The NSW government has accepted a recommendation to consider extending the life of the Eraring coal-fired power station near Newcastle beyond 2025.

The recommendation is contained in a review by energy and public policy specialist Cameron O’Reilly, which was released by Premier Chris Minns on Tuesday.

The review which says it’s reasonable to seek more time on the plant’s closure to avoid risking energy reliability and cost increases.

“Given the proposed closure of the Eraring generator is now less than two years away, the NSW Government should consider new modelling on the affordability impacts of the proposed closure of Eraring in August 2025,” the review says.

It also recommends that “engagement begin with Origin Energy on an extension of the Eraring coal plant beyond 2025”.

The government has accepted both recommendations.

“The Check Up finds there will be reliability challenges for NSW in the next couple of years,” Premier Chris Minns said in a statement.

“The government will engage with Origin on its plans for Eraring”.

Roadmap reconsidered

The state government’s November 2020 electricity infrastructure roadmap sets out a framework for the replacement of coal-fired power stations and the transition to clean energy.

In February 2022, Origin Energy notified AEMO it intended to close Eraring “no sooner than” August 2025.

The notice gives Origin Energy the option to close the plant by that date, but doesn’t require it to.

Mr O’Reilly was given the task of reviewing the current energy supply and reliability in the context of changes since the roadmap was released, including higher global commodity prices and delays in the delivery of major electricity infrastructure projects.

The review included whether the planned 2025 close of Eraring would have any negative effects.

“The Check Up makes clear that Origin Energy has a strong commercial interest to defer the closure of Eraring,” the government says in its response to Mr O’Reilly’s report.

It also says AEMO’s latest advice indicates that consumers face reliability risks if new network and firming infrastructure doesn’t arrive on time.

“A decision by Origin to temporarily extend its timeline for phasing out Eraring could provide NSW with a buffer to manage these risk,” it says.

“Appreciating that NSW has a privatised energy market, the NSW Government will engage with Origin Energy to clarify its plans for Eraring.”

Replacing Eraring on time ‘a challenge’

Mr O’Reilly said Around 70 per cent of NSW’s delivered electricity comes from four coal generation plants scheduled to retire in the next 10 to 15 years. Eraring is the largest of those plants.

“Under any circumstances, replacing a plant like Eraring … would have been extremely challenging,” he says.

 “With just three-and-a-half years’ notice, it is almost impossible without reliability and affordability impacts.”

He also noted that closing Eraring by 2025 will require fast-tracking infrastructure builds.

“Given the multiple headwinds, the likelihood of success is low. The cost to consumers could be high. Long-term social license in the REZs could be jeopardised,” he says.

“In other sectors, building infrastructure in 3.5 years to replace a critical asset would not be possible. If there was a projected water shortage, a new desalination plant could not be commissioned in such a timeframe. With the amount of notice given on Eraring’s closure, it is reasonable to seek more time.”

Origin Energy said it would will continue to engage with the NSW Government to find an acceptable path forward that could help navigate the economic challenges facing the plant, as well as risks to energy supply.

“The Eraring closure notice provided an important signal to the market about progress towards our nation’s climate goals, and Origin does not shy away from the need to exit coal generation as soon as there is sufficient renewables,” a spokesman said.