Snowy Hydro is pushing back on critics of its controversial energy project with new modelling showing the huge pumped hydro project will be needed in coming decades to keep a lid on power prices as renewables flood the electricity grid and coal plants close.
Chief executive of Snowy Hydro, Dennis Barnes, has conceded that cost blowouts above the current $12 billion price tag are inevitable, and hinted that ongoing delays may mean the project may not reach its 2028 completion deadline.
However, he told this masthead that an independent study on the electricity grid showed that Snowy 2.0 would fill a gap that could not be plugged with large-scale batteries and would, in fact, deliver big savings in average wholesale electricity prices.
“Just because some commentators don’t like the energy transition or don’t like its politics, I’ve got to ignore all that and showcase the facts about this project,” Barnes said.
“I struggle to see how the energy transition is done without it, and our people are doing good work. But it’s complex, it’s remote, and it’s a globally significant scale.”
Snowy 2.0 costs have blown out from an initial $2 billion estimate to more than $12 billion. Snowy has commissioned an audit that is set to report this month, and Barnes conceded a further price rise was expected.
The report from consultancy Baringa Partners, which will no doubt be questioned by critics of Snowy 2.0, found that increasing volumes of energy storage will be needed to keep the grid supplied as coal plants reach the end of their life in coming years and renewables take over.
Wholesale power prices spike in the rare but inevitable weeks when calm weather combines with cloudy weather, known as the dark doldrums, depressing the amount of wind and solar power supplied to the grid.
The study projected a hypothetical scenario for a week of the dark doldrums in 2041, when coal power is gone, and found that the cost of wholesale electricity in a grid with Snowy 2.0 would be around $7000 a megawatt hour cheaper than a grid powered by the alternative, a vast array of large-scale batteries.
Barnes said it would cost more than $100 billion to replace the capacity of Snowy 2.0 with batteries, and the electricity grid would face increased risks of blackouts once coal retires.
“Every one or two years, you get a three- or four-day lull in wind generation and batteries run out of juice, simply put, to handle those situations. Every 10 years or so you get seven days of renewable lull, and without the Snowy 2 storage levels there’s an impact on price, and while we don’t want to be too sensationalist, grid reliability’s at risk.”
Snowy Hydro uses surplus electricity to pump water from a reservoir at the bottom of a hill to the top, from where it will be released to flow down and spin turbines.
It can supply power on demand when the grid needs it most, supplying back-up for renewables when the wind isn’t blowing and the sun isn’t shining.
Snowy 2.0 is a massive upgrade to the existing Snowy scheme – taking total generation capacity to 375,000 megawatt hours, or enough to power 3 million homes for a week.
Prominent critics Bruce Mountain of Victoria University Energy Policy Centre and former energy executive Ted Woodley have argued Snowy 2.0’s budget blowout makes the project uneconomic and claimed that battery technology is more flexible, cost-effective and better suited to supply rapidly shifting energy demand.
The possibility of timeline blowouts beyond 2028 is a political risk for the Albanese government, which faces an election that year and has committed to an ambitious renewable energy target of 82 per cent clean energy in the grid by 2030 that depends on Snowy 2.0 being completed on time.
Former prime minister Malcolm Turnbull commissioned Snowy 2.0 in 2017, declaring a completion deadline of 2021.
The official price tag was changed to $12 billion in 2023, and the deadline extended to 2028. In October last year, Snowy asked its construction contractor Webuild to undertake another cost assessment, leaving many observers expecting another blowout.
This masthead reported last month that workers on the project believed that a series of safety incidents and delays meant the project would be held up by years.
When asked about the 2028 deadline, Barnes was not optimistic.
“That’s what we’re targeting, but obviously the productivity challenges that have arisen have not helped make that 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.