NSW cements deal keep Eraring coal power plant open until 2027

NSW taxpayers will fork out a maximum of $450m over two years, under the state government’s new deal to keep the privately-owned Eraring power station open a further two years.

Owners Origin Energy had flagged it would be ceasing operations at the Lake Macquarie station in August 2025, leading to reliability risks in NSW power requirements, and the potential of blackouts across the state.

While the government will pay no upfront fees to ensure it remains open, the “profit-sharing arrangement” will allow Origin to choose to annually opt in to an underwritten agreement which caps its losses at $225m each year, or 80 per cent of it costs needed to operate Eraring.

NSW will also be able to share up to $40m a year on profits Origin makes from its operation of Eraring.

NSW Premier Chris Minns said Eraring’s extension would delivery “certainty for households and businesses”.

“The people of NSW now have certainty that the NSW government has a plan to ensure we have reliable energy while we transition the workforce and the economy to net zero,” he said.

“The best way to undermine the renewable energy transition is to have the lights go out in 2025. I’m not letting that happen.”

NSW Treasurer Daniel Mookhey defended the deal.

“The reason why we insisted on a profit share arrangement is to ensure that Origin doesn’t think this is an easy ride,” he said.

“This is a finely calibrated risk sharing arrangement.

“It’s not an act of corporate welfare on the part of the government, but nor is it an act of charity on the part of Origin Energy.”

He also called on the opposition to offer bipartisan support for the deal to offer “stability” on the state’s energy transition.

“This has not been an easy negotiation, but we’ve gotten the balance right, that balance would be a lot stronger if it was now to be accompanied with bipartisanship,” he said.

Terms of the arrangement mean Eraring needs to generate at least 6 terawatt hours of power each year, which equals to the typical annual output of two of Eraring’s four generating units.

If Eraring sends out more than 6 terawatts hours of power, the amount the government will underwrite, will also reduce. For example if Eraring sends out 12 terawatt hours of power, the government would only underwrite 50 per cent of Eraring’s costs.

Origin will have until March 31 of each year to decide whether it wishes to continue the underwritten arrangements for the next financial year.

Origin chief executive Frank Calabria said the deal gave employees, suppliers and the local community “greater certainty around the future of the plant”.

Under the new arrangement, the new closure date for Eraring is estimated to be August 19, 2027, however its permanent closure must occur before April 2029, in line with obligations under the National Energy Market and NSW’s legislated 2030 emissions reduction target.

“This agreement supports Eraring to continue to play an important role in maintaining reliable power for businesses and households through a period in which there remains considerable uncertainty about the volume and timing of new renewables, transmission and firming infrastructure coming online,” he said.

The deal will also protect Eraring’s current workforce of about 220 people. The company is also committed to releasing a maintenance plan, and report Eraring’s profits and losses in Origin’s annual reports.

NSW Energy Minister Penny Sharpe emphasised the decision was a “temporary and targeted agreement” to ensure reliability, however, she said the state was still prioritising a transition to green energy.

“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 temporary and targeted agreement will provide financial support only if it’s needed, and only for as long as needed, during an orderly exit of coal-fired power.

“This is a proactive and sensible step to ensure a plan is in place, if needed, to avoid electricity outages and rising power prices.”