Extend or Close? Eraring debate fires up

As uncertainty swirls around the planned closure of Eraring power station, experts are weighing a reliable power supply against the need to meet emission targets.

The stakes are high. As the largest electricity generator in NSW, the Eraring black coal-fired plant at Lake Macquarie is integral to the state’s power supply, with its 2880 MW capacity.

While Origin Energy plans to close the ageing plant in August 2025, many of the renewable energy projects designed to replace it are stuck in a bureaucratic loop.

If the government intervenes to extend Eraring’s output beyond the closure date, how long before new renewable transmission comes online?

Which route will ultimately cost taxpayers the most - propping up an outdated technology, or taking a risk on renewable projects not yet ready to roll?

The debate so far

In July this year, the Australian Energy Regulator (AER) highlighted a spike in May electricity prices. This was due to a range of factors, including increased demand in southern states, reduced solar generation and a lower supply of cheap coal-fired power.

The problem was compounded by the April closure of the Liddell power plant in the Hunter Valley.

A review of the energy transition in NSW, authored by Cameron O’Reilly, says a delay in Eraring’s closure - beyond August 2025 - could mitigate the challenges.

The NSW Government is now negotiating with Origin Energy about possible intervention to keep generation rolling.

Yet NSW Energy Minister Penny Sharpe has admitted: "I can't give you a time and I can't give you a cost."

Arguments against closure

Beyond the hardliners who want coal-fired power to stay indefinitely, there’s a case for extending Eraring’s life for a short, clearly defined time.

This would allow the government to expedite banked-up large-scale renewable energy projects, vital to fortify the east coast power grid when Eraring does close.

Short-term, it would also put downward pressure on electricity prices.

Tim Buckley, from Climate Energy Finance, has a list of imperatives to accelerate the NSW energy transition.

These include front-loading finance, as well as speeding up planning approvals for 1200 MW of utility scale renewable projects and 1200 MW of small-scale renewables every year, up to 2030.

This could be boosted by faster adoption of rooftop solar and batteries in NSW schools and public housing, Buckley suggests. Renewable Energy Zone auctions could also be ramped up, with identification of existing spare capacity on the grid.

Meanwhile, deployment could be speeded up in commercial and industrial sectors, with expansion of the Small-Scale Renewable Energy Scheme from 100 KW to 1000 KW.

Arguments for closure

Critics of extension point to two main areas of concern – the high cost involved, and the negative impact on the state’s energy transition.

It’s likely to cost between $200 million and $400 million to keep the plant operating. That’s before you factor in coal purchase.

The NSW Government has a questionable track record with energy generation facilities, having sold the Vales Point plant to Delta Electricity for $1 million, back in 2015. Last year, the private owners sold it for a reported $200 million, netting them a staggering profit.

If that money was spent instead on fast-tracking tardy renewables projects, the taxpayer could get greater bang for their buck.

It would also push the energy transition forward, rather than falling back on outdated and polluting forms of energy generation.

AEMO’s NSW reliability risk forecast, for 2025-26, highlights the increased risk of blackouts, should Eraring close in August 2025.

However, ageing coal-fired power stations are notoriously unreliable and inefficient. In this context, state and federal government renewable initiatives can offset the closure.

AEMO says its scenarios do not include the huge 248 GW pipeline of renewable proposals currently underway in Australia. This is four times bigger than the existing total installed capacity of 63 GW, across the NEM.

Delaying Eraring’s closure sends a negative message to developers of utility-scale renewables projects, stymying investment and delaying the transition.

It could also exacerbate the cost of living crisis. Nexa has forecast increased consumer bills of $2,250-$3,000 over the next decade, if closure is delayed and the transition is allowed to drift.

Time will tell if extending Eraring’s operation assists or delays the state’s energy transition.