NSW Treasurer and Energy Minister Matt Kean has vowed to "keep the lights on" after Origin Energy's shock announcement that it planned to close Eraring power station in mid-2025.
Mr Kean said on Thursday that the government would "work with industry partners" on building the "biggest battery in the southern hemisphere" to help secure power supply before Eraring closed.
The 700-megawatt transmission battery would release grid capacity so Newcastle, Sydney and Wollongong consumers could access more energy from existing electricity generation.
"The battery will act as a shock absorber to free up more capacity in the system," he said.
Mr Kean said NSW had the highest energy security target in Australia.
"AEMO [Australian Energy Market Operator] has considered our plan and have said that we will meet our energy security target even with the closure of Eraring in 2025. In fact, I want to make it very clear ... our system will be more reliable in 2025 than it was two years ago.
"We know that the best way to deal with electricity price increases in our system is to build more supply, and our Electricity Infrastructure Roadmap will ensure that that is exactly what occurs.
"That can be wind, solar, pumped hydro, gas."
The government will spend $84 million to bring forward new capacity.
Mr Kean said he wanted "all our power stations to run until the end of their lives, giving us enough time to replace that capacity", but the government had accelerated its roadmap to maintain supply and keep prices down.
Eraring is the largest coal-fired generator in Australia at 2880 megawatts. Its closure will follow the loss of AGL's Liddell plant in 2023.
AGL also announced last week that it could close its Bayswater plant in 2030, five years earlier than planned.
Delta Electricity's Vales Point plant, at the southern end of Lake Macquarie, is due to close in 2029.
"We'll obviously continue to watch what the market does, but we have been and continue to invest in our plant so that it remains a reliable asset," a Delta spokesman told the Newcastle Herald on Thursday.
I suspect we're all about to get mugged by reality.- Snowy Hydro CEO Paul Broad
Snowy Hydro chief executive Paul Broad, whose Commonwealth-owned company is building the 660MW gas-fired peaking plant at Kurri Kurri in time for Liddell's closure, said he was as "shocked as everybody" by the Origin announcement.
He questioned whether NSW had enough shovel-ready renewables projects to compensate for the loss of two major generators in the next three and a half years.
"I suspect we're all about to get mugged by reality," Mr Broad told the Newcastle Herald.
"With that closing and Liddell closing, I can't point to what's going to replace it. Maybe in 10 years' time I can, but I can't in the short-term."
The former Novocastrian said Eraring was one of the better performing plants in NSW and he had wrongly assumed it would stay open until 2032.
"We and everybody else are going to have to sit down calmly and work through the implications of that and ... the role we can play to firm up the renewables."
Mr Broad said Mr Kean's "super battery" would help frequency control in the grid but would deliver "very little energy". Origin plans to build a separate 700MW storage battery on the Eraring site.
Hunter Business chief executive Bob Hawes echoed Mr Broad's concerns about the "uncertainty" of electricity supplies.
He said Hunter businesses were reporting "huge gaps and risks" in accessing reliable, dispatchable power supply at affordable prices".
"Bringing forward closure of the state's largest coal-fired energy supplier will only widen that gap and will create more uncertainty for the market," he said. "The timing to transition from coal-fired power to renewables as the underlying source of energy is still way off.
"Quite frankly, the commercial interest in renewable baseload power supply that has been reported in recent days is just that: registrations of interest, not power projects ready to commission in three years.
"Our conversations with industry over at least the last five years have highlighted concerns about continuity of power supply for big power users, many of which are medium-sized enterprises.
"The dial hasn't shifted very far in five years and today's announcement makes this even more difficult."
Mr Hawes said the 700MW transmission battery was welcome but "far from a like-for-like replacement".
"We do have businesses out there right now that will be very concerned about what the future holds and whether power supply certainty and affordability will fall off a cliff in 2025," he said.
But Monash University Energy Institute director Professor Ariel Liebman said the 2025 shutdown was "unlikely to impact power supply to customers" as other projects, including Origin's proposed new big battery and Snowy Hydro 2.0, would compensate for the loss.
"Understandably, people are concerned about the impact on wholesale and thus retail electricity prices and on system stability in the transition," Professor Liebman said.
"Price increases for a couple of years after the shutdown are unavoidable but are designed into our deregulated wholesale market.
"However, higher energy prices are not likely to last long as this announcement will bring forward several large wind and solar projects. It may even finally kick off an Australian offshore wind revolution."
He called for more research on managing grid stability during the transition to renewables.
"Australia is now one of the world leaders in solar and wind power generation as a percentage of electricity production, so there is little to no global expertise on how to manage stability in grids dominated by renewables.
"Australia can take the lead in developing a whole new industry by backing a big push into this research and development space."
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