After 52 years of operation, the NSW Liddell power station officially shut down last 28 April. With Liddell’s closure, NSW’s transition to a green energy future is in full swing. First announced in 2015, NSW had seven years to ensure there is enough replacement capacity once Liddell is retired. Since then, NSW has steadily built the state’s installed renewable and energy storage capacity and imported energy from VIC and QLD, as highlighted in our last Chart of the week.
In this Chart of the week, we are looking at the expected closure date of Eraring, the next coal plant to retire in NSW, and potential impacts on prices and import of energy to NSW. Announced back on 17 February 2022, Origin Energy’s Eraring power station is set to close by August 2025. Unlike Liddell, which shut down Unit 3 one year ahead of the other three units, Eraring will shut down all four units (equivalent to 2,880 MW) at the same time. Cornwall Insight Australia conducted simulations to determine the amount of renewable energy and energy storage capacity required to replace Eraring, considering the significant capacity that will go offline three years from now.
Figure 1 below shows our forecast capacity built and retired in NSW since FY2023 and the corresponding average price for each year. As can be seen in the chart, Eraring’s retirement applies upward pressure on price. This impact is partially offset by new entrant wind and energy storage capacity.
Eraring functions as a base load power plant and provides power during evening and early morning peak periods. We anticipate that renewable sources such as wind, and energy storage will replace the retiring plant during the peak periods. The middle of the day period is expected to be served by the projected significant increase in rooftop PV installations, some new large-scale solar installations, and energy imports from QLD.
We also modelled a staggered retirement option where one Eraring unit is retired in FYE 2026, and the remaining three units are staggered across FYE2027 and FYE2028. This staggered retirement approach provides more time for NSW to develop the capacity to replace almost 3 GW of coal-fired power capacity.
Figure 2 compares the average time-of-day price and the average NSW net import reduction in FYE 2026 between the two retirement options. Based on this chart, unsurprisingly, a staggered retirement schedule results in a lower NSW price and reduces net imports to NSW.
Timely delivery of schemes such as the NSW Electricity Infrastructure Roadmap (EIR), Long-term Energy Service Agreements (LTESA), and major projects such as Snowy 2.0 and Project Energy Connect are paramount to maintain reliability and affordability of energy as NSW looks to meet its decarbonisation targets.
Our Benchmark power curve is a 30-year energy price forecast which considers market developments and state policies and provides a more in-depth market analysis of the transition towards decarbonisation. For more information on our price forecasts, please contact us at enquiries@cornwall-insight.com.au.
