Premier Minns to extend the life of Eraring to keep the NSW lights on!
Introduction
The NSW Government has been spooked by recent AEMO findings around reliability and possible blackouts. The Government’s independent review, NSW Electricity Supply and Reliability Checkup, recommends the temporary extension of the Eraring coal plant, which is due to close in 2025.
The Premier has accepted that Eraring needs to stay open during 2025/26 to safeguard electricity supplies and prevent soaring increases in electricity bills. It’s now up to the NSW Government and Origin to negotiate some reasonable terms.
The Cost of Eraring – Coalkeeper
The deferral of Eraring closure was considered by the former NSW Coalition government at a cost of $3 billion. It will be interesting to see where Origin’s negotiation with the Minn’s Government land. The NSW Treasurer has already foreshadowed tough negotiations with Origin. Will extending Eraring influence the market and stop the price gouging or will it translate to increases in consumer bills?
Surging Demand and Strong Prices
Demand for electricity will grow as we progress towards NetZero:
- as we transition 20 million ICE vehicles to EVs; and
- as we electrify 10 million homes.
The anticipated hot and dry El Nino event will also drive up energy demand this summer and risk supply. There is nothing on the horizon that will take pressure off prices. Only significant and uninterrupted supply of renewable energy will put downward pressure on electricity prices over the long term.
Magnitude of Change
70% of NSW’s electricity comes from four coal generation plants that are scheduled to retire in the next 10 to 15 years. Each time one of these plants is about to retire, there will be pressure on keeping it running a little longer. The main reason for this is that the speed of transition is not and will not be adequate, due to the magnitude of what needs to be done within the required timeframe.
Pipeline of Proposals
There is a pipeline of project proposals of 284GW across the country, which is four times the current total capacity of 63GW in Australia’s NEM. There are more than enough renewable proposals in the pipeline to replace Eraring’s capacity. The NSW Government’s focus should be on renewable project approvals and laying the groundwork for connecting renewables to the NEM.
Delaying the Eraring closure should not create any delays in moving towards reaching 82% of renewables in the NEM by 2030. Although, the news coming out of the REZs is not great with cost blowouts and three-year delays to be expected.
Forced Outages
Last year, forced outages of ageing coal plants left the grid short of coal generation and in July unexpected outages reached almost one third of the NEM’s coal capacity. Recent history shows us the old clunkers are not reliable, so why extend their life. With the fleet getting older there is greater risk of outages.
The Politics of Energy Pricing
We saw the wholesale electricity price reach unprecedented levels after the Ukraine conflict commenced. This exposed our households and made the politicians life difficult, as everybody wanted to know why the price of Australian gas and coal was going through the roof because of the conflict in Ukraine.
About Us
Ravim RBC is a strategic consultancy assisting councils with aggregated procurement of renewable energy and their progress towards NetZero.
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