The New South Wales Government faces an integrity test over fast-tracking the final approval for the Snowy 2.0 pumped hydro electricity project in Kosciuszko National Park.
Desperate to create jobs in a COVID-19 recovery strategy, NSW is preparing to green light 24 so-called “shovel ready” infrastructure and property development projects, including Snowy 2.0.
NSW Planning and Public Spaces Minister Rob Stokes, who is the consent authority for Snowy 2.0, the biggest energy project ever to be undertaken in Australia, told me: “It is important to recognise that the assessment process is accelerated, not changed. There is no change to the environmental approvals required.”
But 30 experts in energy, engineering, economics and environment who object to Snowy 2.0 have written letters to state and federal politicians outlining their concerns. The project is now contentious because of the experts questioning its cost-effectiveness as a renewable energy source, and the collateral environmental damage to an alpine national park which is supposed to be inviolate and protected by state legislation.
Stokes, Premier Gladys Berejiklian, state Environment and Energy Minister Matt Kean, Prime Minister Scott Morrison, and federal Environment Minister Angus Taylor have all received such letters.
After securing approvals for exploratory works and a “segment factory”, Snowy Hydro’s main works application is currently under “accelerated assessment” by the Department of Planning, Industry and Environment. Once that assessment is concluded the project will go to Stokes for final approval.
Some experts are cynical and skeptical about the integrity of the approval process, speculating the Snowy 2.0 “deal” may already have been done in March 2018 when the Turnbull government agreed to pay Victoria and NSW more than $6.2 billion for their shares in Snowy Hydro Ltd.
This cynicism seems to be based on the publicly-released details of the inter-government negotiations when the purchase was announced on March 2, 2018. One of the terms of sale included “that NSW will provide all reasonable assistance to Snowy Hydro in relation to its current and future operations (including planning and approvals process for Snowy 2.0)”.
Stokes stood by the integrity of his state’s processes, telling me all projects would be subjected to the “same rigorous checks and balances that ensure they have merit and are in the best interests of the people of NSW”.
Snowy Hydro is sentimentally supported by Australians as a post-war immigrant success story in nation building. In 2006 the Howard government was forced by public protest to withdraw its plan to privatise the jointly-owned government company.
Kosciuszko National Park was declared by NSW after the hydro scheme was completed and operational.
Now under 100%-Commonwealth ownership, Snowy Hydro has already bought tunnel boring machinery from Germany for its exploratory works for a pumped hydro plan, which had been mothballed for decades.
Experts now say that at an estimated total construction and transmission grid connection cost of $10 billion, Snowy 2.0 is too expensive. There are alternative “shovel ready” pumped hydro projects without the environmental damage to Kosciuszko National Park.
A 27km, 10m-wide tunnel up a 700m incline with a massive cavern for reversible turbines and a power station 1km underground, is estimated to require the excavation of 20 million tonnes of rock and soil, quantities which could fill much of Sydney Harbour.
The excavated spoil would need to be dumped inside the national park’s boundaries including into existing reservoirs, reducing their water-holding capacities.
One of the experts objecting to the project is former Energy Australia managing director Ted Woodley. In a letter to ministers last week he said Snowy 2.0’s main works application should not be assessed on its own, as the environmental impact should include the associated transmission line project, which has yet to be exhibited.
Woodley said Snowy 2.0 was the first industrial development inside an Australian national park. The transmission link from the power station to the national grid, which would cut an easement swathe through the alpine landscape, had yet to be assessed. “Clearly it would take a very courageous minister to knock it back if the main works is already approved,” he said.
Snowy Hydro says the project will create 2000 jobs during the construction phase over four to five years, and that the environmental concerns are manageable given the economic and energy storage benefits.
In his memoir A Bigger Picture, former prime minister Malcolm Turnbull, the “father” of Snowy 2.0, asserts that the economics of Snowy 2.0 were sound and confirmed by multiple engineering, geological and financial analyses conducted in 2017 and 2018.
It was estimated to have an internal rate of return of over 8%, very good for a big infrastructure project, and Snowy Hydro said they could fund it without any additional government equity, as long as they could retain all their earnings, and not pay dividends for five years.
But Victoria Energy Policy Centre Associate Professor Bruce Mountain told me that Turnbull’s expected return on the Commonwealth’s investment was “implausible” given the company’s projected present value of its wholesale market income.
“Wholesale electricity forward market prices are now around half as high as Snowy Hydro had assumed,” he said. “Snowy 2.0 — even based on their own projections of inflated 2017 prices — has absolutely no chance of covering its costs. Snowy’s board and its shareholding ministers will have some serious questions to answer.”
Mountain referred to a recent AEMO (Australian Energy Market Operator) projection which significantly differed from Snowy Hydro’s forecast for electricity generation. The fact that Snowy 2.0 would be effectively idle for its first five years or so would have a “dramatic impact” on its financial returns.
The Commonwealth government rejects this: “Following Snowy Hydro board’s final investment decision on 12 December 2018, the government has reviewed the project’s business case and is satisfied that the project stacks up and will benefit energy consumers and the Snowy Mountains region”.
Since Turnbull’s departure from office, the Morrison government has committed up to $1.38 billion in an equity investment while still declaring the project will be financed by Snowy Hydro Ltd.
Woodley and other objectors contend that Stokes should reject Snowy Hydro’s submission as it has not included detailed assessment of any viable alternatives and does not take into account future energy market trends identified by AEMO.
These included the capability of a more robust grid to take the majority of its power from solar and wind enhanced by the rapidly declining costs of in situ battery storage. Woodley said this would push any need for Snowy 2.0’s pumped hydro generation capacity of 2000 megawatts or more out to beyond 2030.
Such is the intensity of the objections that it appears inevitable Snowy 2.0 will end up in litigation before the NSW Land and Environment Court.
Over to you, Stokes.
With the State Government policy on brumbies in the National Park, Gladys has shown she has no interest in any degradation it might suffer.
I have always thought the geology made it implausible. Dumping that volume of rock into the reservoirs is clearly insane. We are used to seeing big boring machines chomping up the benign Sydney basin sandstones. Forget that in the Snowy. The tunneling is so high cost and the availability of water might also be problematic.
As an unqualified nobody (common enough) I’ve read everything possible about this and asked questions on grey areas. It seems uneconomic, seems environmentally bad, clearly, and is devious, The grid path, the extra constructions, the likely lowering of all wholesale electricity prices, the changing nature of stored battery usage, so many facors, make it dodgy, political but unscientific, sales bullshit drenched (come in Morrison) and a receding bad dream. Costs always rise, double and more as the riggers, fleecers and job stretchers get teeth in. Our lovely wildernesses and the wildlife therein deserve more weight here.
According to Victoria Energy Policy Centre Snowy 2.0 will lead to an increase in greenhouse emissions and benefit fossil fuel electricity generators.
The Snowy Mountain scheme already has a pumped hydro section of about 2MW. This has been used to allow the coal generators to near or at peak capacity even when demand is low.
The energy stored is then used for use when demand is at peak, and coal generation is not enough.
The tasmanian state owned pumped hydro development seems to be more feasible as it would use hydro electricity to do the pumping, but is it cost effective either?
Using conventional hydro to power the pumping process of pumped hydro would be a waste.
The energy that needs to be used is wind and solar.
The Tasmanian pumped hydro project won’t be big enough for the east coast electricity network.
But several smaller pumped hydro and battery installations around the network would be better than one huge system.