‘NBN 2.0’: Calls for more scrutiny on Snowy Hydro upgrade
By Sophie Boot
Snowy 2.0 is, depending on who you ask, a vital project to shore up Australia’s energy security as the shift to renewables steadily gains pace, or a mysterious white elephant that is actually creating the dearth of investment it seeks to solve.
Some of the split is ideological: how big should the government’s role in energy be? But much of the public debate lies in the unknown, the full details of the business case having been withheld due to commercial concerns.
Snowy 2.0 would expand the scheme’s existing pumped hydro, increasing its generating capacity by 2 gigawatts from the current 4.1GW and adding storage. It’s the latter that its proponents argue makes the project so important as coal factories become less and less viable. At full capacity, Snowy Hydro says, it would provide enough large-scale energy storage to power three million homes for a week.
Worth it?
All that comes at a cost, of course. The publicly available information, via the feasibility study released by Snowy Hydro in 2017, is that the base cost is likely to be between A$3.8 billion and A$4.5 billion; this excludes the cost of land and development, foreign exchange, funding or financing, project management and GST, and the feasibility study notes there “are risks, opportunities and contingency amounts that significantly affect this range”.
On top of that is SnowyLink, the necessary upgrades to shared transmission lines for Snowy 2.0’s power to be sent to Victoria and NSW, estimated at about A$2 billion. Those upgrades aren’t included in the project costing as NSW high-voltage network operator TransGrid, not Snowy, is responsible for the shared network.*
Andrew Blakers, professor of engineering at the Australian National University, says A$4 billion for the project is “a very acceptable price”.
“That’s roughly in the middle of the price band that would be acceptable for pumped hydro of this scale - $2000 per kilowatt with a week of water, that’s a pretty nice price. Of course, I don’t know whether that’s what the final documents will say. $6 billion I think it would probably still be ok; if it was $8 billion, you’d start to think, could we do something else?”
That uncertainty is what drives fear among sceptics of the project. Bruce Mountain, director of the Victoria Energy Policy Centre, says in his analysis the project will cost at least A$8 billion and the market value of the project won’t come close to the amount spent building it.
“I’m afraid it’s NBN 2.0 - it had been subject to no proper scrutiny, no public accountability, no proper assessment.
“It’s not money the government is spending, it’s money the government is taking out of taxpayer pockets. On such a major investment, not least the size of the expenditure but on implications for the rest of the industry, good public process ought to hold this decision up for scrutiny.”
It is unclear whether any of that information will ever be released to the public. Snowy Hydro considers the information commercially sensitive and says that, as it operates in a competitive market, it will protect its intellectual property - though it seeks to release as much information as it can to keep interested parties informed.
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Hydro heaven
Snowy Hydro is not alone in seeing the appeal of pumped hydro as Australia’s take-up of renewables continues to rise. Origin Energy has proposed to double its pumped hydro storage power at Shoalhaven in NSW, taking the total generation capacity to about 500MW; in Queensland, Genex Power has development approval to start building 250MW of pumped hydro at its Kidston project; and Tasmania has identified 14 sites it could use through its ‘Battery of the Nation’ project and says it could start building as soon as 2020.
Blakers says Snowy 2.0 would ideally be one of many. The most robust system for pumped hydro is multiple plants of different sizes in different locations; the whole system needs 15 to 20GW of storage to support 100% renewable energy, he says.
“People talk about Snowy 3.0, Snowy 4.0 being 4 and 6GW, you could even go [Snowy] 5.0. After a while you start to say, there’s too many eggs in one basket here, if something goes wrong - terrorist strike, or massive powerline failure - then you’ve got a real problem. You’d have to think very carefully before we put 6 or 8GW there, but 2 or 4GW - if there is also 4 or 8 or 10GW elsewhere - is not a serious risk of failure.”
Both proponents and critics agree the delay between former Prime Minister Turnbull’s announcement in March 2017, and the final investment decision - which will be made by Snowy Hydro’s board next month - has deterred other construction of pumped hydro. The company has said approvals and detailed plans could be completed in 2019, with full construction forecast to be finished about seven years after the final call is made.
“While it’s hanging there it hugely inhibits other people wanting to construct pumped hydro. If it’s committed, other people will say ‘ok, we’re pretty much right until 2024, I will commit my pumped hydro to start in 2025, or 2026’,” Blakers said.
‘How not to do a major project’
Mountain, on the other hand, says it’s not plausible that the project will be finished that quickly - there are too many unknowns, even to those making the plans, and there has been no independent public scrutiny. And, he says, “while it is being developed it is likely to create a great deal of uncertainty for others who would otherwise invest, but for the prospect of a huge project coming onstream at some indeterminate future point will be put off. There couldn’t be a clearer example of how not to do a major project”.
Politically, it’s popular. As the Coalition becomes ever more interventionist in its attitude towards the energy market - waving its big stick around as it goes - a massive battery in the Snowy Mountains which can provide certainty when the wind doesn’t blow and the sun isn’t shining doesn’t seem so out of place.
Labor, too, seems favourable: shadow energy minister Mark Butler has had the same line since Turnbull announced the plan, that only Labor’s policies would result in enough renewables to make 2.0 a worthwhile investment.
So what now for Snowy 2.0? If the Snowy board does make the decision to push ahead with the project, as is widely expected, it still has some regulatory hoops to jump through. The project was declared ‘critical State significant infrastructure’ by NSW in March, and that set out a planning approval pathway, beginning with environmental impact statements for each phase.
The first of these was produced and open to public submissions from July to August, and Snowy Hydro has given NSW’s Department of Planning and Environment its response to those submissions; the NSW Minister for Planning now needs to give approval before exploration work can begin. NSW’s state parliament has just this week passed a bill enabling Snowy Hydro to lease land it will need if 2.0 gets the necessary approvals.
If it gets through that process, construction could begin as early as 2020 and, on Snowy Hydro’s timings, start generating power by 2024. From there, the company already anticipates it will have the need, and the business case, to expand further - by up to as much as 8GW of capacity.
Before all that, the final decision must be announced at some point next month. Malcolm Turnbull’s legacy may be that he was knifed over his energy policy - but he may also have spurred the creation of a multi-billion dollar battery.
*This story was updated on November 27th to correct the operator of the transmission lines.
Sophie Boot is Australian Energy Daily’s policy reporter. She has covered markets, courts and parliament, most recently for NZ business wire service BusinessDesk.