Origin to close first unit of Australia’s biggest coal generator in 2030

Origin Energy has quietly informed the Australian Energy Market Operator that the first units of its 2,800MW Eraring coal generator in NSW – the biggest in the country – will close in 2030.

The revelation comes in the latest data published by AEMO’s “Generator expected closure year” document  – a spreadsheet input into its annual energy supply forecasts – and follows new advice from Origin to AEMO made on May 4.

It does not represent an early closure of Eraring – which Origin has said repeatedly will close by 2032 – but indicates it will not switch off all its capacity at one time, and will instead manage a staged exit over a couple of years.

The new advice to AEMO says its number 4 unit will close in 2030, and its number 1 unit in 2031. The other two units will shut, as intended, in 2032.

This, of course, does not rule out the possibility that Origin will fast forward the closures to an earlier year, particularly given the rapid changes in the electricity market, including the huge uptake of rooftop solar which is expected to grow 4GW in 2020, with NSW being the strongest market.

“(There is) no change to plans to exit coal-fired fired generation by 2032,” an Origin spokesperson told RenewEconomy in an email statement.

“In practice, given the scale of Eraring which meets around a quarter of NSW’s power needs, its exit from the market was always going to be carefully managed to support reliability of supply.

“Our recent update to AEMO reflects this approach, with the four units likely to be progressively closed leading up to final closure by 2032, and taking into consideration factors including the timing of major maintenance overhauls.”

Origin has already advised that it will be ramping output from its Eraring units up and down in response to the pricing impacts of rooftop solar, and the growing amounts of large scale solar and wind, particularly in the middle of the day.

Any decision on an early closure will likely depend on what new market signals are included in the rewrite of market rules that will be unveiled by regulators and rule-makers in the next month or so. These could include some form of “capacity” payments to coal generators.

Energy Security Board chair Kerry Schott last week warned that coal generators were going broke.

“The coal generators are going broke. So those of you who are worried about coal retiring, please don’t. It’s happening, and it’s happening for commercial reasons,” Schott said.

Analysis from IEEFA and Green Energy Markets has noted that the “tidal wave” of wind and solar will force early coal closures. That analysis predicted the output from Eraring could fall by more than 40 per cent by 2025.

AGL is closing Liddell by 2023 and has flagged the possible moth-balling of units at other plants, while Stanwell CEO Richard van Breda also warned of moth-balling some coal units in Queensland, but then resigned a few days later before his state government owner contradicted him.

EnergyAustralia has brought forward the closure of the Yallourn brown coal generator to 2028, from 2032, under a deal with the Victoria state government, while Vales Point in NSW is due to close in 2029 but is also subject to speculation it may close earlier.

In February, when announcing a sharp slump in interim earnings due to the price falls in the electricity market, Origin CEO Frank Calabria warned of a potentially messy exit from coal generation.