Origin Energy Ltd (ASX: ORG) shares were one of the worst performing out of the entire S&P/ASX 200 Index (ASX: XJO) in morning trade on Thursday.
It's difficult to discern what exactly is causing the company's shares to fall today. Mainly because two significant pieces of information have been released to the market this morning.
Firstly, the energy provider released its half-year results, posting a loss of $131 million. However, the news hitting headlines today is the company's proposal to bring forward its exit from coal-fired power generation to 2025.
Origin's coal power plants to go up in smoke in 2025
Investors are mostly sitting on the pessimistic side of the fence today amid the company's latest stride toward net-zero emissions. Although, shares have bounced back strongly throughout the session.
According to the release, Origin Energy wants to get out of coal-fired power generation sooner rather than later. The plan is to move the retirement of Australia's largest coal-fired power plant, Eraring power station, to August 2025.
Notably, the closure of Eraring would be seven years ahead of its previous plans. However, Origin shares are not responding positively to the news.
The ASX-listed company has submitted its notice to the Australian Energy Market Operator (AEMO) today. The AEMO introduced this notice period in 2018, requiring large electricity generators to provide a minimum of three years' notice before a closure.
A three-year window will enable other sources of power generation to make up for any supply losses to the grid. In this situation, the loss would be substantial. Eraring currently supplies around a fifth of New South Wales' energy, offering 2,880 megawatts of capacity.
Providing reasoning for the proposed early closure, Origin CEO Frank Calabria said:
[…] the cost of renewable energy and battery storage is increasingly competitive, and the penetration of renewables is growing and changing the shape of wholesale electricity prices, which means our cost of energy is expected to be more economical through a combination of renewables, storage and Origin's fleet of peaking power stations.
Origin sharesholders could soon be battery-backers
In place of the power plant, Origin is proposing a "well-progressed" plan for a battery of up to 700 megawatts. In addition, the company is looking to bring online more renewable infrastructure, including the Shoalhaven pumped hydro scheme.
Early retirement of the large-scale coal-fired plant will put Origin in good step for its net-zero emission targets. However, not everyone is as excited about the announcement.
Austalia's federal energy minister, Angus Taylor, has voiced concerns over electricity affordability for households. This comes after Taylor shared similar worries with AGL Energy Limited (ASX: AGL) and its plan to bring forward power station closures as well.
Origin shares have been benefitting from the rise in natural gas — which is touted as a cleaner alternative to coal. The Origin share price is up 30% in the past 12 months.
Today's announcement marks a milestone in the energy giant's pivot away from coal.
