’s biggest coal fired power station will run beyond its current closure date of August, 2027, saying there are “lots of scenarios” where this will be required.
The 2.88 GW Eraring coal plant in the central coast of NSW was to due to close in August, 2025, under an accelerated timetable first announced in 2022.
But the lack of sufficient new wind and solar capacity, and fears of a potential supply shortfall, or even just significant price spikes, led to a NSW government offer to underwrite an extension to August, 2027, with April 2029 written down as a “hard stop”.
There is now growing speculation that Origin will delay that August, 2027, closure date – again because of the lack of new wind and solar capacity and delays and the rising costs in transmission projects.
Origin says the August, 2027, date remains its “base case”, but it is clearly in ongoing talks with state government, and presumably the Australian Energy Market Operator, and its options are open.
“We haven’t shifted off our base scenario,” CEO Frank Calabria said at the AFR climate and energy summit in Sydney on Tuesday, according to a transcript provided by the company.
“But for all the reasons you and everyone asks me every time I talk publicly, and even within our organisation, we can see lots of scenarios that would have it running longer, and it’s up to us to make a good decision.
“And we’ll do that with the customers and people of New South Wales in mind. And I think we’ve done that responsibly to date, and I think people should have the confidence we’ll do that again.”
Origin has not yet accessed the up to $450 million offered as an underwriting deal by the state government to keep Eraring open, presumably because it makes enough money in the open market.
The question for Origin going forward will be the state of wholesale electricity prices, and the cost of investment needed to keep the ageing plant open, including finding solutions for its coal ash issues.
It is also critical for everyone else in the market, who need to make their own forecasts and financial modelling, and the ongoing operation of the biggest coal generator will, of course, have an impact. Recent trading in the futures market indicates that a 2027 closure is not being priced in by traders.
Origin will likely have to make a decision on Eraring in the first half of 2026. One of the factors will be the pace of new projects, but Origin itself has not brought any new wind or solar project into production since it first flagged the early closure of Eraring, and will unlikely do so before 2027.
Its most advanced new project is the 1.46 gigawatt Yanco Delta wind project in the south-west of the state, which would be the country’s biggest if built now. It has grid access rights, but is still finalising approvals, and Origin will not make a final investment decision on that before mid 2026.
The problem facing Origin is that wind costs have doubled since it signed a landmark deal for Stockyard Hill in Victoria, which until recently was the biggest wind farm in the state.
That Stockyard Hill contract was pitched at around $55/MWh, but wind contracts need to be double that amount now because of the increased price of turbines, balance of plant and civil construction costs.
“We’ve got a wonderful wind project in Yanco Delta,” Calabria said.
“It’s on flat land in the Hay plain. We know we’re at the low end of the cost curve of wind, but wind costs have gone up a lot.
“And we’ll find a way, but we’ll work hard, we’ll work diligently, but, but I think people need to understand that, that they’ve got challenges.
“We’ve got challenges associated with the cost of developing that (Yanco Delta) as well, but we know we’re at the low end of that cost curve, and we know more wind is going to be needed in the system.”
Origin also has an interest in the Navigator offshore wind project in Victoria. But Calabria is less enthused. “At the moment, that (offshore wind) would need to be a very conscious decision by governments, because offshore wind is way more expensive to build, and therefore that would need support.”
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