Already a subscriber?A fortnight ago, on a pretty benign autumn day, NSW got a glimpse of what its electricity market could look like without Origin Energy’s Eraring power station.Eraring, the state’s biggest generator, was running at half-throttle. Two of its four units were offline on unplanned outages. Nearby, there were also problems at another coal-fired power plant, Vales Point.
If Eraring makes money, Origin will pay NSW 20 per cent of the agreed profit, capped at $40 million a year. Think about that deal: NSW’s downside is $225 million a year, while the upside is only $40 million.That’s the price of what NSW Premier Chris Minns calls “certainty for households and businesses”. No one wants to see higher power prices – bills are supposed to be going down, not up, in the coming financial year.
The deal came after the Australian Energy Market Operator made it clear that NSW’s energy transition is slipping because of delays to battery projects, transmission developments and higher than forecast demand, particularly in the summer peak.For Origin shareholders, the good thing is that NSW is taking most of that downside risk. Eraring can make money, but it is ageing, costly to keep online and reliant on affordable coal supply. It is an insurance policy to keep the plant open.