Origin Energy has shocked with a decision on Thursday that could see it close its huge Eraring coal fired power station in the Hunter Valley of NSW seven years earlier in mid to late 2025.
Earing is Australia’s largest coal-burning power station and its viability has been undermined by the remorseless slide in the cost of energy from renewables and higher thermal coal costs for much of the past six months thanks to Europe’s gas crisis, China’s power crisis and rationing last October and then the latest upsurge in tensions (and prices) as Russia pressures Ukraine and Western Europe and the US.
A combination of these factors has seen the average cost of typical Newcastle thermal coal (used in power stations) rise from around $US82 a tonne in February, 2021 to $US202 a tonne in late December and to more than $US230 a tonne at the moment.
Origin says it has given notice to authorities that it intends to shut down the 2,880-megawatt Eraring station and its four generating units on Lake Macquarie, north of Sydney after the required notice period of three and a half years, saying “rapidly changing” energy market conditions have hit the plant’s viability.
Originally scheduled to close in 2032, Eraring and its coal-fired power is now too expensive in the face of low-cost renewables — especially with the sharp rise in thermal coal prices which do not looking like returning to the levels of a year ago any time soon given the continuing tensions in Europe.
“Eraring has been impacted by operational constraints at one of its primary suppliers,” Origin said, “contributing to a material increase in both coal and wholesale electricity procurement costs,” Origin explained in the statement to the ASX.
Origin CEO, Frank Calabria said in the statement:
“Origin’s proposed exit from coal-fired generation reflects the continuing, rapid transition of the National Energy Market as we move to cleaner sources of energy.”
Origin’s early exit from coal follows similar moves by other major power utilities. EnergyAustralia last year announced it would shut Victoria’s Yallourn coal-fired power plant in 2028, four years earlier than planned, while AGL, the largest Australian power company, has pledged to bring forward the closure dates of its coal assets in Victoria and NSW at least three years.
In fact AGL could close its Bayswater coal fired station in the Hunter Valley by 2030, according to last week’s announcement.
The influx of large-scale wind and solar farms coupled with an ongoing boom in the uptake of rooftop solar panels is reshaping the industry and slashing daytime wholesale prices to levels at which the dominant sources of power – coal and gas – struggle to compete and have been forced to regularly operate at a loss and not operate at all.
Origin is planning to build a 700-megawatt battery at the site of Eraring as part of its “replacement plan” while the Federal Government wants to build a gas-powered station in the region. but soaring export prices of LNG (for the same reasons as coal) will mean it will be uneconomic before it opens, unless LNG prices collapse back to the levels seen in mid 2020 in the first pandemic lockdowns around the world.
But it is clear from the wording of some of the company’s statements on Thursday Origin is leaving the exact closure data flexible to allow some delays to handle political and staff problems that will flow from its decision.
