The Minns cabinet is expected to decide as soon as Monday whether it will spend potentially billions of dollars to keep Australia’s biggest coal-fired power station running for an extra two years to reduce the risk of blackouts.
The New South Wales government would have had to pay Origin Energy as much as $3bn to keep just half of its 2,880-megawatt Eraring plant near Newcastle open for two years, former energy minister and treasurer Matt Kean said on Monday.
“Origin wanted us to take the full risk of the inputs and sell back [electricity] at a fixed cost. They’d take no risk,” he told Guardian Australia. “It was the worst deal ever.”
Kean, who also wrote an opinion piece for the Nine papers, said the $3bn figure had been updated prior to the March state election that was won by Labor.
His successor as energy minister, Penny Sharpe, said she had not seen that figure and was “concerned that any figure has been bandied about”.
“The former energy minister is undermining his own work and the bipartisanship he enjoyed in delivering the Energy Roadmap by throwing unverified numbers around,” Sharpe said.
“It is a bit late for the previous minister to say he cares about taxpayers’ money when the previous government privatised the electricity system, making the transition to renewables harder,” she said.
Eraring was bought by Origin in 2013 for $50m, and included a payment it received of $300m for ending a contract to buy as much as 5m tonnes of coal a year from a developed Cobbora coal project.
In February 2022, Origin gave the market the required 42-month warning that it was planning to close Eraring by August 2025.
Signs that large-scale renewable investment has begun to dry up, combined with warnings from the market operator that the eastern Australian grid faced elevated risks of power outages as soon as this summer, have stoked calls for Eraring’s operations to be extended.
Guardian Australia has been told that there are concerns with Labor about the cost of Eraring’s extension on an already stretched budget – due to be revealed on 19 September – and the extra greenhouse gas emissions that would result.
Kean said a lot of other uses could be made of any money paid to Origin. For instance, $1bn could provide every household with a $300 rebate to help with energy bills. It could also pay for another giant battery – such as NSW’s 850MW Waratah super battery – that is already being built to limit the impact of Eraring’s eventual closure.
Extending Eraring would also carry a “moral hazard” for the government as every power station would ask for a similar package before closing, he said.
At a press conference on Monday, Sharpe insisted she had never seen the $3bn figure and said she had received different information from her department over the weekend.
Sharpe initially said the government “hadn’t looked at the figures in terms of how much it might cost” to keep Eraring open. She then said the government was keeping its choices open and “there are options that suggest it could cost nothing”.
Pressed on whether her comments meant the government was willing to sign a “blank cheque” to Origin Energy for Eraring, Sharpe said: “absolutely not”.
“When it comes to Eraring, and when it comes to renewable energy, it’s a very easy equation – the coal fired power that’s coming out needs to be replaced by renewable energy,” Sharpe said.
Sharpe said NSW would meet its greenhouse gas emissions reductions targets – which the government is about to legislate – including a 50 per cent reduction on 2005 emissions by 2030.
Origin Energy is itself in the process of being taken over by a consortium led by Canada’s Brookfield, an asset manager. Competition regulators are yet to give final approval of the $18bn takeover.
An Origin spokesperson said the company continued “to engage with the market operator, the NSW government, our people, and the local community regarding plans for the plant’s closure”.
“As we stated in the [February 2022] notice, we will continue to assess the market over time, and this will help inform the final timing for the closure of all four units,” she said.