NSW Government secures 2-year extension to Eraring Power Station to manage reliability and price risks

The NSW Government has secured an agreement with Origin Energy to operate the Eraring Power Station until August 2027.

Eraring power station is a black coal-fired power station on the shores of Lake Macquarie, southeast of Newcastle, NSW. Its four steam turbines give it a generating capacity of 2640 megawatts, making it the equal largest power station in Australia in terms of generating capacity. Eraring substation on the left.

This will manage an orderly exit from coal-fired power to ensure the lights stay on for homes, businesses and industry while New South Wales delivers the transition to low-cost, reliable renewable energy.

This temporary and targeted agreement seeks to guarantee a minimum supply of electricity until the new expected closure date of August 2027.

The latest analysis from the Australian Energy Market Operator confirms without Eraring NSW would face energy reliability risks from 2025.

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

The state will not make upfront payments to Origin Energy to operate Eraring. Instead, the Government and Origin have agreed to an underwriting arrangement that requires the company to:

  • decide by 31 March in 2025 and 2026 whether it wishes to opt in to the underwriting arrangement for the following financial year
  • share up to $40 million per year of any profits it earns from Eraring, if it does opt in
  • claim no more than 80% of losses Eraring makes from its operations from the NSW Government, capped at $225 million each year, if it does opt in
  • report the profits or losses it makes from Eraring in its annual report for each year, if it does opt in.

Under the agreement, Origin must also:

  • ensure Eraring endeavours to generate at least 6 terawatt hours each year, the equivalent to the typical annual output of 2 of Eraring's 4 generating units and enough to resolve the forecast reliability gap
  • substantially maintain Eraring's existing workforce of around 220 people, commit to a maintenance plan and adhere to its licence conditions, which includes environmental protections.

Origin has given notice it now expects to close Eraring on 19 August 2027. The permanent closure will be managed by Origin in line with its obligations under the National Energy Market and must occur before April 2029. This ensures Eraring's closure will contribute to New South Wales meeting its legislated 2030 emissions reduction target.

NSW is already about halfway towards meeting the state's 2030 renewable generation target.

The Government is speeding up the delivery of new renewables to reach our net zero target by delivering new generation and storage capacity.

The agreement will be tabled in Parliament in the next sitting week to ensure transparency.

A detailed summary of the agreement is available online: Agreement between the state of New South Wales and Origin on its plans for Eraring power station.

Quote attributable to Premier Chris Minns:

'I said before the election if extending Eraring is required to keep the lights on in New South Wales, we'd do it.

'Today's decision delivers certainty for households and businesses.

'The people of New South Wales now have certainty that the NSW Government has a plan to ensure we have reliable energy while we transition the workforce and the economy to net zero.

'The best way to undermine the renewable energy transition is to have the lights go out in 2025. I'm not letting that happen.'


Quote attributable to Minister for Climate Change, Energy and the Environment Penny Sharpe:

'New South Wales 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 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 NSW Government remains entirely committed to the transition to renewable energy and our emissions reduction targets. A net zero future holds immense opportunities for our state's economy and our environment.'


Quote attributable to Treasurer Daniel Mookhey:

'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.

'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.

'But the previous government's decision to privatise the Eraring power station means entering into agreements like this in order to make sure the lights stay on as we speed up the clean energy transition.

'It's more proof that privatisation doesn't work.'