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AAP
Maeve Bannister

State faces huge bill for major coal-plant's lifeline

Origin Energy is talking with the NSW government about extending the life of its Eraring power plant (HANDOUT/GREENPEACE)

Extending the life of Australia's largest coal-fired power plant could cost NSW taxpayers hundreds of millions of dollars a year on top of subsidies already provided to its owner.

Origin Energy has been in talks with the state government to extend the life of its Eraring plant, located south of Newcastle, after a review warned the scheduled 2025 closure would result in electricity shortfalls and price hikes.

NSW officials are yet to confirm how long the plant's life could be extended or how much it will cost.

But analysis by independent think-tank Climate Energy Finance, released on Thursday, found keeping the plant open past 2025 could cost between $120 million and $150 million per year, paid to Origin to subsidise the extension.

Origin was paid $75 million by the then-state government in 2013 to take over Eraring when the plant was privatised.

Signage outside the Origin Energy
Energy Minister Penny Sharpe says negotiations with Origin over the power station are underway. (Joel Carrett/AAP PHOTOS)

Energy analyst Tim Buckley said Origin Energy was operating an asset gifted to the firm in 2013.

"It has already enjoyed an exceptional rate of return way above its expectations for a decade," he said.

"The idea that Origin should be gifted yet again with largesse from the public purse, on top of the estimated $468m coal subsidy since the coal price cap was introduced in December 2022, is obscene."

Mr Buckley based his analysis on Freedom of Information requests made for reports Origin provided to the premier's office between 2019 and 2021.

He also considered coal prices and anticipated upgrade costs needed to keep the power station safely operating past 40 years.

"Coal prices have been exceptionally volatile ... I'm assuming any deal the NSW government does, taxpayers will end up wearing that risk either on the upside or downside," Mr Buckley said.

The analysis also found NSW had enough renewable capacity in the pipeline to be able to fill any electricity supply gaps left by the station's closure.

The finding was based on renewable projects that were already fully approved or in construction, Mr Buckley said.

"Supply was tested last month when we had the highest peak demand and there was no reliability gap or blackouts.

"There is enough energy capacity coming through," he said.

The report makes several recommendations to the government, including for the phased closure of Eraring from 2025 to be completed by early the following year.

Any subsidy being considered for Eraring should be redirected towards renewable resources such as rooftop solar and batteries, and growing grid capacity, it said.

Solar panels are seen at solar farm
Government subsidies should be redirected towards renewable resources such as rooftop solar. (Mick Tsikas/AAP PHOTOS)

"The more (renewable) capacity that comes online the less reliability problems and the state could do that by using the money that is otherwise going to be given to Origin," Mr Buckley said.

Energy Minister Penny Sharpe said negotiations with Origin were under way.

"The NSW government is engaging with Origin on its plans for Eraring power station and will not comment while these discussions are ongoing," she said.

Origin previously confirmed that it was in discussions with the government over Eraring's future but declined to give any time frame for when a deal could be reached.

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