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NSW Labor partners with Origin to manage Eraring coal station until 2027

NSW Labor has faced backlash from environmental stakeholders for extending its commitment to coal beyond what was initially promised in order to ensure a consistent power supply.

New South Wales (NSW) Labor Treasurer Daniel Mookhey refuted allegations that his party is providing Origin Energy with a $3 billion (US$1.9 billion) payment to continue operating the coal-fired Eraring power station amidst the state’s push towards clean energy.

This announcement coincided with Premier Chris Minns’s declaration on May 23 that the NSW government had inked a deal allowing Origin to oversee the power station’s operations until August 2027.

This decision is anticipated to address a shortfall during the transition to alternative energy sources.

“This agreement strikes a balance,” stated Mr. Mookhey.

“It ensures the progression towards clean energy without subjecting households and businesses to exorbitant costs during a severe cost-of-living crisis.

“Taxpayers are safeguarded, and we are not writing a $3 billion check to Origin, as some have claimed.”

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“Instead, this agreement encourages Origin to utilize the underwriting option only in case of sudden market changes.”

Mr. Mookhey attributed the need for this agreement to the former Liberal government.

“If Eraring had remained publicly owned, such an agreement would not have been required,” he remarked.

“However, the prior government’s decision to privatize the Eraring power station necessitated agreements like this to ensure a continuous power supply during the accelerated transition to clean energy.

“It serves as further evidence that privatization is not effective.”

Mr. Minns indicated that even before the election, he had consented to extending the power station’s operation if a power deficit were likely without this extension.

“The people of NSW can now be assured that the NSW government has a strategy to guarantee stable energy supply while facilitating the transition of the workforce and economy towards net zero emissions,” he reassured.

“Allowing the lights to go out in 2025 would undermine the transition to renewable energy. I won’t allow that to occur.”

The government confirmed that the business would oversee the “orderly phase-out” of coal while emphasizing renewable energy sources.

Recent analysis from the Australian Energy Market Operator cautioned that excluding the coal-fired power generated by Eraring could result in “energy reliability risks” from 2025.

Origin and the government have reached an “underwriting agreement” outlining several conditions that the company must follow.

According to the stipulations, Origin must make a decision by March 31 in 2025 and 2026 regarding continuation of the agreement for the subsequent financial year.

If Origin chooses to participate, it must share a portion of its profits, up to $40 million annually.

Furthermore, Origin cannot claim more than 80 percent of losses from the NSW government, capped at $225 million each year.

Origin is also obligated to report on profits or losses from Eraring, ensure the plant generates at least six terawatt hours annually, and maintain a workforce of at least 220 individuals.

The company must adhere to a maintenance plan and comply with specified conditions.

Parliament is expected to review the agreement in the upcoming sitting week.

Minister for Climate Change, Energy, and the Environment Penny Sharpe praised the move as a “proactive and sensible step.”

“NSW is accelerating the transition to affordable, clean, reliable renewable energy. However, to uphold energy supply and keep costs low, we must ensure new renewable infrastructure and storage capacity are operational before coal-fired generators reach the end of their lifespan,” she outlined.

“This temporary and targeted agreement will provide financial assistance only if necessary and only for as long as required for the smooth phase-out of coal-fired power.”

The Eraring station is Australia’s largest and meets approximately one-quarter of NSW’s power demands.

The current NSW government had initially pledged to close the 45-year-old station in 2025.

Green Groups Criticize Labor’s Decision

NSW Labor has been criticized by green groups, including the Greens, for reneging on plans to shut down the plant in the upcoming year.

The Climate Council condemned it as a failure in “climate leadership” that conveys the wrong message during a “climate crisis.”

“This choice represents a triple failure: it is a policy failure, a failure in climate leadership, and it neglects the well-being of communities throughout NSW and the nation,” stated Climate Council economist Nicki Hutley said.

The Nature Conservation Council (NCC) of the state expressed concerns that this decision could hinder investments in renewables.

“The government must ramp up efforts to accelerate the transition to renewables and ensure that we do not have to subsidize privatized coal plants in the future,” NCC stressed.

Abigail Boyd, spokesperson for Energy and Treasury for the Greens, criticized the extension, accusing Labor of delaying emissions reductions.

“Now, when decisive action is required, the NSW Labor government is potentially providing hundreds of millions of dollars to the highly profitable Origin Energy, which recently announced $747 million in net profits in just six months,” she declared in a statement.

“The NSW Labor government’s report on Electricity Supply and Reliability from last year, as well as the recent AEMO report on reliability, did not recommend prolonging Eraring’s operation.

“Both reports highlighted potential reliability gaps without significant increases in ambition, investments, and the pace of transmission and generation rollout.”

Shadow NSW Energy Minister James Griffin was contacted for his input.

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