AGL deemed Liddell, its ageing Muswellbrook coal-fired plant, too outdated to continue operating and will cease power production entirely by the end of the month.
Premier Chris Minns said the government had received assurances by the Australian Energy Market Operator (AEMO) and NSW Energy Department the closure of Liddell would not affect supply.
"The closure of Liddell has been long in the works and its redundancy provisions have been put in place to ensure that the lights stay on," Mr Minns told media on Tuesday.
He said the state faced challenges down the track, including the potential closure of the Eraring power station at Lake Macquarie, which provides roughly a quarter of NSW's fossil fuel-based energy, with an overall generating capacity of 2922 MW.
Origin purchased Eraring from the NSW government in 2013 and last year flagged the potential early retirement of the station as soon as August 2025.
"We know that there's a big challenge coming around the corner ... particularly in relation to Eraring, (with) baseload supply of power in the state of NSW," Mr Minns said.
"But we're getting the building policy pieces in place to ensure we can manage the renewable energy revolution in the state."
Prior to the March state election, Labor committed to creating a $1 billion NSW Energy Security Corporation to partner with industry to create dispatchable energy solutions, including pumped hydro and community batteries.
AEMO executive general manager of system design Merryn York said NSW had a strong pipeline of proposed generation and storage projects, totalling more than three times current generation capacity, as well as essential transmission projects.
"Delivering these investments to schedule will offset planned generation retirements, such as the Eraring Power Station," Ms York said.
NSW Energy Minister Penny Sharpe said renewable projects constructed in NSW since mid-2019 could produce the same or more electricity each year than Liddell, including around 2060 MW of large-scale solar and 840 MW of wind.
"NSW's energy future is mostly renewable power. Renewables are the cheapest power for families and businesses, and they bring us towards a net zero future," she said.
Ms Sharpe said the Liddell plant had served the state well for 50 years and praised AGL for its smooth handling of the closure.
"AGL have demonstrated that industry is thinking about the future and moving towards renewables," she said.
Existing generation capacity in NSW excluding rooftop solar sits about 19,890 MW, according to AEMO, with coal and gas contributing roughly 12,078 MW, and wind, grid-scale solar, hydro and biomass making up 7720 MW.
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