The federal government’s much-vaunted Snowy Hydro expansion is supposed to smooth out the bumps in electricity supply as Australia transitions to renewables. But not only is the project a bad deal for taxpayers, our analysis suggests it will deliver a fraction of the energy benefits promised.
Fossil-fuel power generators store coal or gas at the point of production. This means electricity can mostly be created on demand when homes and businesses need it. Renewable energy cannot do this. If wind or sun is not abundant, solar panels and wind turbines may not produce enough electricity to meet demand. At other times they might produce more than required.
The Snowy 2.0 project is supposed to provide a solution to this problem - storing renewable energy for when it is needed.
The project’s cost and time estimates have blown out massively. It would now be surprising if Snowy 2.0, including the transmission upgrades it relies on, comes in at less than A$10 billion or is finished before 2027.
But there is another serious problem. Our analysis has revealed that of the extra pumped hydro capacity promised by the project, less than half can be delivered. There is now overwhelming evidence the project should be put on hold.Snowy Hydro Ltd
The problems we know about: cost and time blowouts
The list of possible alternatives to Snowy 2.0 is long. Aside from other pumped hydro projects, it includes chemical batteries, encouraging demand to follow supply, gas or diesel generators, and re-orienting renewable generators to capture the wind or sun when it is less plentiful.
But despite this plethora of options, the federal government announced the Snowy 2.0 project without a market assessment, cost-benefit analysis or indeed even a feasibility study.
When former Prime Minister Malcolm Turnbull announced the expansion project in March 2017 he said it would cost A$2 billion and be commissioned by 2021. This was revised upwards several times and in April this year, a A$5.1 billion contract for partial construction was awarded. This excludes the costs of transmission and other considerable expenses.
The main contractor says the project will take eight years to build - bringing us to 2027 before the full scheme is completed. We will happily wager that more delays and cost increases will be announced.Lucas Cochairs/AAP
Snowy Hydro has not costed the transmission upgrades upon which the project depends. TransGrid, owner of the grid in New South Wales, has identified options including extensions to Sydney with indicative costs up to A$1.9 billion. Massive extensions south to Melbourne will also be required.
Snowy Hydro contends it should not pay for the new transmission lines because the benefits would flow to the entire grid, not just its venture. In other words Snowy Hydro argues, conveniently, that we should count the benefits but ignore the costs when thinking about their project.
The numbers simply do not add up
The Snowy 2.0 project grandly claims it could generate at its full 2,000 megawatt capacity for 175 hours - or about a week. This capacity can also be expressed as 350 gigawatt hours (GWh).
Energy Minister Angus Taylor has talked up the project’s superiority to smaller-capacity alternatives such as batteries.
But the maximum additional pumped hydro capacity Snowy 2.0 can create, in theory, is less than half this. The reasons are technical, but worth taking the time to understand.
The figure below outlines the main physical features that define Snowy 2.0. It includes four dams: Tantangara, Talbingo, Jounama and Blowering. For simplicity, we have numbered these from 1-4 in the following explanation.
Authors: Bruce Mountain, Director, Victoria Energy Policy Centre, Victoria University