Eraring Power Station cash grab shows energy must be publicly owned

May 31, 2024
Eraring coal-fired power station, originally slated to be decommissioned next year, will be kept open with public funds. Photo: Wikimedia/Webaware/CC0 1.0 DEED

In yet another public hand-out to fossil energy, New South Wales Premier Chris Minns announced on May 23 that Labor had struck a $450 million deal with Origin Energy to keep Eraring coal-fired power station open until 2027.

Following the 2022 decommission of Liddell Power Station, Eraring was next in line, supposed to be wound up by mid-2025.

Eraring, Australia’s largest power station, was once publicly-owned. Built on the western shore of Lake Macquarie for $1.65 billion, it was opened in 1984 by then NSW Labor Premier Neville Wran.

Kristina Keneally’s Labor government started privatisating electricity in 2010, selling the first tranche for $5.3 billion. The Coalition passed laws in May 2012 to sell the NSW-owned generators.

Eraring was sold to Origin Energy in 2013 for $50 million — around 3% of what it cost to build — giving private energy corporations license to profiteer from dirty energy.

As energy prices soared, the corporation boasted in February it had more than doubled its profits over the first half of 2023–24.

Climate experts say Labor’s decision on Eraring runs counter to its claims to support renewable energy targets.

While the exact impact on carbon emissions will not be known until the end of the year, Climate Council economist Nicki Hutley said on May 23 that Labor’s decision fails on “health and well being of communities”, adding that taxpayers will “bear the financial burden of this decision”.

Dr Jennifer Rayner, also from the Climate Council, said Labor is ignoring the science and that governments must “throw everything at accelerating the shift to renewable energy sources like wind and solar”, also to create new clean energy jobs, lower power bills and tackle the climate crisis.

Rayner pointed to the Australian Energy Market Operator’s (AEMO) latest report which said solar, wind and storage projects in the pipeline “can more than meet the electricity needs of every home and business in NSW”.

The NSW government said Eraring has to stay open an extra two years to ensure stable power supply.

But that is disputed by energy experts, including Clean Energy Finance director Tim Buckley, who said in January that NSW will have enough capacity to cover the exit of the 2,880-megawatt Eraring station, then set down for decommissioning in August 2025.

As renewable energy floods the market with cheap electricity for longer periods each day, it means the window for coal-fired power stations to be able to sell power at a profit is declining.

The profitability of coal-fired generators will deteriorate rapidly as bigger amounts of wind, solar and storage are integrated into the grid.

Making the transition to 100% renewables as fast as possible, is not only good climate policy, it might even help energy corporations, many of which have a foot in both fossil and clean energy camps.

However, energy corporations seem determined to ensure the transition is as chaotic and as drawn out as possible.

As the 24 aging coal-fired power stations across Australia become financial albatrosses, their owners are likely to take desperate measures to stem their losses.

Private operators will be tempted to engineer shortages to ensure power is sold at the maximum regulated price (currently around $16,600 per megawatt hour) compared to a typical price of $50-200 per megawatt hour.

It would make a lot of sense to renationalise coal-fired power stations to manage the energy transition.

If coal-fired power stations were publicly-owned, governments could run them at cost price (and incur short-term losses) during the transition to 100% renewables. Governments know how to run loss-making services as part of supporting the health of the economy.

Corporations, on the other hand, are programmed to pursue profit ahead of all other considerations. They will try to cover their losses on the coal-fired part of their operations through higher prices and, at the same time, demand governments throw cash at them.

The NSW government’s deal with Origin is an example of the “throwing cash” tactic.

Subsidising loss-making coal-fired generators twice — through higher bills to consumers on one hand and cash handouts by governments on the other — is not going to fly.

The phasing out of coal fired power will be a lot easier to do if energy companies are brought back into public ownership.

This would ensure that the phase-out can be planned, meaning that energy workers could keep their jobs in new sustainable industries, energy prices would remain under control, and there would be no blackouts.

The sunset of coal-fired power, even in a neoliberal marketised energy system, is coming.

The only question is how much more of our money will governments hand over to corporations to run power stations producing dirty energy for maximum price?

[Check out Rising Tide’s film The First Wave and make plans to join the blockade over November 19–28.]

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