Eraring power station in Australia. Credit: Harlz via Getty Images.

The New South Wales (NSW) Government is set to announce that it will extend the operation of Eraring power station for as long as four more years.

Taxpayer money will be used to subsidise Australia’s largest coal-fired power station for two years, with permits to run for two more, several people briefed on the plans told the Guardian.

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On Friday, the cost of the subsidies is due to be discussed by the NSW Government’s executive review committee.

Origin Energy, the Sydney-based energy company that runs the plant, does not have long-term contracts for the operation of the four-unit facility. The subsidy would be used to cap the price of coal and to expand the plant’s coal-ash dams.

Speaking to the Guardian, a spokesperson for Australian Energy Minister Chris Bowen said: “The NSW government believes Eraring should close not a day earlier or a day later than it is needed. Both governments are focused on ensuring a reliable and affordable transformation of the electricity sector.”

The Eraring power plant, located 120km north of Sydney, has a generating capacity of 2,922MW and accounts for 25% of NSW’s power requirements. In February 2022, Origin notified the Australian Energy Market Operator of the potential retirement of Eraring in August 2025.

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In September, the NSW Government entered talks with Origin to discuss extending the plant’s life. At the time, the NSW Government said that the move was motivated by the need to shield Origin customers from volatile global energy prices and maintain sufficient supply.

NSW Premier Chris Minns said: “One of the biggest challenges facing NSW is ensuring that we can keep the lights on, while managing the biggest change in energy mix and consumption in the shortest period of time in our nation’s history.”