Eraring Power Station's life will be extended until August 2027 as part of a plan to support the rollout of clean energy infrastructure.
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The deal will not require taxpayers to pay upfront to keep the plant running beyond mid-2025 but the state government could end up paying Origin Energy up to $450million in compensation.
![Eraring Power Station supplies about a quarter of the state's energy needs. Picture by Peter Lorimer. Eraring Power Station supplies about a quarter of the state's energy needs. Picture by Peter Lorimer.](/images/transform/v1/crop/frm/UfX4XDhNMhVpTbjzWZdknP/587d4cba-c445-4b8b-ae49-91a7389dab5e.jpg/r0_0_1004_669_w1200_h678_fmax.jpg)
"We believe this agreement strikes the right balance, with an extension to operations enabling Eraring to continue supporting security of electricity supply in NSW through the energy transition, while making compensation available to Origin in the event economic conditions for the plant are challenging," Origin chief executive Frank Calabria said on Thursday.
Under the agreement, Eraring must generate at least six terawatt hours each year, the equivalent to the typical annual output of two of Eraring's four generating units.
Eraring will maintain its existing workforce of about 220 and commit to a maintenance plan including environmental protections.
The decision to extend the coal-fired plant's life follows this week's warning from the Australian Energy Market Operator (AEMO) that NSW faced increased reliability risks because major renewable energy projects are not coming online fast enough.
Positioned on the southern shore of Lake Macquarie, the 2880 megawatt plant has provided about 25 per cent of the state's energy needs since the early 1980s.
Origin sent shockwaves through the government and corporate sectors in when it announced in early 2022 that it was bringing forward the plant's closure by seven years to August 2025 .
In addition to full time employed at Eraring power station, an estimated 2000 people in the wider community are indirectly employed by its operation.
The state government has been in talks with Origin Energy since last September with the O'Rielly review of the state's energy transition recommended the government strike a deal to keep Eraring running to ensure the grid's stability.
The report highlighted the risk of losing 2880 megawatts of baseload power at a time when the energy grid is undergoing an unprecedented transformation.
Despite that, clean energy advocates have highlighted modelling in recent months to argue that it would be possible to close Eraring in mid-2025 without risking grid stability.
In its report The Lights Will Stay On: NSW Electricity Plan 2024-2030 Think tank Climate Energy Finance found an unprecedented number of clean energy projects had come online over the past six months, which more than offset the loss of 2880 megawatts of coal-fired generation.
![Eraring Power station. Eraring Power station.](/images/transform/v1/crop/frm/UfX4XDhNMhVpTbjzWZdknP/874808fc-ca4a-49a7-ab30-56ad2571bd36.jpg/r0_0_1122_631_w1200_h678_fmax.jpg)
Hunter Community Environment Centre coordinator Jo Lynch said the extension of Eraring was deeply disappointing for communities living with the environmental and health impacts of coal power.
"The NSW Government has shown enough leniency to coal companies and this huge taxpayer handout for Eraring will prolong the ill effects of coal ash waste dumping and toxic stack emissions impacting community health, the lake ecosystem and our climate," she said.
An estimated 900,000 additional tonnes of coal ash waste is expected to be dumped in Eraring's ash dam to accommodate the 2 year extension.
Lyn Fraser, Lake resident and Secretary of Coal-ash Community Alliance said local communities deserved a cleaner environment.
It is not a good policy to throw more public money at the fossil fuel industry. Let's give our community, workers and the environment a better chance for the future. Let's clean up the exposed ash dams and focus on investment in renewable energy".
Research into the health impacts of coal power completed by Dr Ben Ewald in 2018, found that particulate pollution lowers the birthweight of an estimated 200 newborns, contribute to almost 300 premature deaths and 200 diagnoses of early onset diabetes per year.