By Nick Toscano
Origin Energy still plans to close Australia’s largest coal-fired power station in 2025, but vows to continue assessing market conditions before making a final call amid concerns about the slow roll-out of new transmission lines and clean energy projects to help replace it.
The power and gas giant last year notified authorities of its intention to bring forward the retirement of the 2880-megawatt Eraring generator in NSW by up to seven years to as early as August 2025, while outlining ambitious new goals for a massive expansion of renewables.
Like many of Australia’s ageing coal-fired power plants, Eraring’s viability is under pressure as the influx of rooftop solar panels and wind and solar farms radically reshapes the market and slashes daytime wholesale electricity prices to levels where it cannot compete.
However, the proposed earlier shutdown of Eraring has stoked concern in the energy market about delays in building other projects that would help compensate for its closure, and the risk it may pose to the availability of reliable and affordable power when the wind isn’t blowing and the sun isn’t shining.
Origin chief executive Frank Calabria on Thursday said there were “no changes to our plan” to close Eraring by August 2025. But he said Origin would continue assessing the power grid’s supply-and-demand balance.
“There is clearly a transition on, and there are some projects that are later than where we thought they were,” he said. “The assessment continues, but no change has been made today.”
The new NSW energy minister, Penny Sharpe, has listed energy security as a priority for her government, and has not ruled out striking a deal with Origin to help keep Eraring open for longer if required.
Coal-fired power stations, which supply two-thirds of the nation’s electricity, are increasingly bringing forward their closure dates while renewable energy continues to grow. AGL’s Liddell plant in NSW closed earlier this year and at least four more are expected to shut down by 2030. The federal government is aiming for the grid to be 82 per cent renewable by 2030.
However, the Australian Energy Market Operator (AEMO) is worried about a lack of new “firming” projects such as pumped hydro, fast-start gas generators and long-duration batteries to support renewables.
There are also concerns that the build-out of more than 10,000 kilometres of high-voltage transmission lines, which will be needed to link up new renewable energy zones and facilitate the flow of clean electrons from one part of the country to another, is happening too slowly amid funding issues and local community opposition.
Origin on Thursday said it did not have a fixed date by which it would make the final decision on whether to fully retire Eraring, stagger its closure, or keep it open after August 2025, but Calabria said it would likely be made about 18 months in advance.
“It does mean that this year is important,” he said.
The comments come as Origin Energy reported it had swung to a full-year profit of more than $1 billion, up from a $1.4 billion loss a year earlier, as it recovers from a turbulent 12 months of power plant disruptions and volatile electricity prices hammering Australia’s east-coast grid.
Stripping out one-off costs, Origin’s underlying profit soared more than 83 per cent across the year to $747 million, surpassing market analysts’ forecasts. The board declared a final dividend of 20¢ a share, up from 16.5¢ last year.
‘Australians will find it hard to swallow that Origin can post such an enormous increase in profits, especially when we hear heartbreaking stories of people going without heating, hot water or sacrificing lighting their homes at night just to be able to make ends meet.’Joseph Mitchell, assistant secretary at the Australian Council of Trade Unions
Last year’s heavy losses for Origin came as problems with Eraring’s coal provider forced it to contract replacement supplies at record-high prices as the war in Ukraine was deepening a global energy crunch, partly offsetting soaring revenue from Origin’s sales of liquefied natural gas (LNG) overseas.
Calabria on Thursday said earnings in Origin’s domestic energy business had improved following the Albanese government’s introduction of a temporary $125-a-tonne cap on the domestic price of intermediate-grade thermal coal, which has driven down the cost of generating power. The company is now expecting further growth in its domestic energy business across 2024.
Suhas Nayak, a portfolio manager with Origin investor Allan Gray, said the profit guidance marked a major turnaround from the “dire earnings they reported a year or two back”. “I think that’s encouraging for shareholders,” he said.
The earnings uplift also came as Origin and other retailers, including AGL and EnergyAustralia, were allowed to increase consumers’ power bills across Australia’s eastern states by hundreds of dollars from July 1 after the regulator raised default tariffs by 20-25 per cent to recover last year’s unprecedented increases in wholesale prices.
Calabria said Origin was now seeing “early signs” that a moderation in prices could drive a reduction in retail power bills when the regulator resets prices around the middle of next year.
“I would still caution that there are a number of months to play out, but it is coming off,” he said.
Origin’s profit announcement on Thursday drew criticism from trade union leaders, who said it would come as a shock to many households that had seen their energy bills rise by up to a quarter since July 1.
“Australians will find it hard to swallow that Origin can post such an enormous increase in profits, especially when we hear heartbreaking stories of people going without heating, hot water or sacrificing lighting their homes at night just to be able to make ends meet,” said Joseph Mitchell, assistant secretary at the Australian Council of Trade Unions.
Origin said it recognised its obligation to assist customers who were the least able to afford rising bills, and had invested $30 million in the past year into hardship support.
“We have significantly increased our support for customers, recognising the cost-of-living challenges across the economy, including the contribution of higher energy prices,” Calabria said. “We are targeting $45 million to support customers in hardship this year.”
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