Drive the F3 past Dora Creek of a still morning and you can usually still pick the plume over Lake Macquarie. Eraring hasn’t stopped, and now it isn’t going to for a while yet. The short version: Australia’s biggest coal-fired power station, which Origin Energy once planned to shut in 2025, is now contracted to keep running to August 2027, and there’s a very large battery going up on the same fenced perimeter while everyone argues about what happens after that.
Agree on the units first, because this story gets mangled more than most. Eraring is four units, roughly 2,880 megawatts of nameplate capacity between them, on the northern shore of Lake Macquarie in the NSW Hunter region. At full tilt it has supplied something like a quarter of New South Wales’ electricity on a given day, more some winters. That is not a rounding error in the state’s supply-demand balance. It is the single biggest chunk of dispatchable capacity the NSW grid has, and it has been since it was commissioned in the early 1980s.
Why 2025 became 2027 #
Origin Energy announced back in 2022 that it intended to close Eraring in 2025, seven years ahead of the closure date it had originally flagged to AEMO. The company’s own reasoning was straightforward: an ageing coal plant losing money against cheap rooftop and grid-scale solar in the middle of the day is not a business Origin wanted to keep running past its economic life, and it said so plainly in its own market filings at the time.
AEMO’s Electricity Statement of Opportunities modelling, and its Integrated System Plan work more broadly, kept flagging the same problem though: NSW’s replacement pipeline of renewable energy zones, transmission and storage was not going to be ready in time. I wrote about that gap at length in NSW’s energy transition: the coal exit meets a REZ rollout running late, and nothing in the past year has really closed it. Transmission approvals in this country move at their own pace regardless of how urgently a coal unit wants to retire, and NSW’s REZ build has been no exception.
So in April 2025 the NSW Government and Origin struck an agreement, brokered with NSW Minister for Energy Penny Sharpe front and centre, to keep Eraring open to 2027. It wasn’t really a negotiation between equals. NSW needed the capacity, Origin needed cover for running an asset it had already committed to walking away from, and the deal reflects that.
What the deed actually does #
The arrangement is a commercial risk-sharing deed rather than a straight subsidy, and it’s worth being precise about that distinction because it gets flattened in a lot of coverage. Origin keeps operating and dispatching Eraring as normal. If the plant runs at a loss over the extension period, the NSW Government picks up a share of that loss above an agreed threshold, up to a cap. If Eraring instead turns a healthy profit, because prices spike or the plant runs harder than expected, the government takes a cut of the upside too. It’s an underwrite, not a blank cheque, and Origin has been careful in its own disclosures to describe it that way.
Whether it was the cheapest way to buy two extra years of reliability is a fair question, and not one I think has a clean answer yet, because we won’t know the final bill until the deed period is closed out and both sides’ books are reconciled. My own read is that the NSW Government didn’t have a lot of better options on the table by early 2025, given how far behind schedule the transmission and storage build had fallen. That’s a value judgement, not a fact, but I’ll stand by it.
The battery going in next door #
The more interesting long-term story is what Origin is building on the same site. The company has been staging a large battery, the Eraring Energy Storage System, on land adjacent to the existing plant, with the first stage already energised and later stages under construction. It sits in the same tier as some of the bigger battery projects now spreading across the NEM, the kind of build I’ve covered in Akaysha Energy: BlackRock’s big battery bet on the NEM, and it points to where Origin actually sees Eraring’s site heading once the coal units stop: as a grid connection point and a battery paddock, not a coal plant.
That’s not a small thing. The transmission connection at Eraring is one of the more valuable pieces of NSW grid infrastructure, feeding into the Hunter and Central Coast networks that a lot of Sydney’s demand ultimately draws on. Reusing that connection for storage rather than starting from scratch somewhere else is one of the more sensible pieces of coal-to-clean transition planning going on in this country at the moment, and it deserves more attention than it gets relative to the closure headline.
The reliability question nobody’s fully answered #
Whether a battery on the same site actually substitutes for Eraring’s output is a different question again, and I’d push back gently on the way it sometimes gets presented as a like-for-like swap. A battery discharges for a few hours at most; Eraring, whatever else you think of it, can run flat out for days. My piece on whether big batteries are being built for the wrong job goes into this in more detail, but the short version applies here too: storage is brilliant at smoothing the evening ramp and soaking up the midday solar surplus, genuinely useful work that coal plants do badly. It is not a substitute for weeks of low wind and cloudy skies in a cold snap, which is still the scenario that keeps AEMO’s planners up at night.
I’ll admit a small personal bias here. I spend more evenings than I probably should out past the hills with a decent pair of binoculars, and the thing you notice watching the sky clear just as the sun drops is how fast the grid’s job changes in that same hour, solar production falling off a cliff while everyone gets home and switches the aircon or the oven on. That ramp, not the 3am trough, is where firm capacity earns its keep, and it’s exactly the window Eraring’s remaining units are being asked to cover while the batteries and transmission catch up.
What it means for the rest of the NEM #
Eraring’s extension isn’t happening in isolation. It sits alongside AGL’s own staged coal exit, which I covered in AGL Energy: coal’s biggest landlord trying to check out early, and the broader pattern I laid out in is Australia closing coal faster than it can replace it?. The pattern across the NEM is fairly consistent: owners want out, the economics of ageing coal against rooftop solar are genuinely bad, and state governments keep finding themselves as the last line of defence against a reliability gap nobody quite planned for. AEMO’s own Electricity Statement of Opportunities, published annually, has flagged reliability risk in NSW specifically tied to the pace of the Eraring exit and the REZ build behind it, and that document is worth reading directly rather than through a press release if you want the actual numbers rather than the spin.
Where this leaves 2027 #
Nobody I’ve spoken to in the sector treats August 2027 as an especially firm date, in the sense that if the transmission and storage pipeline is still short of where it needs to be, there will be pressure for a further extension, deed or no deed. Origin has been careful not to rule that out publicly, and NSW’s own planning documents hedge on it too. The battery build is the tell here: you don’t stage several hundred megawatts of storage next to a coal plant you’re confident will close cleanly and on schedule unless you’re also hedging your bets on the schedule slipping.
So the honest state of play, as of now, is this: Eraring is running, it’s contracted to keep running to 2027 under a cost-sharing arrangement between Origin and the NSW Government, a large battery is rising on the same site to take over part of its job, and the actual closure date remains, in my view, more of a working assumption than a certainty. Worth checking back in on this one before the extension period is even half done.
— Tom Fitzgerald, Baseload & Fuels Correspondent
Photo by Declan Sun on Unsplash