Nation’s largest coal-fired power plant closure delayed by two more years

Australia’s biggest coal-fired power station, Eraring, will delay its closure by another two years following fresh warnings that the electricity grid is under-prepared to manage its imminent retirement without worsening the threat of blackouts.

Origin Energy, which owns the 2880-megawatt Eraring generator on the shores of Lake Macquarie, about 130 kilometres north of Sydney, had intended to close the plant in August next year, but said it would now keep all four of its units running until 2029.

News of the extension on Tuesday angered environmental advocates who fear that prolonging the use of climate-polluting coal will make it harder to arrest global warming. It also underscored a political vulnerability for the Albanese government, which is facing criticism over rising energy prices and is racing to add more renewables to cut emissions and replace retiring coal plants while keeping the lights on and bills stable.

Origin last year agreed to a deal with NSW Energy Minister Penny Sharpe to delay Eraring’s closure from 2025 to 2027 amid concerns the grid was not ready to handle its exit, but expectations have been building in the industry that the company may have to push back its closure plan. The deal, which included an option to extend Eraring until 2029 if it is still needed, entitles Origin to call on NSW taxpayer funding, capped at $225 million a year, to subsidise the plant’s losses. Origin has not yet had to call on any funds under the deal.

Keeping Eraring in the grid until 2029 would provide more time for the rollout of renewable energy, storage assets such as batteries and hydroelectric dams, and new power lines to compensate for its closure, Origin chief executive Frank Calabria said.

“Good progress is being made on the delivery of new energy infrastructure, including major transmission works and projects like our large-scale battery at Eraring, but it has become clear Eraring power station will need to run for longer to support secure and stable power supply,” he said.

Across Australia, billions of dollars have been gushing into new wind and solar farms, rooftop solar panels and energy-storage projects every year, boosting renewables to a 40 per cent share of the grid. At the same time, most of the giant coal-fired power stations that still supply the bulk of the nation’s electricity are nearing the end of their usable lives, facing spiralling maintenance costs and frequent breakdowns, prompting their operators to bring forward their closure dates. More than half of Australia’s remaining coal-fired generators are now scheduled to be retired by 2035.

However, the clean energy transition is lagging the speed that authorities and experts say is necessary to ready the grid for a future with less coal without increasing the risk of energy price spikes or blackouts. Key projects, including the hundreds of kilometres of new power lines needed to link far-flung renewable energy zones to major cities, are facing permitting delays, rising costs and opposition from rural and regional communities worried about impacts on farming practices, property values and the environment.

Officials from the Australian Energy Market Operator sounded warnings last year about a shortage of the infrastructure required to maintain the safe and stable flow of electricity to protect the grid from sudden blackouts following Eraring’s scheduled closure, even though enough new generation projects and power lines were on track to be built by 2027.

To run smoothly, power grids must not only match supply and demand, but also maintain “system security”, including inertia, which comes from the steady frequency that has traditionally been provided by the spinning turbines of gas, coal and pumped hydro plants.

The NSW government said it was aiming to speed up the installation of synchronous condensers – grid-connected machines that don’t burn fuel but deliver the same stabilising effects to the system as the spinning turbines of coal and gas plants.

Climate campaigners worried about Australia’s continued use of coal expressed disappointment at the announcement on Tuesday.

The decision “puts a safe climate further out of reach” just as communities were recovering from bushfires and flash-floods fuelled by the climate crisis, said Jacqui Mumford, chief executive of the Nature Conservation Council of NSW.

“Far from supporting the transition, Origin’s decision will crowd out investment in the clean, modern sources of generation we need to be switching to,” she said.

Climate and Energy Minister Chris Bowen said it was important to ensure the reliability of the grid during its transition to lower-cost renewable energy, but flagged that continued reliance on coal could heighten the risk of power bills shocks due to ageing equipment breaking down with no notice and causing huge supply gaps and price swings.

“Coal remains an unreliable source of energy – when coal breaks down, bills go up,” Bowen said.

“No one wants to see these coal-fired power stations open longer than they need to, or close earlier than expected.”

The Albanese government has set a target to double the share of renewable energy to 82 per cent of the grid by 2030 to underpin its legislated commitment to a 43 per cent emissions reduction by then. However, the lagging pace of the renewable rollout and further coal-fired power generator extensions raise the risk that its targets may be missed.

The Clean Energy Council, representing renewables developers, said extending the lives of decades-old coal-fired plants was “far from ideal”.

“An orderly transition matters, but the reality is that old coal power stations are increasingly unreliable and expensive, and that volatility flows straight through to consumers,” the group’s chief executive, Jackie Trad, said.

“Every renewable energy, storage and transmission project that reaches delivery reduces our reliance on ageing coal and moves the system closer to being cleaner, more affordable and more reliable,” she said.

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