The Eraring Power Station has had its life extended by two years.
Today the NSW Government announced it had struck a deal with the coal-fired plant’s owner Origin Energy which will see the Lake Macquarie facility continue to operate until August 2027.
It follows a warning from the Australian Energy Market Operator (AEMO) earlier this week that without Eraring, the state would face reliability issues from 2025.
Under the deal, there will be no up-front payments to Origin. Instead the government has signed off on an underwriting arrangement which will cover any losses up to $225 million a year.
The full agreement will be tabled in Parliament in the next sitting week, but the terms stipulate that Origin will be required to decide by the end of March in 2025 and 2026 whether it wishes to opt in for the following financial year.
Should it opt in, the company will must report the profits or losses it makes from Eraring in its annual report.
If the power station generates a profit, Origin must share up to $40 million per year, giving it back to taxpayers.
If Eraring makes a loss, Origin can claim no more than 80 per cent of losses, capped at $225 million annually.
The State Government is confident the deal strikes a balance between managing “an orderly exit from coal-fired power” and ensuring “the lights stay on for homes, businesses and industry” during the transition to renewable energy.
Eraring will be required to generate at least six terawatt hours each year, the equivalent of two of the plant’s four units.
Origin must also maintain its existing workforce of about 220 and commit to a maintenance plan for Eraring, including environmental protections.
NSW Energy and Environment Minister Penny Sharpe said the “temporary and targeted agreement” would provide financial support only if and when it is needed.
“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”
“This is a proactive and sensible step to ensure a plan is in place, if needed, to avoid electricity outages and rising power prices”
“The NSW Government remains entirely committed to the transition to renewable energy and our emissions reduction targets.”
Treasurer Daniel Mookhey said taxpayers were well-protected under the arrangement.
“It means the clean energy transition can continue without exposing families and businesses to extreme bill shocks during a severe cost-of-living crisis”
“We won’t be handing over a $3 billion cheque to Origin as some said we would. Instead, this agreement incentivises Origin to only use the underwrite if there is a sudden change in market conditions.”
Origin has given notice it now expects to close Eraring on 19 August 2027.
The permanent closure will be managed by the company in line with its obligations under the National Energy Market and must occur before April 2029.