New South Wales (NSW) Labor Treasurer Daniel Mookhey has denied claims his party is handing Origin Energy a $3 billion (US$1.9 billion) cheque to operate the coal-fired Eraring power station amid the state’s push to go green on power.
His comments come as Premier Chris Minns announced on May 23 that the NSW government had signed a deal allowing Origin to operate the power station through till August 2027.
The move is expected to bridge a shortfall in the process of transitioning to other energy sources.
“This agreement gets the balance right,” Mr. Mookhey said in statement.
“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.”
Mr. Mookhey pinned blame on the former Liberal government.
“Had Eraring remained in public ownership, an agreement like this would not have been necessary,” he said.
“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.”
Mr. Minns said even before the election, he had agreed to extend the power station if it meant there would otherwise be a lack of power.
“The people of NSW 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,” he said.
“The best way to undermine the renewable energy transition is to have the lights go out in 2025. I’m not letting that happen.”
The government says the business will manage an “orderly exit” from coal while the government places its focus on renewables.
Latest analysis from the Australian Energy Market Operator warned that without the coal-fired power produced by Eraring, the state would face “energy reliability risks” from 2025.
Origin and the government have agreed to an “underwriting agreement” that would require the company to adhere to a number of conditions.
Under the guidelines, Origin would be expected to decide by March 31 in 2025 and 2026, whether it wishes to continue the agreement into the following financial year.
If Origin does opt in, it will be required to share up to $40 million a year of any profits earned.
Further, Origin would not be able to claim more than 80 percent of losses from the NSW government, capped at $225 million annually.
Origin would also be expected to report profits or losses from Eraring, ensure the plant generates at least six terawatt hours a year, and substantially maintains the workforce of 220 people.
The company would have to adhere to a maintenance plan and to necessary conditions.
An agreement is expected to be tabled in Parliament in the next sitting week.
Minister for Climate Change, Energy and the Environment Penny Sharpe deemed the move a “proactive and sensible step.”
“NSW 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,” she said.
“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.”
The Eraring station is the largest in the nation and supplies about a quarter of NSW’s power needs.
Heavy Criticism From Green Groups Follows Labor’s Decision
NSW Labor has faced criticism from both the Greens and environmental groups for not following through on plans to shut the plant down next year.The Climate Council called it a failure in “climate leadership” that sent the wrong message in a “climate crisis”
The state’s Nature Conservation Council (NCC) said the decision would undermine investment into renewables.
Greens spokesperson for Energy and Treasury Abigail Boyd lambasted the extension, saying Labor was dragging its heels on cutting emissions.
“Now, when the rubber needs to hit the road, the NSW Labor government is grifting potentially hundreds of millions of dollars to the mega profitable Origin energy, who recently announced $747 million in net profits in just the last six months,” she said in a statement.
“Labor’s Electricity Supply and Reliability Check Up report from last year, and the recent AEMO report into reliability, did not recommend extending Eraring.
“They said there could be potential reliability gaps if there is not a step change in ambitions, in investment and the pace of transmission and generation roll out.”
Shadow NSW energy minister James Griffin was contacted for comment.
