NSW could face future energy supply challenges as one of the state’s major coal-fired electricity producers prepares to power down.

“The challenges are big but the work can be done,” NSW’s new Energy Minister Penny Sharpe told reporters from Nowra on Monday.

“We do have a challenge also, with prices rising over time.”

The Liddell Power Station in Muswellbrook in the Hunter region will close next Tuesday, after owner AGL delayed its planned closure by a year.

The shutdown was initially flagged by AGL in 2015 after the operator found the plant had “reached the end of its technical life”.

The closure will mean there is 1260MW less electricity in the NSW grid, as three of its remaining seven power units are decommissioned.

Ms Sharpe said the grid would manage as it lost input from Liddell, but the closure could present difficulties for base load power requirements.

“The grid can cope. Yes, it is more challenging. But this has been a planned closure for over seven years, so it’s not a surprise,” she said.

“There has been renewables coming online, as well as the other work that’s being undertaken.

“We need to make sure that households and businesses in particular can continue to stay connected to the grid, and can continue, hopefully, to not pay very high prices.”

The government has also not ruled out intervening to keep another ageing coal station, Eraring, near Lake Macquarie, open beyond its scheduled closure date of 2025.

Ms Sharpe said the government would work with the operator in the coming years.

“The issue here with Eraring is that we need to make sure that the lights stay on in NSW,” Ms Sharpe said.

“That’s my number one job and the job of the Minns Labor government.

“We have said that all options are on the table as we make this transition, so we’re not saying that we’re going to be closing it down in 2025.”

This work would take place at the same time the government works on renewable energy technologies, including battery storage technology, she said.

By Phoebe Loomes in Sydney