Australia's largest coal-fired powerplant to remain open

The life of Australia's largest coal-fired power station will be extended for at least two years in order to prevent power shortages and blackouts in NSW.

Origin Energy has been in talks with the NSW government about extending the life of the Eraring power station after a review warned the scheduled August 2025 retirement could result in electricity shortfalls and price hikes, leaving a 25 per cent gap in NSW's power requirements.

In a statement on Thursday, the state government described the agreement as 'temporary and targeted' in order to guarantee a minimum supply of electricity until the new expected closure date.

australia's largest coal-fired powerplant to remain open

The Eraring power station (pictured) was due to close in mid-2025, seven years earlier than planned

'A temporary extension of Eraring will provide time to deliver the renewable energy, storage and network infrastructure projects required to replace the power station,' it said.

The NSW government and Origin have agreed to an underwriting arrangement under which the state will not make any up-front payments to the energy company to operate Eraring.

Instead, Origin will need to decide by March 31 in 2025 and 2026 whether it wishes to opt in to the underwriting arrangement for the following financial year and share up to $40 million per year of any profits it earns from the facility.

If the power station operates at a loss, Origin will be able to claim no more than 80 per cent of the sum from the state government.

Those claims will be capped at $225 million each year, if the company does opt in.

Environmental groups and progressive think-tanks have long railed against Eraring receiving any lifeline.

'To keep Eraring open beyond its closure date will make the national job of decarbonising our energy grid all that much harder,' Australian Conservation Foundation climate policy adviser Annika Reynolds said.

Federal Energy Minister Chris Bowen in March said delaying Eraring's retirement would not imperil Australia's 2030 emissions reduction target.

Eraring was privatised under the former coalition government in a 2013 deal that resulted in Origin being paid $75 million to take over the ageing asset.

australia's largest coal-fired powerplant to remain open

Opened in 1984, the Eraing operation is Australia's biggest coal power plant (pictured)

NSW Energy Minister Penny Sharpe emphasised today's 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.'

The government has stressed Thursday's announcement would protect NSW taxpayers.

'This agreement gets the balance right. It means the clean energy transition can continue without exposing families and businesses to extreme bill shocks during a severe cost-of-living crisis,' said NSW Treasurer Daniel Mookhey.

'Taxpayers are well-protected. 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.

'Had Eraring remained in public ownership, an agreement like this would not have been necessary.'

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