Origin Energy Ltd will delay the closure of Australia’s largest coal-fired power station amid concerns renewable energy isn’t being added fast enough to keep pace with plans to quit fossil fuels.
The utility agreed to a request from the New South Wales government to keep operating the equivalent of two of the four units at the 2.9 gigawatt site until August 2027, accounting for about a quarter of power demand in Australia’s most populous state. Origin may receive compensation of as much as A$225 million a year from the state to cover the cost of operations.
Australia faces risks of power shortfalls as coal-fired plants are phased out due to delays in renewable energy projects. More than 80% of the country’s coal plants are likely to close by 2035 to meet decarbonization targets. Under the agreement, Origin must generate at least six terawatt-hours of power during the 2026 and 2027 financial years.
Origin’s decision to delay Eraring’s closure comes after Australia’s main grid operator highlighted energy reliability risks in the state. The utility has committed to exiting coal generation as soon as there is sufficient renewable energy capacity available.
We believe this agreement strikes the right balance, said Frank Calabria, Origin’s CEO. Origin does not shy away from the need to exit coal generation as soon as there is sufficient renewable energy, firming, and transmission capacity available.
New South Wales state will end compensation after the 2027 financial year, and the plant must retire in full by April 2029. The process of quitting fossil fuels in Australia is being complicated by the slow development of renewable projects to replace coal generation capacity.
Origin’s decision to delay the closure of Australia’s biggest coal plant reflects the challenges in transitioning to renewable energy amid concerns about power reliability. The utility’s agreement with the New South Wales government aims to balance energy needs with the imperative to reduce fossil fuel reliance.
