The New South Wales (NSW) government has committed to pay Origin Energy up to $450 million to keep Eraring power station operating until August 2027, with the option for the 2,880 MW coal-fired plant to remain open until mid-2029.
Origin said it now expects to close Eraring on 19 August 2027, noting that the permanent closure will be managed in line with its obligations under the National Energy Market and “must occur before April 2029.”
NSW Energy Minister Penny Sharpe said the “temporary and targeted agreement” will provide financial support only if it’s needed, and only for as long as needed.
Under the agreement, the government and Origin have agreed to an underwriting arrangement that requires the company to decide by 31 March in 2025 and 2026 whether it wishes to opt in to the underwriting arrangement for the following financial year and to share up to $40 million per year of any profits it earns from Eraring, if it does opt in.
The agreement also stipulates that Origin can claim no more than 80% of losses Eraring makes from its operations from the state government, capped at $225 million each year.
Sharpe said the temporary extension of Eraring will provide time to deliver the renewable energy, storage and network infrastructure projects required to replace the “orderly exit of coal-fired power.”
“NSW is stepping up the transition to cheap, clean, reliable renewable energy. But to keep the lights on and prices down, we need to make sure new renewable infrastructure and storage capacity is online before coal-fired generators reach the end of their life,” she said.
“This is a proactive and sensible step to ensure a plan is in place, if needed, to avoid electricity outages and rising power prices.”
Renewable energy pundits have responded to the announcement by hauling the decision over the coals, describing it as a backward step that undermines the state government’s 50% by 2030 emissions reduction target.
Climate Council Head of Policy and Advocacy Jennifer Rayner said the latest analysis from the Australian Energy Market Operator shows solar, wind and storage projects in the pipeline can more than meet the electricity needs of every home and business in NSW.
“Keeping the coal fires burning at Eraring sends the wrong message when urgent action is needed to fight the climate crisis,” she said. “Governments must now throw everything at accelerating the shift to renewable energy sources like wind and solar. This will create new clean energy jobs, help lower power bills and, most importantly, tackle the climate crisis.”
Former NSW energy minister Matt Keen was also critical of the decision, saying “it’s setting a terrible precedent that will see the coal industry stretch out its decline on the public dollar so it can squeeze out and delay cheaper renewables.”
Marilyne Crestias, interim CEO at the Clean Energy Investor Group (CEIG) said the announcement will have far-reaching implications for investor sentiment, renewable energy targets and climate commitments.
Crestias said the decision raises significant concerns for investors, risks deterring capital from being invested in the NSW and risks making the state much less attractive as a clean energy investment destination.
“This decision will impact investor confidence in the renewable energy sector and hinder our progress towards a sustainable future,” she said.
Energy analytics company Nexa Advisory Principal Stehanie Bashir said rather than focusing its efforts on extending an old, unreliable coal-fired power station, the state government should be focusing on practical solutions which remain untapped and can help address forecasted reliability gaps.
“The NSW government should be accelerating demand response measures, leveraging the potential 1.1 GW of demand-side management from commercial and industrial consumers, as well as residential consumer energy uptake,” she said.
“These practical solutions are not only actionable before 2025, but also provide NSW with additional insurance against extreme weather and electricity reliability events which will become more common whether Eraring is extended or not.
As part of the agreement, Origin must ensure Eraring attempts to generate at least 6 TWh each year, the equivalent to the typical annual output of two of Eraring’s four generating units.
It must also substantially maintain Eraring’s existing workforce of approximately 220 people, commit to a maintenance plan and adhere to its licence conditions, which includes environmental protections.
The agreement is now be tabled in Parliament.
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