Origin Energy (ASX: ORG) is planning on shutting down Australia’s largest coal-fired power plant ahead of schedule as it moves to align with its core strategy of being a leader in Australia’s energy transition to net-zero emissions.
Australia’s largest energy retailer has submitted a request to the Australian Energy Market Operator (AEMO) to close the Eraring Power Station in August 2025, seven years ahead of schedule, once the three and half year notice period has been served.
The energy player says the conditions are no longer favourable for traditional baseload power stations, and the announcement comes as it reports a statutory loss of $131 million for the half-year, reflecting the one-off impairment and net capital gains tax expense associated with the $2 billion sale of a 10 per cent interest in Australia Pacific LNG.
“Origin’s proposed exit from coal-fired generation reflects the continuing, rapid transition of the National Electricity Market (NEM) as we move to cleaner sources of energy,” Origin CEO Frank Calabria said.
“Australia’s energy market today is very different to the one when Eraring was brought online in the early 1980s, and the reality is the economics of coal-fired power stations are being put under increasing, unsustainable pressure by cleaner and lower cost generation, including solar, wind and batteries.
“To enable Origin to support the market’s continued transition to renewables, we intend to utilise the Eraring site beyond any retirement of the coal-fired power station, with plans to install a large-scale battery.”
Plans to replace the power station with a battery of up to 7000 MW on the same site are already in advanced stages with NSW Government.
The business has a $240 million restoration and rehabilitation provision in place for the proposed 2032 closure of the 2880 MW black coal plant on the shores of Lake Macquarie, which has been fully operational since 1984.
Mindful of the 400 employees who currently work at the site, Origin was at pains to confirm there were no immediate changes to operations.
“Eraring is a high-quality asset, run by a skilled and dedicated team, that has worked tirelessly to supply reliable and affordable energy in NSW for four decades,” Calabria said.
“However, it has become increasingly clear over the last few years that the influx of renewables has changed the nature of demand for baseload power.
“At the same time, the cost of renewable energy and battery storage is increasingly competitive, and the penetration of renewables is growing and changing the shape of wholesale electricity prices, which means our cost of energy is expected to be more economical through a combination of renewables, storage and Origin’s fleet of peaking power stations.”
NSW Treasurer and Energy Minister Matt Kean said he was disappointed by Origin’s decision but looked to alleviate any energy production concerns by confirming he was working with industry partners to install the ‘Waratah Super Battery’ by 2025.
“NSW has the strongest reliability standard in the country – the Energy Security Target – which aims to have sufficient firm capacity to keep the lights on even if the State’s two largest generating units are offline during a one-in-ten year peak demand event,” Kean said.
“Our giant grid battery will act as a shock absorber so that transmission capacity currently kept in reserve to handle shocks, such as lightning strikes, can be freed up to transfer energy to consumers.
“AEMO has advised that this additional transmission capacity will give the State’s consumers access to enough existing electricity generation to meet the Energy Security Target at the time Eraring closes.”
Greenpeace ranks Origin Energy as 44th out of 48 Australian energy providers in its independent Green Electricity Guide, which guides consumers on which energy providers are credible on the environment. Greenpeace classes Origin as Australia’s 4th largest climate polluter mainly due to the coal-burning Eraring power station.
"In bringing forward the closure of Eraring coal-burning power station to 2025, Origin has acknowledged the reality of the Australian energy market - that renewables backed by storage are the future of electricity,” Greenpeace Australia Pacific senior campaigner Glenn Walker told Business News Australia.
“This stands in sharp contrast to AGL, which last week failed investors and communities yet again by delaying the inevitable closure of its coal assets.
“Coal companies like AGL must follow Origin's lead and work with government to plot a timely transition from coal to renewables - anything less fails our energy workforce."
Shares in Origin Energy (ASX: ORG) have dropped 0.49 per cent as of 14.05 AEDT after it published half-yearly results alongside the Eraring power station announcement.
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