Snowy Hydro pumps up the case of 2.0 before more delays, cost blowouts
Snowy Hydro is pushing back against critics of its controversial energy project with new modeling showing the massive pumped hydro project will be needed to contain energy prices in coming years as renewable energy floods the power grid and coal plants close.
Dennis Barnes, Snowy Hydro’s chief executive, acknowledged cost blowouts above the current $12 billion price tag were inevitable and hinted that ongoing delays could mean the project would fail to meet its 2028 completion date.
But he told this imprint that an independent study of the power grid showed that Snowy 2.0 would fill a gap that cannot be filled by large-scale batteries and would actually deliver huge savings on average wholesale electricity prices.
“Because some commentators don’t like the energy transition or don’t like its policies, I have to ignore all that and present the facts about this project,” Barnes said.
“I struggle to see how the energy transition can be done without it, and our people are doing good work. But it’s complex, remote and on a globally significant scale.”
Costs for Snowy 2.0 rose from an initial estimate of $2 billion to more than $12 billion. Snowy has launched an audit due to be reported this month and Barnes acknowledged further price increases were expected.
The report from consultancy Baringa Partners, which will no doubt be questioned by critics of Snowy 2.0, found that increasing amounts of energy storage will be needed to feed the grid in the coming years as coal plants reach the end of their life and renewables come online.
Wholesale energy prices rise during those rare but inevitable weeks when calm weather combines with cloudy weather, known as a dark lull, and the amount of wind and solar energy supplied to the grid decreases.
The study projected a hypothetical scenario for a dark doomsday week in 2041 when coal power runs out and found that the cost of wholesale electricity on a grid with Snowy 2.0 would be about $7,000 per megawatt hour cheaper than an alternative grid powered by a wide range of large-scale batteries.
Replacing Snowy 2.0’s capacity with batteries would cost more than $100 billion and the power grid would face increased risks of outages as coal is phased out, Barnes said.
“Every year or two there is a three or four day outage in wind generation and, simply put, the batteries run out of juice to handle these situations. About every 10 years there is a seven day renewable outage and without Snowy 2 storage levels there is an impact on price and, although we don’t want to be too sensational, grid reliability is at risk.”
Snowy Hydro uses excess electricity to pump water up from a reservoir at the bottom of a hill, from where it flows down and turns turbines.
It can provide power on demand when the grid needs it most, supporting renewable energy sources when the wind isn’t blowing and the sun isn’t shining.
Snowy 2.0 is a major upgrade to the existing Snowy plan; It brings the total production capacity to 375,000 megawatt hours, enough to power 3 million homes for a week.
Leading critics Bruce Mountain of the University of Victoria’s Center for Energy Policy and former energy executive Ted Woodley have argued that Snowy 2.0’s budget blowout has made the project uneconomic, arguing that battery technology is more flexible, cost-effective and better suited to meeting rapidly changing energy demand.
The possibility of an explosion beyond 2028 in the timeline poses a political risk for the Albanian government, which faces an election that year and has committed to an ambitious renewable energy target of 82 percent clean energy on the grid by 2030, contingent on the timely completion of Snowy 2.0.
Former prime minister Malcolm Turnbull commissioned Snowy 2.0 in 2017 and announced a 2021 deadline.
The official price tag was changed to $12 billion in 2023 and the deadline was extended to 2028. Snowy asked construction contractor Webuild to carry out another cost assessment in October last year and many observers expected a new boom.
This imprint reported last month that workers on the project believed a series of security incidents and delays would cause the project to be delayed for years.
Barnes wasn’t optimistic when asked about the 2028 deadline.
“That’s what we’re aiming for, but the productivity challenges that have arisen have obviously not helped make this a comfortable date,” he said.
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Mike Foley is the climate and energy correspondent for The Age and The Sydney Morning Herald.Connect via email.
