Australia: Keeping Eraring open could cost $3 billion, says Kean

The reliable supply of energy in NSW would be boosted if Australia’s largest coal-fired power station was kept partially open for an extra two years, according to new modelling that is likely to guide the Labor government’s position on the fate of the Eraring power plant. However, former treasurer and energy minister Matt Kean has revealed he was advised that extending the life of Origin Energy’s Eraring plant would cost taxpayers $3 billion over two years, and he said it would undermine the state’s ambitious transition to renewables.

The state government is close to announcing its position on Eraring, which has a set closure date of 2025, and it is weighing up options beyond allowing the power station to close as planned or forking out to keep it running. One option is keeping Eraring power station partially open for two extra years.

For one option, the Australian Energy Market Operator last week outlined in its Electricity Statement of Opportunities that “delaying generator retirement has the potential to address medium-term risks if necessary”.

Keeping two of Eraring’s four coal-fired generator units online until August 2027 could reduce reliability risks if renewable energy projects – including wind, solar and storage batteries – were delayed, AEMO said.

The government’s Electricity Supply and Reliability Check Up review, commissioned to assess the state’s transition to renewable energy, is yet to be made public. But the Herald has revealed it recommends that Eraring’s operations be extended past 2025. Premier Chris Minns has previously raised the prospect of the government intervening to keep Eraring open, even though the government faces significant budgetary constraints, including $180 billion of debt. The former Coalition government had the opportunity to buy Eraring from Origin in mid-2021 but decided against picking up the asset over concerns that underwriting a plan to keep the coal-fired power station open longer could “crowd out” other investments in energy.

Kean said an initial figure of about $1 billion, which included an upfront payment of $239 million as well as the cost to buy coal to run the power station, was provided to him by energy experts engaged to advise the former government on a potential deal with Origin Energy. But Kean said that figure was revised up to about $3 billion on the back of rising coal costs as a result of the war in Ukraine, and that keeping Eraring open would be a backwards step for taxpayers and renewable energy.

“It hits taxpayers up with about a $3 billion hit, it slows NSW’s energy transition, and it opens the further multibillion hits from every other coal-fired power station,” Kean said. Environment Minister Penny Sharpe said she had not seen the $3 billion figure that Kean cited.