Electricity demand is expected to increase 16 per cent in the national electricity market by 2030 driven by electric vehicle uptake and AI-powered data centres. Australia’s target of providing 82 per cent of electricity from renewables requires an extra 34 gigawatts to be added to the grid by 2030. In the decade following, a similar amount would need to be added to meet underlying demand, Calabria said.

Origin acquired a 20 per cent stake in UK energy retailer Octopus in 2020 for just over $500 million, and adopted its transformative Kraken software as its retail platform, giving it a head start in streamlining customer billing and providing tools to create a “virtual power plant” – pooling, managing and selling the energy stored in its customers’ home batteries or electric vehicles.

The Octopus platform’s success and the question marks over its true value in Origin’s portfolio helped scuttle Canadian funds giant Brookfield Asset Management’s $20 billion takeover bid for the retailer that came unstuck late in 2023.

Another competitive advantage is Origin’s gas-fired generation fleet, which is “very difficult and costly to replicate”, Calabria said. Gas plants will be critical to smoothing energy supply when the sun isn’t shining and the wind isn’t blowing, the company maintains.

Origin said on Wednesday it would up its target for ordinary financial year dividend payouts to a minimum of half of its free cash flow, increasing the payout from its previous payout ratio between 30 per cent and 50 per cent.

Investors reacted cautiously to the company’s plans, with its stock sliding 1.44 per cent to $9.94 in afternoon trade.

The company reached an agreement last month with the NSW government to extend the operational life of Australia’s largest coal-fired power generator, Eraring, after half a year of confidential discussions.

Coal power stations have faced mounting challenges from the proliferation of low-cost wind and solar energy, which is driving down daytime electricity prices and squeezing profit margins for traditional generators.

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The deal secures Eraring’s operation until at least 2027, a two-year extension from its previous slated closure, and will minimise the risk of blackouts from grid instability as renewables are added to electricity networks. Origin will be compensated by up to $225 million annually if the plant operates at a loss, or it will share a portion of operating profits with the government, capped at $40 million, if it turns a profit.

Calabria said that as renewable increased its share of Australia’s energy mix, the volatility currently seen in wholesale electricity prices was likely to continue, providing opportunities for Origin’s investment in large-scale battery storage, which can sell electricity back to the market at peak prices.

“We also believe the price variability is expected to persist over the longer term,” he said. “In 2018, it was a $90 average intraday spread. Today it’s $290 on an average basis for the 2024 year to date. Twenty-five per cent of all days in 2023 had a negative price.”

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