Federal govt lashes Origin over coal exit

"This decision is bitterly disappointing for all energy users – from households to small businesses to heavy industry – who rely on affordable, reliable energy to prosper," federal Energy Minister Angus Taylor said on Thursday.

"It is also bitterly disappointing for the 400 workers and communities in the Lake Macquarie region."

Origin Energy has given the Australian Energy Market Operator notice that it plans to close the Eraring power station earlier than 2032, when the asset was due to come to the end of its technical life.

It cannot happen more quickly than 2025, because of the need to provide notice to the market operator.

Chief executive Frank Calabria said the federal minister, who he spoke to last night, was aware of the plans.

"We both have common objectives to make sure that the transition is navigated successfully," he said on a conference call.

"We're very much focused on what we think is the right think to do over time for customers and Origin."

Mr Calabria said there was "more than enough" supply coming into the electricity market to compensate for the exit of Eraring.

"This is a market in rapid transition."

He said the closure of the plant would see Origin deliver on its commitment to help deliver the emissions-busting goals of the Paris Agreement "well ahead" of 2030.

"We've been clear on our strategy and ambition to lead the energy transition."

The Origin boss said the 240 workers on site would get individual support to reskill or enhance skills, redeploy across Origin, and be first in line for a role in the plant's decommissioning and the battery.

Origin will also work with contractors, is in talks with unions and also plans to set up a local community fund.

Mr Calabria said the influx of renewable sources of energy has changed the market and the traditional baseload coal brought online in the early 1980s will no longer be suitable.

"The reality is the economics of coal-fired power stations are being put under increasing, unsustainable pressure by cleaner and lower-cost generation, including solar, wind and batteries."

A world beyond Eraring will see a lower cost of energy and it will also be less capital intensive to supply, he said.

The Eraring site will remain in the hands of Origin, which will install a large-scale 700MW battery to operate beyond the closure date.

The plans for the battery are "well advanced" as the company sees the site as the best location, but the timing is not yet certain.

Mr Calabria insisted the plans were "not forced" by the state government's energy policy, rather they were driven by the rapid transition and need for security of electricity supply.

He said Origin is working closely with the NSW Government on how the timing of the plant's closure will fit into the overall energy transition roadmap.

Mr Taylor said the early and sudden closure would leave a considerable gap in reliable generation in the National Electricity Market, representing more than 20 per cent of NSW generation output.

"This risks higher prices, like the 85 per cent increase we saw after the closure of the Hazelwood Power Station, and a less reliable grid," he said.

Mr Calabria said the rise of renewable power generation was affecting wholesale electricity prices.

"Our cost of energy is expected to be more economical through a combination of renewables, storage and Origin's fleet of peaking power stations," he said.

Australasian Centre for Corporate Responsibility spokesman Dan Gocher said Origin has finally acknowledged the market signals on power generation.

"Origin's plans to install a 700MW battery at the Eraring site confirm that the future of the electricity grid will be dominated by renewables supported by batteries and pumped hydro - not gas," he said.

Origin expects the cost of restoring and rehabilitating the Eraring site will be about $240 million.

Eraring is a 2880MW black coal plant and has four units. It became fully operational in 1984.