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Forecast NSW power shortages fuel questions over buying back Eraring plant

As we mentioned earlier, the low-intensity heatwave lapping eastern parts of NSW is expected to push up electricity demand.

There’s a level 1 (low level) alert about a shortage of power in the state for this evening, which will probably be met. As tomorrow’s likely to be warm again (if not quite as hot), there’s also a lack of reserve at level 2 issued for tomorrow evening by the Australian Energy Market Operator.

As it happens, debate is been stoked again about whether NSW should buy back its (and Australia’s) biggest coal-fired power station. Origin Energy’s Eraring plant.

The Australian today reported NSW’s treasurer and energy minister, Matt Kean, as saying: “We will take the necessary steps to ensure there’s enough energy in the system to keep the lights on and drive prices down.” Kean declined to rule “things in or out”.

A spokesperson for Kean’s office has sought to dispel unwarranted speculation:

The government is not considering an extension of Eraring, which is entirely a matter for Origin Energy.

Thanks to the Waratah Super Battery, there is no forecast gap in the reliability standard in 2025

For its part, Origin isn’t budging from their line of February 2022 that Eraring will shut in 2025, seven years early: “We’ll continue to assess the market over time and this will inform the final timing for closure of all four units.”

Bear in mind that it costs $200-250m a year in maintenance work alone – quite apart from the fuel costs – to keep Eraring going, and you get a sense taxpayers might be up for a hefty bill if they did buy back a plant sold by the Coalition in 2013 for about $659m.

Chris Minns, the NSW opposition leader who is hoping to become premier after the 25 March election, offered a cautious response when asked a bit prematurely how much he’d be willing to pay to take back the plant to extend its life.

I’m not going to take anything off the table.

I will not allow the lights to go out in NSW.

Whether or not the government ever would buy back Eraring, Minns has sought to channel the issue into Labor’s broader rejection of the privatisation of state assets.

We’re getting hosed as a result of those privatisations. Don’t elect a government that’s dumb enough to sell [assets like Eraring].

Kean’s spokesperson has described such comments as implying a “dangerous nationalisation of this power station for ideological reasons”.

A major blackout might change the debate but odds must favour Eraring shutting in 2025 at this stage.

Separately, the difference between future wholesale power prices in NSW and Queensland compared with Victoria and South Australia is getting wider, at least according to the latest numbers published by the ASX.

The Albanese government, which has pointed to falling wholesale power prices as proof its energy market intervention to cap gas and coal prices was getting some traction, will be hoping those prices turn lower again.